Tag Archives: STCs

What you need to know about accounting for LGCs, STCs, ESCs, VEECs, ACCUs

This blog post has been updated in Dec 19 to reflect the re-branding of NCOS to ‘Climate Active’.

For many sustainability managers, navigating the many acronyms that exist for renewable energy certificates like LGCs and state-based certificate schemes like ESCs for carbon reduction activities can be confusing. Some schemes are federal; others are state-based. Some relate to energy, others to carbon. Some can be used for carbon reduction; others can’t. To make sense of these three and four-letter acronyms, we thought it was time to publish a blog post on this topic.

Renewable Energy Certificates (RECs)

Description

Once electricity from renewable sources enters the grid, it mixes with electrons from multiple sources, like coal-fired power plants, and becomes indistinguishable. To track renewable energy, Renewable Energy Certificates (RECs) are assigned for every megawatt hour created from renewables. Each REC is assigned its own unique number to track the ownership of the environmental (and social) benefits of the renewable energy. They can be traded separately from the underlying electricity.

Renewable Energy Certificates (RECs)
Renewable Energy Certificates (RECs)

Renewable Energy Certificates (RECs) were created to spur the development of renewable energy generation through a market-based mechanism of supply and demand. A REC has a financial value attached to it, which fluctuates depending on prevailing market conditions.

In Australia, RECs are supported by Australia’s Renewable Energy Target, which states that by 2020, 33,000 GWh must be generated from renewable sources (this equates to about 23.5% of the overall total). The scheme ends in 2030.

RECs are divided into Small Scale Technology Certificates (STCs) and Large-Scale Generation Certificates (LGCs).

Treatment

The party that owns the REC owns the claim to that megawatt hour of renewable energy. Renewable energy certificates are used to offset electricity consumption. They cannot be used to offset other emission sources like fuel consumption or Scope 3 emissions like waste or business travel.

Small-scale Technology Certificates (STCs)

Description

STCs are like an upfront subsidy for renewable energy systems that are under 100kW. They are deemed upfront and come with your renewable energy installation.

Treatment

Under previous Australian carbon accounting rules (Climate Active) selling the STCs (i.e., claiming the subsidy) meant that you were not allowed to account for the emission reduction. However, under revised Climate Active’s rules, behind-the-meter energy usage originating from small-scale onsite generation systems can now be treated as zero-emissions energy, regardless of whether any STCs have been created, sold or transferred to any other party. This applies to systems installed in the past as well as future installations.

As such, you can add the self-consumption of electricity from your solar PV systems to your total demand for electricity, and this generation is treated as zero-emissions electricity for your carbon footprint. You can also use the generated renewable electricity against your renewable energy target.

Large-scale Generation Certificates (LGCs) from onsite renewable energy generation

Description

If your renewable energy system is larger than 100kW, you are eligible for one LGC for every megawatt hour your solar PV system generates. As opposed to STCs, the LGCs are not deemed upfront. You need to keep track of your renewable energy generation on an annual basis to be able to create and then sell LGCs. While LGCs currently have a much higher market value than STCs, this can change in line with the supply and demand for certificates by liable entities (like electricity retailers).

Treatment

If you sell the LGCs, you will generate income. However, if you sell your LGCs, the carbon reduction and renewable energy generation associated with the energy generated cannot be claimed.

According to the Climate Active, behind-the-meter energy usage originating from large-scale onsite generation systems that have created LGCs can be treated as zero-emissions energy only if the equivalent amount of LGCs are voluntarily retired. Behind-the-meter energy usage that is not matched by an equivalent amount of voluntarily retired LGCs must be accounted for in the same way as grid-based energy, and offset accordingly if a carbon neutral strategy is pursued.

Large-scale Generation Certificates (LGCs) from offsite renewable energy generation

Description

Rather than having a system onsite, you can purchase LGCs from a renewable energy project that is grid-connected, or offsite. There are principally two options to purchase offsite LGCs – either through a Power Purchase Agreement (PPA) or through a broker.

Treatment

Large-scale Generation Certificates (LGCs) are treated the same as the purchase of GreenPower® provided the certificates are retired. If you have entered into a PPA without obtaining and retiring the LGCs (purchasing the black portion only), then you cannot claim the emissions reduction/renewable energy attributes from the project.

 

A note on surplus electricity

The treatment of surplus electricity from renewable energy and batteries from the perspective of renewable energy and carbon abatement claims is complex. You can read more about this topic in our blog post at  https://100percentrenewables.com.au/how-to-account-for-exported-solar-electricity/.

GreenPower®

Description

The GreenPower® program is an independent government accreditation scheme and is recognised as the most highly regarded standard for offsite renewables in Australia. GreenPower® purchases are additional to Australia’s Renewable Energy Target, and an extensive two-tier auditing process ensures that no double counting can occur. To purchase GreenPower®, you can approach your electricity retailer, buy from an independent provider, decoupled from your electricity agreement or through a GreenPower® PPA.

