Renewable Energy Certificates – The Energy Currency

Renewable Energy Certificates – The Energy Currency

Australia’s greenhouse gas per capita emission values are currently the highest in the world with a major portion of the emissions, about 35%, contributed by the electricity generation sector. In order to bring down the greenhouse gas emission levels, the Australian government has begun focusing on renewable sources of energy. The outcome of this focus is the government sponsored Mandatory Renewable Energy Target (MRET) scheme that was implemented in 2001 with a view to increase energy contribution from this area.

MRET fixed a target to generate 9500 GWh per year by 2010. Later, the target for renewable energy generation (i.e., RET scheme) was implemented in 2009 and fixed at 45000 GWh per year by 2020. This ambitious plan is to increase energy contributed by renewable sources from a mere 7% to 20% in 2020. Since 2011, the RET has been separated into two parts: one for the large-scale players and the other for small-scale players.

Australia has large deposits of coal, used for thermal power generation and which contributes to about 76% of the total power generated. Therefore, only a favorable government policy will help to improve generation of power from renewable sources such as the sun and wind.

The RET is implemented nationally through certain legislations which makes it mandatory for energy companies and large-scale consumers to buy a portion of electricity requirement, from renewable sources, to contribute towards the 45000 GWh target. This obligation is met by purchasing Renewable Energy Certificates. You can find extensive information about Renewable Energy Certificates here.

Any user, who purchases 1 MWh of renewable power, gets one REC. Though they were created for meeting the additional 9500 GWh per year goal, RECs are sure to play a significant role in guiding the nation towards the 2020 target. For this, 45,000,000 Renewable Energy Certificates will be generated.

For energy companies, it is mandatory to surrender Renewable Energy Certificates at every year-end into their holding account for an amount equivalent to 20% of their share in the market. In case this obligation is not met, the companies are fined at a higher rate than the value of the certificate. The supply of renewable energy is through anyone who has connected the solar power system to the grid.

These Renewable Energy Certificates can be traded for cash in the certificate market. The value fluctuates according to market demand for the certificates. The correct REC value is determined by the ORER.

Renewable Energy Certificates and Solar Credits

The scheme of solar credits was launched within the RET scheme to encourage households as well as small businesses that install solar, wind and hydro power systems. It works by multiplying the number of Renewable Energy Certificates issued to power systems up to 1.5 kW by a factor as high as five for qualifying installations. Solar credits are applicable only to grid connect and off grid solar power installations. However, the factor reduces with passage of time along with reduced technology costs.

Australia is divided into different zones for the purpose of calculating the number of eligible Renewable Energy Certificates. Another factor that is considered is the energy generation capacity of the solar panel in the specific location. The certificates can be sold through agencies that help to realize the cash which can be used as discount against solar power system components that are purchased. They can also be surrendered to the installer/designer of the power system to reduce the upfront expenditure of the equipment. Alternately, an REC agent would trade them in the market. These certificates can be exchanged for cash and makes for a substantial amount of savings.

The REC’s value is prone to fluctuations and market volatility. To get substantial discounts as an installer, timing the purchase of the solar system components is important. Maximum discounts can be realized when the RECs are priced higher. Some installers offer fixed prices to customers to protect them from market volatility.

The REC registry is the Internet based system that records and maintains the history of every REC from its creation to transfer of ownership to details of final surrender. The ORER uses the registry to perform functions pertaining to the management, audit, and report renewable energy market performance and compliance.

For additional information on Renewable Energy Certificates and Solar Credits, please our page on solar rebates.

Category: Solar Articles

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