ERM Power chooses $123m penalty over renewable energy obligations

Snowtown Wind Farm

ERM Power will pay $123 million in shortfall charges rather than meet their full obligation to surrender large-scale generation certificates under the Renewable Energy Target.

The company said they would meet its obligations under the Large-scale Generation Scheme through a combination of surrendering certificates and paying the shortfall charges.

“Due to market and pricing conditions and within the Scheme design, ERM Power has elected to pay the shortfall charge in lieu of surrendering 1.9 million LGCs,” a company statement said.

“As advised in June, the market price for LGCs has more than doubled and traded up toward $90 per certificate during FY2017 versus the non-tax deductible shortfall charge of $65 per certificate.

“By electing to pay the shortfall charge of $65 per certificate in place of surrendering 1.9 million LGCs, ERM Power has adopted an approach which accelerates the utilisation of tax losses and preserves the right to purchase and surrender certificates for 2016 within the prescribed three-year window.”

The Clean Energy Regulator is investigating the matter to “ensure that ERM Power is held to account for their obligations”.

The objectives of the Renewable Energy Target are to increase Australia’s generation of electricity from clean sources, and reduce Australia’s carbon emissions.

Under the Renewable Energy (Electricity) Act 2000, each electricity retailer meets their obligations under the Renewable Energy Target by surrendering large-scale generation certificates to the Clean Energy Regulator in proportion to their share of the electricity market.

Retailers acquire these large-scale generation certificates from renewable energy power generators such as wind or solar farms.

A shortfall charge is imposed on those who fail to surrender sufficient certificates.

“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,” Clean Energy Regulator chair Chloe Munro said.

 

“It’s hugely disappointing that a major company has deliberately chosen to pay a large shortfall charge.”