Renewables on target for 22% by 2020

There is confusion over how the RET has been calculated, leading to deceptive numbers about the likely percentage of renewables to be reached by 2020. Truth is it remains firmly in line with expectations.

The Renewable Energy Target has come under increasing scrutiny as the level of electricity consumption has fallen. There is confusion over how the RET has been calculated, and particularly in relation to how the initial 20 per cent target has been converted into a fixed target. This article summarises how the numbers fit together with further detail provided in a Green Energy Markets Research Note.

A summary of the key points are as follows:

-- The RET policy commitment is for at least 20 per cent of Australia’s electricity supply to come from renewable energy.

Climate change minister Greg Combet, when introducing the legislation to separate the RET in June 2010, made it clear that the government expected renewables to account for 22 per cent market share by 2020. At this time, the legislation which gave rise to the 22 per cent expected market share, had support from all the major political parties.

-- We expect that renewables will increase from 10.6 per cent of total generation in 2011 to 22.5 per cent by 2020 (Figure 1).

Forecast total generation is based on the Bureau of Resource and Energy Economics latest energy projections. Total renewable generation is expected to reach 67.9 TWh by 2020. This incorporates the contribution of large-scale renewables as well as the expected generation from small-scale solar and avoided generation from solar water heaters.Coincidently BREE also estimates that by 2020 renewables will account for 22 per cent of electricity supply.

Figure 1. Components of renewable electricity supply

Graph for Renewables on target for 22% by 2020

-- In determining the market share of electricity supply we cannot just consider the level of generation in the inter-connected National Electricity Market, which currently accounts for approximately 76 per cent of total generation. Electricity generation from Western Australia, Northern Territory and off-grid power generation, which together account for 23 per cent of total generation, needs to be included.

Additionally, we have also added back the level of small-scale generation that is seen by the market as a reduction in the level of demand. Small-scale generation represented 1.3 per cent of total electricity generation in 2011 and is expected to increase to 4.6 per cent by 2020.

-- The level of renewable generation also incorporates the expected level of generation from pre-existing generators (in place prior to the start of the RET). The pre-existing level of generation that is not eligible to produce certificates has reduced to 13,000 GWh. This is 13 per cent less than the 15,000 GWh that was initially estimated to be in place.

-- The proportion of liable parties’ electricity sales that needs to be surrendered (as either a large-scale or small-scale certificate) reduces from 33 per cent in 2012 to 19 per cent in 2014 before rising again to reach 27 per cent by 2020 (Figure 2).

This is much higher than 22 per cent because consumption from a number of large industrial consumers is partially exempt from obligations under the RET. The proportion of liable parties’ sales then progressively falls to 18 per cent as the number of certificates that get surrendered under the small-scale scheme reduces with the phasing out of the deeming provisions.

Figure 2. Proportion of electricity sales to be surrendered by Liable Parties 

Graph for Renewables on target for 22% by 2020

The complete Research Note can be downloaded from greenmarkets.com.au.

Ric Brazzale is Managing Director of Green Energy Markets.

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