Treatment

The purchase of GreenPower® is considered to be equivalent to the direct use of renewable energy. This means that you can claim the emissions reduction associated with this action. You can also use purchased GreenPower® towards your renewable energy claims.

Australian Carbon Credit Units (ACCUs)

Description

The Emission Reduction Fund (ERF) is a voluntary scheme that provides incentives for organisations and individuals to adopt new practices and technologies to reduce their emissions. Participants can earn ACCUs for emissions reductions. The ACCUs can be sold to the Commonwealth under a carbon abatement contract with the Clean Energy Regulator, or they can be sold on the voluntary market and are eligible as offset units under the Climate Active.

Treatment

If you generate ACCUs from emissions reduction projects occurring within your boundary, you can claim the reduction as part of your carbon account only if the ACCUs from your projects are voluntarily retired. If the ACCUs are not retired, you are required to account for your emissions without the reductions associated with the projects (i.e. as though the projects had never occurred).

Carbon offsets

Description

One carbon offset represents one tonne of carbon emissions that are not released into the atmosphere, that occur as a result of a discrete project. The emissions reductions from a particular carbon offset project can be sold to enable the purchaser to claim those carbon reductions as their own. Renewable energy is one type of offset activity, but there are many others like energy efficiency or forestry projects.

Treatment

Carbon offsets can be used to offset any emission source, including ones that are not electricity related. You cannot use carbon offset for any renewable energy claims.

State-based white certificate schemes

Description

Several jurisdictions have energy efficiency schemes that require energy retailers to achieve energy efficiency in their customer portfolio. The NSW Energy Savings Scheme and the Victorian Energy Efficiency Target Scheme are the biggest in terms of number of certificates. The ACT and South Australia operate similar, but smaller schemes mainly targeting households and small business.

Energy Savings Certificates (ESCs) – New South Wales only

ESCs created under the Energy Savings Scheme (ESS) reward energy-saving projects through a financial value on every tonne of carbon that is abated by an organisation. The objective of the scheme is to reward companies that undertake projects that either reduce electricity consumption or improve the efficiency of energy use. The ESS began on the 1st July 2009 and is part of the NSW Government’s plan to cut greenhouse gas emissions. The scheme is legislated to run until 2025 or until there is an equivalent national energy efficiency scheme.

Victorian Energy Efficiency Certificates (VEECs) -Victoria only

The VEET scheme was established under the Victorian Energy Efficiency Target Act 2007 and commenced on 1 January 2009. Each VEEC represents one tonne of carbon dioxide equivalent (CO2-e) abated by specified energy saving activities known as prescribed activities. The abatement is calculated by comparing the difference between the energy use after the completion of an upgrade or project and the ‘baseline’ energy use, which refers to the amount of energy that would have been used if the energy efficient installation/project had not taken place. VEECs are bought by large energy retailers with a liability under the scheme.

Treatment of white certificate schemes

You are not required to account for state or territory-based energy efficiency schemes. Emissions reductions resulting from activities supported by these schemes can be counted towards your carbon account regardless of whether any associated certificates have been created, sold or transferred to any other party. So, in short, you can claim the ESCs/VEECs/other white certificates and the carbon reduction.

 

Carbon accounting for all these different federal and state schemes can be confusing, as may be accounting for your Scope 3 emissions. If you need an expert to help you with putting your carbon inventory together, please contact Barbara or Patrick.

Feel free to use an excerpt of this blog on your own site, newsletter, blog, etc. Just send us a copy or link and include the following text at the end of the excerpt: “This content is reprinted from 100% Renewables Pty Ltd’s blog. 

Breaking through the 100 kW ceiling

In this article, we are looking at the reasons you should consider installing greater than 100 kW solar PV systems and who is leading in this field.

Australia has the highest number of solar PV systems per-capita in the world, with over 1.7 million systems installed since 2001. The total installed capacity surpassed 5,000 MW in early 2016, and just 20 months later it passed the 6,500 MW level[i].

Solar PV installations have increased in both number and size

Households have driven the total number of installations and have provided most of the installed capacity. However, utility and commercial-scale solar have become more prominent in recent years, and have helped to increase the average size of all installed solar PV systems from 1.77 kW in 2010 to almost 4 kW by the end of 2017.

At the utility level, we have seen projects such as the Nyngan 102 MW, Moree 56 MW and Broken Hill 53 MW systems completed, with many of the projects supported by ARENA’s large-scale solar photovoltaics round to come online soon.

At the commercial scale, the Clean Energy Council reported that the 75-100 kW market is the fastest growing sector in the solar market[ii]. This includes businesses who are keen to invest in solar but wish to avail of the upfront discount from Small-scale Technology Certificates (STCs).

Solar PV systems are now breaking through the 100 kW ceiling

Customer-level implementation of solar PV systems greater than 100 kW is also rapidly growing. Let’s analyse solar installations under 4 MW but greater than 100 kW:

  • In 2016 and 2017, almost the same number of installations (96) were installed as those between 2001 and 2015 (103).
  • In terms of capacity, over 37 MW was added in 2016 and 2017 by systems in the 100-4,000 kW range, compared with 38 MW in the preceding 15 years.

