The Clean Energy Regulator has confirmed that Australia will meet and exceed its Large-scale Renewable Energy Target (LRET) set at 33,000 gigawatt hours of renewable electricity generation by 2020.
In its 2018 annual statement on the progress of the Renewable Energy Target (RET), the agency reports that there were a record 3,455 megawatts of constructed projects accredited in 2018, which is more than triple the previous record of 1,113 megawatts accredited in 2017.
Australia’s industry is expected to build a higher level of large-scale renewable energy projects in the three years from 2017 to 2019 than in the first 16 years of the RET scheme.
According to the statement, 4,474 megawatts of new capacity has been commissioned since 2016, and a further 5,408 megawatts are under construction. In addition, projects totalling 1,729 megawatts in capacity hold a power purchase agreement and are expected to reach financial close and start construction in 2019.
This will materially exceed the 6,400 megawatts required to meet the 2020 target.
The Clean Energy Regulator thus expects that Australia's large-scale renewable energy generation will step up from around 22,000 gigawatt hours in 2018 to around 30,000 gigawatt hours in 2019 and 40,000 gigawatt hours in 2020.
However, this strong increase in capacity generation is increasingly due to commercial factors rather than the incentives given by the RET, on the back of ongoing technology cost reductions.
The heightened activity in the renewable energy industry has now finally also led to a significant drop in the spot price for large-scale renewable energy certificates (LRECs). These tradable certificates, the key currency supporting the LRET, are created by energy generators for every megawatt hour of power they generate, and used by retailers to certify to the government that they have met their obligations under the RET scheme.
Spot prices for LRECs remained at around $85 for most of 2018 before falling to around $47 in December 2018 and further to around $31 by mid-March 2019.
According to the Clean Energy Regulator, the fall is a result of renewable power generation becoming cheaper but also of it agreeing to accept the way retailers have started to treat shortfalls.
Under the RET legislation, retailers can defer buying up to 10% of certificates, but then need to make up the shortfall within three years to avoid a penalty. This deferral can be profitable if the spot price falls, and recently has been used more widely by retailers. Accordingly, the on-time surrender of LRECs by retailers as required under the law reduced to 86% in 2018, down from 93% in 2017.
In October last year, the Clean Energy Regulator issued a statement that it had no objections to the practice “in the expectation that liable entities would true up these positions with large-scale generation certificates in a subsequent year, as allowed under the law”.
According to the agency, “the take up of this option by industry has likely shifted demand for certificates beyond 2020. It also brought forward and smoothed the expected fall in large-scale generation certificate prices. This will likely reduce the impact of the Large-scale Renewable Energy Target on electricity prices in 2019 and beyond.”