What are Energy Savings Certificates (ESCs)?
An energy savings certificate (ESC) is a tradeable certificate created under Division 7 of Part 9 of the Electricity Supply Act 1995. Each ESC represents one notional megawatt hour (MWh) of energy.
More information about how ESCs are registered and transferred is available on the ESS Registry and ESS Portal page.
Who purchases ESCs?
People interested in buying ESCs include:
- Scheme Participants, who are required under ESS Legislation to acquire and surrender ESCs or pay a penalty. The number of ESCs required by a Scheme Participants depends on their compliance obligations
- Accredited Certificate Providers
- Intermediary agents who might subsequently sell the ESCs to Scheme Participants
- Organisations or individuals interested in voluntarily purchasing ESCs to offset energy use.
ESC pricing and penalty rates
The ESC price varies depending on market conditions.
There is no maximum price for an ESC. However, the penalty price acts as a practical maximum price. If a Scheme Participant does not surrender the required number of certificates in a given year (excluding any shortfall it is allowed to carry forward to the next compliance year), it must pay a penalty.
The penalty rate is set annually, and is published on the About Targets and Penalties page.
Some organisations such as the Australian Financial Markets Association (AFMA) and a few environmental brokers provide regular updates on certificate wholesale market prices. Subscription to these services typically involves a fee.
Most ESCs are traded under a direct contract between an Accredited Certificate Provider and a buyer. Contracts and prices may vary and there are currently no standard contracts or a recognised exchange for trading. We are currently aware of three types of contracts for trading certificates:
- Spot contract
- Forward contract
- Option contract.
For further guidance on contracts, please refer to the Environmental Product Conventions published by the Australian Financial Markets Association.
Please note that when dealing with some contracts, you may need to hold an Australian Financial Services Licence (which is issued by the Australian Securities & Investments Commission). You should seek independent advice on your obligations in relation to your chosen contracting model.
Anyone can negotiate directly with a Scheme Participant to sell ESCs. Some require a small number of certificates to meet their compliance obligations, and prefer to negotiate with Accredited Certificate Providers directly to avoid dealing with standard parcel sizes (typically of 5,000 certificates) traded in wholesale markets.
As the Scheme Regulator and Scheme Administrator of the Energy Savings Scheme, IPART is not involved in market transactions or negotiations. For more information about IPART’s role as Scheme Regulator and Scheme Administrator, please refer to the Roles in the Scheme page.
More information about how ESCs can be registered and transferred is available on the ESS Registry and ESS Portal.