Environmental Certificates
Introduction
On your SmartestEnergy invoice, you’ll see a section titled ‘Environmental charges’. These charges are the costs incurred under Federal and State legislated schemes that have been implemented to help achieve reduction of emissions from electricity generation in Australia. Each scheme has different mechanisms, obligations, and eligibility. In general, these schemes fall into two categories:
Federal certificate schemes, designed to incentivise investment in new renewable energy infrastructure, or emissions reduction activities.
State-based environmental certificate schemes, designed to incentivise consumers to reduce their energy consumption or Greenhouse gas emissions. This might include installing energy efficient technology, or replacing older, more inefficient equipment to reduce emissions.
Each scheme creates incentives for this activity, as well as obligations for retailers like SmartestEnergy. More information is available below for each of the current Environmental Charge types that may apply to your invoice. Whilst the Federal Schemes (LRET & SREC) apply to all states within the National Electricity Market (NEM), each state may also apply one (or multiple) additional schemes that create obligations for SmartestEnergy and our customers.
Federal certificate Schemes
The Renewable Energy Target (RET) is a Federal Scheme designed to reduce greenhouse gas emissions in the electricity sector by encouraging the additional generation of electricity from renewable sources. The RET is administered by the Clean Energy Regulator (CER) and applied through two schemes.
These schemes create a financial incentive for investment through the generation of tradable certificates for every MWh of power generated. As a tradable commodity the certificates, and the market system created to buy and sell them, creates the financial incentives needed for investment to be attractive. Electricity retailers like SmartestEnergy then purchase these certificates, and then surrender them to the Clean Energy Regulator to meet our obligations under the Renewable Energy Target.
More information can be found here: How the scheme works (cleanenergyregulator.gov.au)
Large-Scale Renewable Energy Target
The Large-scale Renewable Energy Target (LRET) encourages generation investment in renewable power stations, with the aim to achieve an additional 33,000-gigawatt hours of renewable electricity generation by 2030. Accredited generators produce electricity from sources including wind and solar farms, and hydro-electric power stations, and are required to provide Large-scale Generation Certificates (LGCs) to offset their annual emissions. Retailers like SmartestEnergy have an obligation to purchase and surrender specific quantities these LGCs, based on the amount of electricity consumed by their customers.
Around the end of March each year the Renewable Power Percentage (RPP) is published by the Clean Energy Regulator. This is retrospective and covers the full calendar year, so a rate published in March 2023 is effective from Jan 2023 to December 2023. To manage this unknown rate in the first few months of the year we apply the previous calendar year’s RPP until the new RPP is published. At that point we change the RPP that applies to the invoices and calculate an adjustment for the difference.
The published RPP for 2024 is 18.48%
On page 2 of your SmartestEnergy invoice the LRET charge is displayed under the Environmental Charges section, as the LRET Certificate Charge. This line displays the below information:
- RPP: The applied Renewable Power Percentage for the stated billing period
- Quantity: Eligible volume of electricity used (in kWh)
- Unit Price: The certificate rate (in c/kWh)
- Loss Factors: Applicable loss factors
- Total: This is calculated as Quantity x RPP x Unit Price x Loss Factors
Small-Scale Renewable Energy Scheme
The Small-scale Renewable Energy Scheme (SRES) supports businesses and residential users to install small-scale on-site generation and technology through a financial incentive. Their actions generate Small-scale Technology Certificate (STCs). These are tradable certificates that eligible retailers like SmartestEnergy are required to purchase and surrender, in quantities determined by the amount of electricity their customers consume.
Around the end of March each year the Small-scale Technology Percentage (STP) is published by the Clean Energy Regulator. This is retrospective and covers the full calendar year, so a rate published in March 2023 is effective from Jan 2023 to December 2023. To manage this unknown rate in the first few months of the year we apply the previous calendar year’s STP until the new STP is published. At that point we change the STP that applies to the invoices and calculate an adjustment for the difference.
