RECs / STCs – What are they and how are they calculated?

The highest amount of RECs go to Zone 1 properties, decreasing in steps to Zone 2, 3 and then 4.
REC zones in Australia
(Although still an accurate description of the REC scheme in general, some of the details in this article may be out of date! Please click here for regularly updated information on Renewable Energy Certificates (RECs)/STCs and the Federal Solar Credits scheme.)
(Chat with a Solar Choice broker about the incentives that apply to you and get a free comparison of solar quotes from solar system installers in your area.)
Solar Credit discounts for solar energy, and additional non-rebate incentives for solar hot water, wind energy and heat pumps, are underpinned by the value Renewable Energy Certificates (RECs).

At the turn of the millennium, the need to address runaway global warming became increasingly urgent and resulted in international calls to action. The Australian Government enacted the Mandatory Renewable Energy Target (MRET), with various sub-sets of legislation including the Renewable Energy (Electricity) Act2000 (C’th).

Under the this legislation several mechanisms were put into place to ensure that 9,500 GWh per year of renewable electrical energy was achieved by 2010.

What does a GWh stand for?

Energy is measured in various ways depending. With regards to renewable electrical energy, Watt hours (Wh) are used. They refer simply to the amount of power that is consumed or generated over the period of one hour. The prefix, in this case, a Giga (G), is just the particular multiplier that is being used to express a large figure.

 

1Wh  = 1 watt hour

1kWh (One Kilowatt hour) = 1,000 watt hours

1MWh (One Megawatt hour) = 1,000,000 watt hours

1GW (One Gigawatt hour) = 1,000,000,000 watt hours

 

For example, a 100 Watt light globe left on for 10 hours would consume 1kWh, that is, 100 Watts x 10 hours = 1,000 Watt hours = 1kWh.

How the MRET affects electricity retailers

The Office of the Renewable Energy Regulator (ORER) was established to oversee the implementation of the MRET. The ORER is a statutory authority that ensures that all electricity retailers and wholesale buyers uphold their now legal liability to contribute towards the generation of additional renewable energy. It does this by registering and reviewing the amount of RECs that each liable party obtains.

1 Renewable Energy Certificate (REC) = 1MW of energy over the course of 15 years, which is approx 1 tonne of abated carbon emissions.

Electricity retailers do this by installing sources of renewable energy themselves and thus receiving RECs from the government for them, or buying the RECs that other people or companies have received for a similar installation and registering them with the ORER.

These large wholesale purchasers of electricity are personally responsible for supporting an increase in the amount of electricity generated from renewable energy sources in proportion to their acquisitions of electricity. Larger electrical companies must obtain more RECs in order to uphold their part of the MRET.

How the MRET and RECs affect everyone else

So, we know that due to this new legislation, electricity companies and retailers have to establish certain amounts of renewable energy, or purchase RECs themselves from other sources, in order to abide by the MRET. What does that mean for the average person or company that is not involved in the wholesale purchase of energy? Well it’s quite simple. Basically if they install a source of renewable energy that is eligible to receive RECs, they have two main options for what they can do with them.

a)Grant them directly to the installer of your renewable energy source to receive a discounted outlay price.

b)Hold onto the REC so that it can be sold to an interested party (an REC trader) at a later date, perhaps when it has changed value.

Now the most important thing to remember about a REC is that it is a market-valued commodity. Their value changes from day to day depending on the relative disparities of supply and demand and market wide confidence and support. The figure has gone up and down considerably over the past few months, due to the recently volatile nature of the industry. At the time of this writing one REC was worth $36, though in recent times the value has reached $50. The penalty rate for a carbon pollluter not purchasing the statutory minimum number of RECs will be $60.

Another important aspect of the allocation of RECs to renewable energy installations is that the government has taken great steps to ensure that they are valued accurately. All models of renewable energy sources have undergone government supported appraisals to establish how efficiently they operate. It is vital that people installing renewable energy sources on their properties verify the exact amount of RECs they will receive with their installers. Some federal and state rebates require certain numbers of RECs in their eligibility terms.

One final factor that must be considered is the relative zone in which the installation takes place. Because Australia is a large continent with a wide range of sunshine hours across it’s latitudes, the nation has been divided into four zones, and the number of RECs that are allocated for an installation differs from zone to zone. The different annual availability of sunlight in the various regions therefore result in different amounts of energy, and thus RECs. Zone 1 installation gain the most RECs, working through to Zone 4 installations, which receive the least. This is illustrated in the picture at the top of this article.

With regards to electrical energy, it must be considered that the proposed Solar Credits Discount that runs under the Renewable Energy Target(RET) scheme involves increasing the number of RECs that a solar energy installation receives when it is installed. This is the new federal initiative for solar power, and was set to replace the very successful $8,000 Solar Homes and Communities Plan (SHCP) rebate that was cut-short on 9 June 2009. That means that the RECs are of vital importance to the future of solar energy in Australia, as they are set to become the major source of financial aid for future installations once the RET is established.

More information can be found here at http://www.green-bank.com.au/retonhold

That wraps up this articles examination of the RECs, the MRET, the ORER and what roles they play in the renewable energy sector of Australia today.


Jarrah Harburn
Solar Broker
Solar Choice Pty Ltd

© 2009 Solar Choice Pty Ltd

Jarrah Harburn

Jarrah is the Director of Solar Choice’s UK subsidiary, Solar Selections. He has 3 years' experience in the UK solar industry following 2 years' experience with Solar Choice in Australia.
Jarrah Harburn

Comments

  1. How do I work out how many stc’s I would generate for a 5kw solar system? I’ve looked at the stc calculator and I don’t know how many years 1, 5 or 15 to input for solar power and not sure if I input a 5 into the the section asking what is the rated power output in kW of my system. Thank you

    1. Hi Kate,

      Enter ’15 years’ for the deeming period in the calculator – this is the typical period that homes choose. There really isn’t a reason to choose shorter deeming period unless you plan on saving some of the STCs to trade on the market later (which is very very unusual and would mean the up-front ‘discount’ on your system would be less).

      From 1 Jan 2017, the maximum deeming period will drop from 15 years to 14 years, and so on until 2020 (the year until which the current Renewable Energy Target is in place).

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