The Federal Government provides support for all forms of renewable energy through a mechanism called the Renewable Energy Target (RET). The RET obliges ‘liable entities’ to purchase and surrender a certain number of Renewable Energy Certificates (RECs) every year, with the total number of RECs required to meet the target increasing annually. RECs can be purchased from 3rd parties or created by the utilities companies themselves by producing power from renewable energy sources such as solar power.
To ensure that the RET continues to meet its aims an independent review is conducted every two years, the most recent final report was released on 19 December 2012.
In order to encourage the development of both large-scale and small-scale renewable energy generators, the RET is divided into two segments: The Small-scale Renewable Energy Scheme (SRES) and the Large-scale Renewable Energy Target (LRET).
The Small-scale Renewable Energy Scheme (SRES):Residential and <100kW commercial solar power
The SRES was developed to assist households, small business and community groups with the cost of installing a solar PV system. The SRES works by issuing Small-scale Technology Certificates (STCs) to eligible households. STCs are based on the expected output of the solar system over a 15 year period (although most systems can be expected to have a functional lifespan of up to 30 years), one STC is the equivalent of 1 megawatt-hour (MWh) of renewable energy.
At the present time solar PV systems up to 100 kilowatts (kW) are eligible for STCs, however, the most recent RET review has put forward the suggestion that this be reduced to 10kW.
STCs, which can be described as a sort of renewable energy currency, can be bought, traded, and sold, and their value fluctuates with supply and demand. The current STC price sits at around $30, but has fallen as low as $16 and has been as high as $42.
As STCs are created based on the expected output of the system they can be created as soon as the system is installed, the system does not need to produce any power before its STCs are created. Under the expectation that they will produce more power, systems installed in sunnier locations are eligible to for a larger number of STCs,
while less sunny locations create fewer.
In effect, this provides an up-front discount for those who purchase solar systems for their homes or businesses, as installers usually assume the responsibility for creating the STCs as well as the risks associated with holding onto or selling them.