How can your business benefit from the Renewable Energy Target?

Written by: Beth Mclachlan of EPA Victoria

This article follows the 'Introduction to the Renewable Energy Target' article in the previous edition of Carbon Matters. While the previous article discussed the implications of the legislation on those organizations purchasing electricity, this article discusses the implications for businesses producing, or considering producing, renewable energy onsite.

The Renewable Energy Target (RET) legislation was passed by the Commonwealth Parliament on 20 August 2009. This legislation outlines the requirement on electricity suppliers to source at least 45,000GWh of Australia's electricity from renewable sources by 2020, which is expected to be about 20% of electricity generation at that time. This includes renewable energy generated by a variety of renewable energy sources including solar, hydro and wind.

What are Renewable Energy Certificates (RECs)?
The RET provides businesses with a financial incentive to generate renewable energy through the creation of Renewable Energy Certificates (RECs), which are tradable certificates, representing a unit of renewable energy, which can be bought and sold.

Each REC represents a megawatt-hour of eligible renewable electricity. Each certificate is created on an internet based registry system called the REC Registry, managed by the Australian Office of the Renewable Energy Regulator, known as the REC Registry. RECs are eventually surrendered to meet compliance against the Commonwealth Government's Renewable Energy Target, or are voluntarily surrendered to demonstrate additional renewable energy generation.

The RET allows a renewable energy generator to have two streams of income from their renewable electricity production. They can sell their electricity and their renewable energy (or RECs) separately.  As RECs currently sell at between $30 and $40 per MWh (and are capped at $65 MWh), this allows for a significant additional income for the business generating onsite renewable energy.

Source: Renewable Energy Regulator, Australia

Who can create Renewable Energy Certificates?
The Renewable Energy Target (RET) legislation outlines which "eligible parties" can create, sell, and transfer RECs on the REC Registry. Owners or operators of the following types of electricity generations are eligible to apply for RECs:

• eligible renewable power stations
• eligible solar water heaters
• small generation units (including small sized photovoltaic systems (solar), wind systems and small hydro systems).

REC's must be created on the REC registry within a certain time frame of installation of the electricity generation system, which is generally twelve months.

Small Generation Units (SGU)
In order to meet the eligibility requirements, SGUs must meet certain capacity and installation timing conditions which are outlined on the Office of the Renewable Energy Regulators website.

Under the RET, small-scale renewable energy generators, are able to claim multiple RECs for every MWh, between 2009 and 2015. These credits are available to systems installed on or after the 9 June 2009.

The multiplication of RECs for additional small-scale renewable energy generators under RET is as follows.

Options for Business
If you are generating renewable energy and you create RECs you can choose either to trade them on the market or voluntarily surrender them. Below is some more detail regarding these options.

Trading
Owners of eligible renewable energy generation systems have the option to trade their RECs themselves or assign them to an agent, who can trade on their behalf.

The owner or agent is able to set the price of their RECs (up to $65 MWh). In order to set a price which is consistent with the market, it is recommended that the trader obtains an understanding of the current market activity prior to setting their own REC price.

Wholesale purchasers of electricity (or liable entities), as defined in the Renewable Energy Electricity Act 2000, are required to surrender a certain number of RECs each year to allow Australia to meet its renewable energy target. On 14 February each year liable entities are required to surrender RECs equivalent to their liability for the previous calendar year. This generates significant demand in the REC market.

Voluntary surrender of Renewable Energy Certificates
The owners of any RECs can choose to voluntarily surrender them. Some of the main drivers for the surrender of RECs include encouraging additional generation of renewable electricity or to demonstrate use of additional renewable electricity.

RECs accepted for voluntary surrender are permanently removed from the REC market and cannot be transferred to another party or be used to discharge a mandatory liability under the RET.

Resources and further reading
For more information on the Renewable Energy Target visit the Office of the Renewable Energy Regulator website and information sheet at:

• http://www.orer.gov.au/SGU/index.html
• http://www.orer.gov.au/publications/
  pubs/ret-thebasics-0909.pdf

Would you like to discuss this topic with other members?
If you have some thoughts or a response to this article, please visit the Carbon Innovators Network website and post a new topic, or contribute to one that another member has created at: http://www.carboninnovators.net.au/forum/topics