On Friday 27 February 2010 the Minister for Climate Change announced some very positive changes to the prices of Renewable Energy Certificates (RECs, also known as Small-scale Technology Certificates or STCs). The changes add to options for the ways that RECs/STCs generated from the Solar Credits scheme can be traded.
(Get a free solar quote comparison for installers in your area.)
–Update 19 August 2011: This article has been updated and clarified. Please read our more recent article for a detailed explanation of the Enhanced Renewable Energy Target or read about federal solar credits and rebates.-
–Update 20 Sept 2011: The current REC / STC price can now be viewed on our Renewable Energy Certificates page.-
RECs/STCs are a special financial instrument created to boost the amount of renewable energy being generated in Australia to 20% by 2020. They work by providing a subsidy for the clean energy generated from renewable sources, making it more economical to build and install green power. Initially the scheme was designed for the big end up town – large wind farms, hydro electric power and industrial scale solar plants.
When domestic solar hot water and solar PV were later included in the scheme with additional incentives, a flood of certificates washed into the market, depressing the price of RECs/STCs and thus reducing the subsidy. The policy changes are an attempt to ameliorate this problem by creating two categories of REC–one for small-scale generators and one for large-scale.
What are the changes to the REC scheme?
From 1 January 2011 the Renewable Energy Target has been divided into two parts – the Small-scale Renewable Energy Scheme (SRES, from which STCs are generated, and the Large-scale Renewable Energy Target (LRET), from which LGCs (Large-scale Generation Certificates) are generated. The Small-scale Renewable Energy Scheme is the part of greatest interest to households and small business, as it covers technologies such as solar PV panels under 100kW.
REC/STC prices guaranteed at $40?
Under the changes to the Renewable Energy Target scheme, there is occasionally some confusion about the guaranteed $40 REC price. The Federal government has created a REC/STC Clearing House for those who are prepared to wait to sell their certificates. Please keep in mind that when the REC/STC price is low (it has fallen as low as about $16, and currently sits at the price you see on the right of this page–>) it is unlikely that you will find a buyer through the clearing house.
It is not entirely clear what the benefits of the clearing house are, except that it is a safe place to keep your certificates if you are waiting for the price to come back up before you sell them. (Most people usually choose to relinquish ownership of their certificates to their installers for an up-front discount on their system.)
The revised scheme will operate exactly as before, and all of the eligibility criteria are the same as in the Solar Credits program.
For more information on the proposed scheme, see the Department of Climate Change Enhanced Renewable Energy Target fact sheet here, or for up-to-date information with regard to RECs and the RET, please check the ORER website here.
What benefits would REC / STC price security provide?
All RECs / STCs are market instruments with prices that fluctuate regularly, making it difficult for consumers to understand how large a discount they will receive on their solar power system. In addition, the spot price (current market price) of REC’s has fallen below expectations to around $36 at the time this blog was posted, and as little as $23 in late 2009. The $40-per-REC guarantee will provide a rebate for those who are willing to wait for a buyer through the STC Clearing House instead of receiving an up-front discount.
Unfortunately, the non-Clearing House REC / STC market as it currently favours large installers who have the customer volumes to be able to negotiate REC prices directly with buyers and secure above market values. Smaller installers are forced to go through an agent, and hence can often not match the price of the larger players. With a guaranteed price of $40 from 2011, all installers would be able to offer this good rate.
The biggest beneficiary of a guaranteed price, though, would be the environment. The previous problems in the scheme had depressed the price of RECs to a point where large renewable energy projects are no longer feasible and have been put on ice.
Fortunately, the LGC price has stayed strong since the changes to the scheme (see a recent spot price on the right side of this page–>), has the potential to support Australia’s on its way to reaching its 20% renewable energy target. The new changes should work to remove these design flaws for large players and get things back on track.
Who is eligible?
The changes to the eRET scheme operate within the existing Solar Credits scheme, so all the usual rules apply. All solar PV systems with no more than 100 kW of installed capacity (massively more then any normal house would consume) and a total annual electricity output less than 250 MWh will receive RECs guaranteed at $40 under the Solar Credits scheme. The first 1.5kW of installed capacity will receive 3 times the usual number of REC’s allocated, to encourage every house to install solar cells. The number of systems receiving support under the SRES will also be uncapped to ensure small-scale installers have certainty.
Should I wait until next year to install a Solar Power System?
(Some of the information below is out of date. Please read about decision-making in the face of ever-improving solar PV efficiency and reducing prices.)
These changes to the REC market are proposed to only come into effect on the 1st of January 2011. Although waiting till this time could potentially benefit you with a REC price of $40 per certificate, prices of this magnitude are available now from many of the larger installers who have used their market power to secure better prices.
In addition, there is the considerable risk that by that time changes will have been made to the generous Feed In-Tariffs currently available. The NSW scheme is due for review after installed capacity reaches 50MW, and much of this capacity has already been booked for installation. The Victorian scheme has a cap of 100MW, and our best sources indicate that half of this has already been taken up. Hence, customers run the risk of missing out on the most attractive Feed In-Tariff subsidies.
Another possible strategy is to install your system now and either not create or not cash the REC certificates for your system. The Solar Credits scheme allows you up to one year from the date of install to create your certificates, and certificates have no requirement to be sold immediately. However, selling certificates is a complex task that most householders would not want to be burdened with, and would also mean you would have to wait almost a full year to receive the several thousand dollar subsidy, leaving you out of pocket in the meantime.
Solar Energy Consultant
Solar Choice Pty Ltd
© 2010 Solar Choice Pty Ltd
Office of the Renewable Energy Regulator website, updates to RET scheme: http://www.orer.gov.au/lret-sres-updates/index.html
Australian Department of Climate Change and Energy Efficiency: http://www.climatechange.gov.au/government/initiatives/~/media/publications/renewable-energy/enhanced-ret-fs-pdf
*This price may be subject to Ministerial review and therefore change, and RECs put up for sale through the ORER clearing house may not necessarily be guaranteed a buyer–this is still unclear. For up-to-date information on RECs and the RET scheme, please visit the ORER website.