The published STP for 2024 is 21.26%
On page 2 of your SmartestEnergy invoice the SRES charge is displayed under the Environmental Charges section, as the SRES Certificate Charge. This line displays the below information:
- STP: The applied Small-scale Technology Percentage for the stated billing period
- Quantity: Eligible volume of electricity used (in kWh)
- Unit Price: The certificate rate (in c/kWh)
- Loss Factors: Applicable loss factors
- Total: This is calculated as Quantity x STP x Unit Price x Loss Factors
State Based Charges
Some states have also introduced other green schemes. These are different depending on the goals and objectives of each state. Whilst some are tradable certificates like the LRET and SRES, others are non-tradable activity-based certificates that replace the market incentives with direct action. All schemes place obligations on retailers to purchase and surrender certificates based on the energy consumption of their customers.
The Energy Efficiency Improvement Scheme (EEIS) provides activity-based incentives for ACT residents and small businesses to help them reduce the cost of their energy bills. The EEIS provides subsidised installation of specified equipment and appliances. Retailers like SmartestEnergy can fulfil their obligation through a direct Energy Saving Contribution (ESC) that is used to support energy efficiency programs.
- Administrator: The EEIS is administered by the ACT Government
- How the target works: The annual target is set by the ACT Government along with other settings such as any penalty rates.
- Current Target: The Energy Savings Target for 2024 is 14.6%.
- On your bill: EEIS Certificate Charge
The Energy Savings Scheme (ESS), provides financial incentives for NSW businesses to install, improve or replace energy savings equipment and appliances. The certificates created by this are Energy Savings Certificates (ESCs) and are tradable. Eligible retailers like SmartestEnergy must buy and surrender ESCs
- Administrator: The ESS is administered by the Independent Pricing and Regulatory Tribunal of NSW (IPART)
- How the target works: The target increases by 0.5% annually until 2030, after which it remains at 13% each year until the scheme expires in 2050.
- Current Target: The Energy Savings Scheme Target for 2024 is 10%.
- On your bill: ESS Certificate Charge
The Peak Demand Reduction Scheme (PDRS), provides financial incentives for NSW businesses to install, improve or replace energy savings equipment and appliances, that reduce demand during peak usage times.. The certificates created by this are Peak Reduction Certificates (PRCs) and are tradable. Eligible retailers like SmartestEnergy must buy and surrender PRCs.
- Administrator: The PDRS is administered by the Independent Pricing and Regulatory Tribunal of NSW (IPART)
- How the target works: The target increases by 0.5% each financial year until it reaches 10% in 2029-2030
- Current Target: The Energy Savings Scheme Target for 2023-24 is 1%.
- On your bill: NSW PDRS Charge
For more information on PDRS, see our blog from Jan 2023 here.
The Retailer Energy Productivity Scheme (REPS) provides activity-based incentives for SA residents and small businesses to help them reduce the cost of their energy bills. The REPS provides subsidised installation of specified equipment and appliances. Retailers like SmartestEnergy have a proportional requirement of the total target activity output, measured in gigajoules (GJ) of energy.
- Administrator: The REPS is administered by the Essential Services Commission of South Australia (ESCOSA)
- How the target works: The annual targets for the following 5 calendar years are set by the SA Government, including a proportion of activities that must be supplied to priority groups (low-income) households. This is then proportionally applied to each retailer
- Current Target: The Energy Productivity Target for 2024 is 3,437,500 GJ (500,000 GJ for priority group households)
- On your bill: REPS Certificate Charge
The Victorian Energy Upgrades program (VEU), provides financial incentives for Victorian businesses to install, improve or replace energy savings equipment and appliances. The level of incentive or discount received by businesses varies depending on the market activity and certificate price. Each certificate represents one tonne of CO2 emissions reduction. The certificates created by this are Victorian Energy Efficiency Certificates (VEECs) and are tradable. Eligible retailers like SmartestEnergy must buy and surrender VEECs in order to meet our obligations under the Victorian Energy Efficiency Target (VEET).
- Administrator: The VEU is administered by the Essential Services Commission (ESC)
- How the target works: Annual targets have been set for the number of certificates required to be surrendered each year out to 2025. This rises from 2.7 million in 2009 to 7.3 million in 2025
- Current Target: The Greenhouse Gas Reduction Rate for 2024 is 15.244%.
- On your bill: VEET Certificate Charge