Australia’s new ‘enhanced’ Renewable Energy Target (RET)
On Thursday 24th June 2010, the Australian Parliament passed significant changes to the Renewable Energy Target (RET) legislation, many of which are extremely positive for Alternative Technology Assoctiation (ATA) members and households who want to invest in both small and large scale renewable electricity generation and energy efficiency technologies.
In August 2009, the Federal Government secured one of its 2007 election promises to expand the RET to ensure that 20% of Australia’s electrical energy came from renewables in the year 2020.
Whilst the expansion of the RET was a positive move, a number of key design features that ATA, along with a number of other community and industry organisations, had been advocating for were overlooked by the government.
The most significant of these was the fact that strong incentives for small scale systems such as solar photovoltaic (PV) systems and solar water heaters, were leading to an oversupply of Renewable Energy Certificates (RECs) in the market, significantly dampening their price, and hampering the ability of large scale projects to obtain finance to develop.
From ATA’s perspective, the existence of fixed annual targets within the previous version of the RET, and the existence of the ‘Solar Credits’ multiplier for small solar, small wind and micro-hydro systems, meant that not only were investors in small scale technologies being prevented from achieving anything additional beyond the government’s mandated targets, but they were actually reducing the amount of new renewable energy installed by four times the size of their system – clearly not their intention!
After significant lobbying and media pressure in early 2010, the Federal Government finally agreed to amending the design of their expanded RET scheme.
The solution offered by the government through the new ‘enhanced’ RET will see the small and large scale renewable energy markets split into two totally separate trading markets – so that activity and investment in one will not compromise the other.
From 1 January 2011, there will be a Small Renewable Energy Scheme (SRES) and a Large Renewable Energy Target (LRET).
The LRET will continue to operate in much the same way as the existing RET – but with eligibility restricted to large scale renewables such as wind farms, bio-gas plants, wave, geo-thermal and large scale solar projects. The LRET will have annual targets that make up approximately 90% of the existing RET.
The SRES will make up the remaining shortfall, and will likely in the short term go higher than the existing RET targets, meaning that the new scheme will likely deliver slightly more renewable energy across Australia.
Most importantly to ATA members and investors in small scale technologies, the SRES will be uncapped – that is, there will be no fixed annual targets for small scale technologies. All RECs from small systems such as solar PV, small wind, solar hot water, heat pumps and micro-hydro systems will be purchased each year by electricity retailers.
The lack of a cap or annual targets for the SRES means that two fundamental problems of investing in small scale technologies have now been solved:
• Firstly, investors in small scale technologies can be additional to the targets mandated by the government; and
• Secondly, investors in small scale technologies will not be reducing the amount of new renewable energy installed.
The SRES will also include a fixed price for RECs of $40, providing greater financial certainty to investors in small scale technologies.
Finally, the ‘enhanced’ RET will also see the Solar Credits multiplier extend to investors in remote off-grid systems – up to 20kW in size for solar; up to 10kW for small wind and up to 6.4kW for micro-hydro systems. This is a positive step after the winding up of the remote off-grid subsidy (the Remote Renewable Power Generation Program) in September 2009.
For further details on the enhanced RET, please contact Damien Moyse, ATA Energy Policy Manager at: email@example.com
An outline of other important aspects of the enhanced RET include:
Why a RET?
In the absence of a high enough price on carbon, the RET is required to drive investment in new renewable energy projects. Overall, it represents an additional 35,500 GWh of electricity from renewable sources from 2009 levels – achieving a projected total of 60,000 GWh in the year 2020 – equivalent to 20% of Australia’s projected electricity demand in that year.
Solar Credits Scheme
The Solar Credits Scheme exists within the enhanced RET and is aimed directly at small generators. The scheme awards an artificially inflated (multiplied) number of Renewable Energy Certificates (RECs) to small generation units including solar PV, small-wind and micro-hydro. Until 30 June 2011, a 5 times multiplier will be applicable to small generation units up to 1.5 kW in size, with this multiplier reducing annually by a factor of one until mid 2014. For more information on the solar credits scheme, go to: www.orer.gov.au/sgu/option1.html
Solar Water Heaters
Solar water heaters remain an eligible system type under the enhanced RET. Whilst solar hot water is one of the best ways to reduce emissions and electricity demand, it isn’t electricity generation, and ATA maintains our view that in the longer term, the more appropriate mechanism to support solar water heaters is a national energy efficiency market, such as exists now in Victoria, South Australia and New South Wales.