Why is this trend occurring?

This trend is significant as it means that accessing the STC as an upfront discount is becoming less important as a driver of the business case for solar. When talking to our customers, the reasons why they are installing or considering installing larger solar PV systems are numerous.

6 reasons why you should install solar PV systems greater than 100 kW
6 reasons why you should install solar PV systems greater than 100 kW

Here are the six reasons why you should go larger than 100 kW:

  1. Wholesale electricity prices – many businesses have seen their contestable electricity costs increase steeply in recent months, in some cases by as much as 250%. In response, business is re-taking control where they can. Solar, as well as efficiency initiatives such as LED lighting, are tangible measures that offer certainty of savings and a long-term hedge against some of the volatility in the market.
  2. Declining costs of solar means it is becoming cost effective without subsidies – Solar Choice’s November 2017 index of solar PV prices[iii] reports that 100 kW systems now have a median price of just $1.12/Watt inclusive of STCs, which equates to around $1.80/watt total cost. This median price continues a downward trend in commercial-scale solar PV prices of close to 20% over the past four years.
  3. Others are doing it – increasingly businesses see competitors and peers in their region and sector installing solar PV systems and reap rewards through recognition and better reputation. More and more businesses are responding by acting themselves to ensure they remain competitive.
  4. Meeting corporate goals/targets – many businesses, particularly large corporates, have sustainability targets which often include ambitious goals for renewable energy and/or carbon emissions, and many businesses also face supply-chain pressure to improve their sustainability performance. Maximising behind-the-meter solar PV on their facilities is a prominent way to achieve sustainability goals, save costs, improve reputation, motivate staff and demonstrate to customers and supply-chain partners how they are ‘walking the talk’.
  5. Large-scale Generation Certificates – while renewable energy incentives are not as ‘critical’ to the business case as they were a few years ago, the availability of LGCs at today’s spot prices, even for a few years, remains an important financial incentive. Conversely for some businesses, retiring their LGCs is a tangible step they take to validate the carbon abatement they achieve from their solar investment.
  6. Battery storage – it’s not front-of-mind, but most businesses are aware of it and know that in a few years’ time storage will be much cheaper and will offer them the ability to derive greater value from their solar investments, through higher self-consumption, load shifting, reduced peak demand and potentially network support. In the meantime, improved feed-in rates for exported electricity helps the business case.

Who is implementing solar PV systems over 100 kW?

Just 18 solar PV systems greater than 100 kW were built before 2012. The Singleton PV power station led the way, originally built for the Sydney Olympic Games in 2000. This system then led the way again in 2015, showing how a generator could contract directly with an end user (University of Technology Sydney) to supply power.

Some of the other ‘early adopters’ of greater than 100 kW systems were local councils such as Coffs Harbour City Council’s Rigby House (136.5 kW) and airports in both Adelaide and Alice Springs. The Northern Territory was the most active region, implementing nearly half of the systems completed by 2011.

Since 2011 the range of sectors and the locations of solar PV systems greater than 100 kW has increased significantly. Most prominent among adopters of these systems are aged care providers, retail properties, wineries, education facilities and mining & manufacturing firms. These tend to be facilities with large roof or land space and large continuous daytime load that can be part-met by on-site solar power.

In terms of scale, many of the largest systems are being installed by the retail property sector and by Universities. CSU’s Wagga Wagga campus 1,769 kW system and Stockland Shellharbour’s 1,218 kW system are prominent examples.

What are our clients planning?

Many of our clients are planning solar PV projects that will well and truly exceed 100 kW.

  • More and more aged care providers are looking at solar PV and embedded network strategies, extending beyond their main buildings to include residential care homes that will enable them to provide lower cost sustainable energy to their residents.
  • We are seeing many local councils and water authorities recognise the potential for solar on water and wastewater treatment facilities, including land, buildings, reservoirs, ponds and dams. Lismore City Council’s 100 kW floating solar plant will undoubtedly see others replicate this approach, benefit from Lismore’s lead and scale up to larger systems.
  • Several Universities are planning systems that will follow UQ’s and CSU’s leadership, and we expect more mining and manufacturing facilities to do likewise.

Your next steps

The business case for maximising your solar PV potential based on your load and available space has become very attractive in the last two years.

As Patrick, technical director at 100% Renewables puts it, ‘We know that energy prices are going up. We know that costs for solar panels are going down. Staff and customers want you to power your organisation with renewable energy. The business case is clear, and organisations with the capacity to install solar can ‘walk the talk’, take back control of their energy costs and improve their triple bottom line.

For more information, contact or Patrick or Barbara.

Feel free to use an excerpt of this blog on your own site, newsletter, blog, etc. Just send us a copy or link and include the following text at the end of the excerpt: “This content is reprinted from 100% Renewables Pty Ltd’s blog.

[i] Source: http://pv-map.apvi.org.au/analyses

[ii] https://www.cleanenergycouncil.org.au/technologies/solar-pv.html

[iii] https://www.solarchoice.net.au/blog/commercial-solar-pv-price-index-for-november-2017/