The shortfall charge is the stick behind the Renewable Energy Target. It is what turns a regulatory percentage into reliable demand.
The amount
If a liable entity does not surrender enough STCs by the deadline, it pays a shortfall charge of $65 for each certificate it failed to surrender. The same $65 applies to LGCs. The regulator has said it has no discretion to extend surrender deadlines, so the charge applies when the date is missed.
Why $65 and why it matters
The Clearing House sells STCs at $40 ex GST. The shortfall charge is $65. That gap is the point. A retailer that falls short pays about 60 per cent more than if it had bought a certificate at the ceiling, and the charge does not give the retailer a certificate.
So no rational retailer chooses the charge. It creates a hard ceiling on what a retailer will ever pay in extremis and a guarantee that it will pay up to $40 rather than risk $65. That is what holds the market price near the Clearing House level. We explain the ceiling in why the STC price is capped at $40.
How it fits with the surrender cycle
Surrender is quarterly, with deadlines of 28 April, 28 July, 28 October and 14 February, as set out in how liable entities surrender STCs. The charge is calculated on the shortfall for the relevant period.
Is the charge tax deductible
The regulator treats shortfall charges as non-deductible for tax purposes under the legislation. If you need to rely on that, confirm with the regulator’s guidance or a tax adviser, because tax treatment is outside the scope of this page.
Who actually pays
Only liable entities pay it, and nearly all are retailers. Installers, homeowners and certificate traders are not subject to it. See who liable entities are.
How the charge is administered
The regulator assesses each liable entity’s liability against what it surrendered and issues a shortfall statement where there is a gap. The charge is a debt to the Commonwealth and the regulator can recover it. Because the penalty is so much higher than the market price, enforcement is rarely the issue. The practical consequence is the opposite: retailers over-prepare, which supports demand and keeps the spot price close to the ceiling.
What this means for installers
The shortfall charge underwrites your market. Retailers have to buy, so your certificates always have a buyer at the end of the chain, and the fixed ceiling keeps your price close to $40 ex GST. Your actual proceeds depend on your trader, so check the pricing page, and how STC trading works for the path from install to payment.