Which companies are doing the most to support renewable energy generation?

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How many companies have “torn up” their renewable energy certificates to ensure their efforts are “additional” to the legislated renewable energy target?

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Under Australia’s Renewable Target (RET), energy retailers and large users of energy (excluding Emissions Intensive Trade Exposed (EITE) industries) connected to electricity grids have been required to source a minimum amount of electricity from renewable sources since 2001.

This target has been gradually increasing to the level it’s at today (18.6% or equivalent to 31,244 GWh), and will stay around 33,000 GWh from 2020 until 2030.

Renewable Energy Target
Figure 1: Renewable Energy Target in GWh and Renewable Power Percentage

Each year, the Clean Energy Regulator (CER) sets a Renewable Power Percentage (RPP) that obliges each liable entity to acquit its obligation by surrendering Renewable Energy Certificates equal to the RPP multiplied by their annual electricity consumption.

i.e. if an energy retailer had 10 GWh of load and the RPP was 20% in a given year, they would need to surrender 20% of 10,000 megawatt hours, which is 2,000 certificates as a certificate is equivalent to a single megawatt hour.

Certificates are created from additional sources of renewable generation since 2001 from technologies such as solar, wind, biomass or hydro (above previous baseline levels).

These renewable generators can earn certificates after they have generated electricity and these certificates are then on-sold to the liable entities. These certificates were previously known as Renewable Energy Certificates (REC’s) but the scheme had rooftop solar spun off in 2011, and these are now known as Large-scale Generation Certificates (LGC’s).

For those businesses and users of energy that wish to use additional renewable energy, above and beyond the RET, the option to purchase certificates and “voluntarily surrender” them ensures that these purchases provide “additionality” i.e. that these certificates are indeed additional to the RET such that these purchases actually increase the use of utility scale renewable energy above the legislated targets.

It is also effectively equivalent to “tearing up” these certificates. Reviewing data from the CER, we can observe the level of voluntary surrender based upon which year these certificates were surrendered and can see that this peaked in 2010, with 2,660 GWh, which has trended down every year since then with only 629GWh in 2018.

Voluntary Surrender Levels
Figure 2: Voluntary Surrender Levels (GWh)

There may be a number of reasons such as less desalination use until recently, the increasing target each year, support from other schemes such as the ACT’s 100% target and limited visibility to those surrendering, but it may be expected that increasing energy prices may have dissuaded many from purchasing additional renewable energy.

It is then interesting to delve further into the history of voluntary surrender to examine which energy retailers and individual firms have contributed the most to supporting renewable energy above the RET.

It must be noted that whilst we have visibility on certificates that are surrendered, we do not know if the owners of some certificates may have the intention of surrendering certificates at a future point, or may have the intention of holding but never surrendering the certificates, which will simply expire worthless at the end of 2030.

A meaningful example of this is the ACT government which holds in excess of 1.1m wind and solar LGC’s but is yet to surrender any.

In the following chart we can see the total number of LGC’s that have been surrendered by the various identified entities since 2003.  As expected, the major retailers are a large share of this as they surrender on behalf of those customers that wish to purchase renewable energy.

It must also be noted that these figures do not reveal when certificates may be voluntary surrendered on behalf of other parties such as those under a Power Purchase Agreement where the renewable generator may action this on behalf of a client.

At the end of the day, these certificates have been voluntarily surrendered and there is not always an obligation that the sponsor of the surrender needs to be the party that identifies itself at the time of surrender.

Voluntary Surrender (LGC's)
Figure : Voluntary Surrender (LGC’s)

It should be further noted that some of the retailers in this analysis no longer exist (such as COZero, or Jack Green) or have been either fully or partially absorbed into another retailer such as Sun Retail, Ergon Energy, APG, Country Energy, Integral Energy or Powerdirect.

The major desalination plants supporting Sydney, Melbourne and Adelaide were also significant users of additional renewable power, as well as Planet Ark, Queensland’s EcoFund and Bunnings.  In total there were almost 200 entities that surrendered certificates to support additional renewable energy including those listed above.

It’s important to recognise that whilst the RET does not increase from 2020, the mechanism that gives the ability to surrender voluntarily gives businesses the opportunity to support renewable energy generation by purchasing LGC’s.

Notwithstanding the superior economics of wind and solar against coal and gas plants, the RET can still be utilised by businesses, governments and individuals to accelerate the use of renewable energy in Australia.

Warwick Forster is the Managing Director of Apogee Energy.

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