Renewable Energy Certificates Explained

Renewable Energy Certificates Explained

Australia is cited as one of the countries that faces a great amount of risk from climate change. The burning of coal is seen as a major factor contributing to climate change in Australia. However, Australia has a significant potential for generating power from renewable energy sources such as solar, wind, geothermal, etc. Design and installation of such technologies are expected to mitigate the generation of greenhouse gases substantially.

With a view to increase the generation and use of renewable energy, the Renewable Energy (Electricity) Act 2000 made it compulsory for electricity retailers and major users to purchase a specified amount of electricity from clean energy generators. They also needed to produce evidence of purchase of renewable energy by acquiring Renewable Energy Certificates (RECs). Each REC represents one MWh of electricity purchased. In case of failure to acquire the requisite number of RECs that would meet the annual target according to the legislation, the parties have to pay a fine of AUD40 per MWh.  The Mandatory Renewable Energy Target has been increased to 45,000 GWh from 9500 GWh to meet a target that would ensure that 20% of the total electricity supply is from renewable energy sources. This would mean a total generation of 45,000,000 RECs.

The RET itself has been split further into two separate targets: RECs from large generators of renewable power such as wind farms and hydro power stations and RECs from small renewable power generating devices such as solar power devices.

A particular number of Large-Scale Generation Certificates (LGCs) have to be surrendered annually to show evidence of meeting RET requirements. Alternately, they can be voluntarily surrendered for any other reason through the year. One LGC is created on the REC Registry for every MWh power of renewable energy over the baseline of the power station. LGCs are usually validated by the ORER and can be transferred between concerned parties for a negotiated price outside the REC Registry.

The Small-Scale Technology Certificates (STCs) are surrendered quarterly to show compliance with the requirements of the SRES. One STC is equivalent to one MWh generated with the help of a small generating unit (unless the solar credits REC multiplier figure is applicable). It is also equivalent to one MWh of electricity displaced by the installation of a solar water heater. A registered agent such as an installer can provide a discount against STCs for the user. Alternately, they can be traded through the clearing house for STCs for a fixed price of AUD40.

The Solar Credits Scheme was set up to help small businesses and households install renewable energy systems to meet a part of their power requirements. As of today, RECs issued to power systems up to 1.5kW capacity can be multiplied by a factor of five for installations that qualify. Australia is divided into many zones for the purpose of calculating the eligible number of RECs. The multiplier reduces with the passage of time and reduced costs of technology. However, it is important to note that amendments to the RET in 2010 and other changes to the legislation has conferred on the ORER the discretion and authority to change the multiplier for the solar credits program or change the system size.

Category: Solar Articles


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