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Important information regarding Quarter 1 STC surrender obligations

07 April 2020

This information is for liable entities on available options for small-scale technology (STC) Quarterly surrender, with Quarter 1 due on or before 28 April 2020.

We understand that some electricity retailers have approached the government requesting broad support in the context of COVID-19 impacts on their business.

The Clean Energy Regulator (the Regulator) has also received requests from retailers seeking flexibility in STC surrender for Q1 and/or exemption from shortfall charge. The Regulator does not have any discretion under the current law to offer extensions to quarterly STC surrender deadlines. The Regulator does not have the power to vary the operation of the law in relation to the calculation of shortfall or the shortfall charges that are incurred. This advice only relates to flexibility available under the current law which is outlined below.

The Regulator estimates there will be sufficient STCs to meet the Quarter 1 surrender liability of 14.9 million STCs, with a likely surplus of between 2.5 and 3.5 million STCs after 28 April 2020. The Regulator continues to focus its efforts on timely processing of STC claims to assist with supply in the market.

With expectations of a potential fall in both electricity demand and STC supply, the STC spot price has risen to be close to the Clearing House price of $40. Depending on the contracting position of individual liable entities for STCs, some may need to buy at the current spot price or through the Clearing House to obtain the surrender amounts notified by the Regulator under Section 40C of the Renewable Energy (Electricity) Act 2000 (the Act).

The legislation provides for liable entities to apply to reduce their annual acquisitions where they expect acquisitions in the current assessment year to be less than the previous year. If approved, this has the effect of reducing the number of STCs to be surrendered each quarter.

The following provides greater detail for those considering making applications to better align their surrender amounts to their expected acquisitions for 2020.

Available options for STC quarterly surrender

1. Variation of required surrender amount (existing liable entities)

If a decrease in acquisitions is anticipated for the 2020 assessment year compared to 2019 acquisitions, an application can be submitted under subsection 38AF(1) of the Act to vary the required surrender amount for the first three Quarters. This application form (CER-RET-009) is available on the Forms and resources for liable entities page on our website.

If an application is submitted, please include monthly acquisition forecasts for 2020.

Important considerations

If the final 2020 assessment year's acquisitions (amount lodged in the 2020 EAS) exceeds the amount determined through a subsection 38AF(1) application by more than 10 per cent, the required surrender amount for the first three Quarters will be recalculated – refer to subsection 38AF(7) of the Act. This would result in a shortfall for the first three Quarters and small-scale shortfall charge incurred for the 2020 assessment year.

Multiple applications under subsection 38AF(1) can be lodged during the assessment year before 1 October 2020. However, as additional STCs cannot be surrendered for a Quarter where a surrender deadline has passed, and a subsequent subsection 38AF(1) application may result in a shortfall for that Quarter and unavoidable small-scale shortfall charge incurred for the 2020 assessment year.

To avoid the risk of shortfall, you should consider making any application conservative in relation to your expected acquisitions.

Timeframes

Applications to vary the required surrender amount for Quarter 1 must be submitted on or before Friday 17 April 2020 to ensure a determination can be made five business daysfootnote 1 before the surrender due date of 28 April 2020 for that Quarter.

2. Set the required surrender amount (new liable entities)

New liable entities can fulfil their surrender obligations, including nominating their required surrender amount, by applying under section 38AG of the Act. This application form (CER-RET-008) is available on the Calculating certificate liability page on our website.

Details of information required to submit this application type is included in the application form, including evidence of acquisitions during the assessment year.

3. Purchase from the STC Clearing House

If additional STCs are required to fulfil a surrender obligation, they can be purchased on the open market or directly from the STC Clearing House.

Once a buy order has been placed in the STC Clearing House and approved, an invoice is provided to the buyer on the same day.

Once payments are cleared, the trade will be settled and the STCs will be transferred into the buyer‘s REC Registry account. These certificates will have the status of ‘registered’.

Please note that the purchase of STCs does not automatically meet an entity's surrender obligations. A separate surrender must still be made in the REC Registry.

STC Clearing House access can be obtained via a REC Registry account. Information to upgrade REC Registry account access is available from the REC Registry Guideline.

Timeframes

Buy orders must be placed in the STC clearing house at least five business days prior to the Quarterly surrender deadline to avoid potential transaction delays. Payment must be received in the Regulator‘s bank account prior to the STCs being made available in an entities REC Registry account.

Market Updates

The market will be kept informed through our regular Quarterly Carbon Market Reports. This will include information on STC supply and demand, including trends and opportunities.

Contact us

The Regulator‘s preferred method of contact during this period is by email at RETLiability@cleanenergyregulator.gov.au, or phone on 1300 553 542.

Please note, there are several public holidays before the Quarter 1 surrender deadline. Regulator staff will be available to assist with enquiries during operational business hours.

Footnote

footnote 1A decision five business days before the surrender deadline is to allow sufficient time for a liable entity to acquire any additional certificates it may need.


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