Image Credit: RenewReporter

The Clean Energy Regulator has called on electricity retailers to demonstrate their commitment to the Renewable Energy Target, as it receives word that a second major retailer, Alinta Energy, may not comply with the annual surrender of renewable energy certificates.

In a statement released on its website, the Clean Energy Regulator reiterated its position that non-compliance with an electricity retailer’s obligations acquire and surrender renewable energy certificates is not within the “spirit of the law”.

“Our position is that the primary obligation under the scheme is to surrender large-scale generation certificates, as this is the only action that leads to an investment in renewable energy. Any shortfall charges are paid into consolidated revenue rather than boosting a growing Australian industry.” The Clean Energy Regulator said in a statement.

“We have been clear that we view the intentional failure to surrender certificates as a failure to comply with the spirit of the law and an undermining of the objectives of the scheme.”

Alinta Energy services customers across all Australian states, with approximately 800,000 retail electricity customers. According to corporate reports, Alinta Energy sold approximately 5,300 Gigawatt-hours of electricity to consumers in the year to June 2016. This would place Alinta Energy’s liability under the RET in the region of 700,000 Large-scale Generation Certificates for the 2016 calendar year.

In a statement provided to RenewReporter, Alinta Energy indicated that it “strongly supports the Federal Government’s Renewable Energy Target”, and the company’s RET strategy was designed to “minimise the cost of meeting its RET liability”.

“In addition to its own renewable development capability, Alinta Energy has also executed several [Power Purchase Agreements] with other developers for wind and solar projects due to be commissioned over the next two years. The certificates produced from these projects were procured at rates significantly cheaper that the current spot market.” Alinta Energy’s statement said.

The Renewable Energy Target (RET) is the core compliance mechanism for meeting Australia’s 20 per cent renewables goal. Under the scheme, renewable energy generators are awarded renewable energy certificates for the electricity they produce. An obligation is placed on electricity retailers to acquire and surrender these certificates back to the government, ensuring annual renewables targets are met.

If retailers fail to surrender sufficient renewable energy certificates, a shortfall fee is imposed by the regulator. Since its establishment in 2001 the RET has operated with near 100 per cent compliance with just a handful of minor cases were certificates had not been surrendered.  

The calls for retailers to work within the “spirit”  of the scheme by the Clean Energy Regulator are rare interventions for the agency that has had carriage of the RET, Carbon Price Mechanism and Emissions Reductions Fund since being established in 2012.

Electricity Retailer ERM Power announced earlier this month that it would opt to pay the penalty fees instead of purchasing renewable energy certificates. The Clean Energy Regulator may face its first serious revolt against the against the scheme if reports of Alinta Energy’s non-compliance hold true.

Under the RET, electricity retailers are granted a three-year make-good period, where the cost of the penalty charges can be redeemed through the surrender of large-scale generation certificates within the window.

While the costs of paying the penalty fees are ultimately passed through to consumers via electricity prices, the fees collected by the Clean Energy Regulator do not support the clean energy sector and instead go into government consolidated revenues.

Clean Energy Regulator Chair Chloe Munro stressed that it is important for electricity retailers to support the renewable energy sector through the mechanisms established under the RET when the intention of ERM Power’s non-compliance was announced.

“It’s hugely disappointing that a major company has deliberately chosen to pay a large shortfall charge. It’s our view that an investment in a growing industry is money better spent than a financial penalty that has no return.” Ms Munro said.

Coalition backbenchers have jumped on reports of RET non-compliance, renewing calls for the scheme to be paired back. Western Australian Liberal Senator Chris Back call for a moratorium on new wind farms while there was a risk of consumers paying fees that ultimately did not support renewable energy generation.

“All consumers are in effect paying a federal tax on electricity either as the subsidy issued in the form of renewable energy certificates or the shortfall charge recovered as a penalty – so where is the benefit to the environment from such a scheme?” Senator Back said.

The compliance window for the 2016 calendar year closes on 14 February 2017. Retailers have up until that date to offer certificates for surrender to demonstrate compliance with the RET and for companies to make clear their intentions around compliance.

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