July 16 Australia's renewable energy target is a mandatory national scheme that aims to boost green energy generation and give investors in large renewable energy projects more certainty on investment returns.
The RET sets a target of 20 percent renewable energy generation in Australia by 2020 from a few percent now.
It also places a legal obligation on wholesale power retailers and some generators to support the creation of additional green power and halt the expansion of polluting coal-fired generation.
Following are key points about the scheme, which first began in 2001 but was significantly revamped by the current government in 2009, with further amendments passed by parliament last month.
GENERATE AND TRADE
The scheme rewards investors with renewable energy certificates, or RECs, that can be sold to a ready market of buyers.
Each REC equals one megawatt/hour of green power produced and retailers buy these at a negotiated price through a regulated market. The RECs are held in a government-supervised registry.
Retailers and some generators are legally bound to buy RECs and the amount is based on an annual calculation depending on the level of their liability.
HITTING THE TARGET
To achieve the 20 percent goal, the government has legislated renewable energy generation of nearly 46,000 gigawatt-hours by 2020. The bulk of this will come from large green power projects.
The scheme had run into trouble because of a flood of RECs, largely from small household solar installations. This had driven down the market price for the certificates, deterring investment in large projects.
Big wind farm developers say they need a REC price of at least A$65 each instead of about A$40 now to cover investment costs.
Recent amendments mean the scheme will be split into two from Jan 1, 2011 -- the Small-scale Renewable Energy Scheme (SRES) and the Large-scale Renewable Energy Target (LRET).
At least 41,000 GWhr will come from large-scale projects and the government has set a series of annual targets, from 10,400 GWhr for 2011, 18,000 GWhr by 2015 and 41,000 GWhr by 2020. The scheme runs until 2030 to give investors long-term certainty on returns.
The government says the degree to which the 20 percent target is exceeded will depend on the uptake of small-scale technologies by households, small business and community groups.
The LRET portion of the target will be increased to ensure the 20 percent by 2020 target is still met if the uptake of small-scale technologies is lower than anticipated.
The government and Greens amended the laws in the Senate in June. Under the Greens amendments, the government will review the scheme every two years to take account of new technology.
The government amended its laws to allow the renewable energy target to be temporarily raised in 2012 and 2013, if needed, to absorb a possible boom in RECs generated from household solar panels. That will help support the value of RECs for large power generators.
But analysts say there will still be a glut of RECs until about 2014, after which demand will start to outstrip supply.
Macquarie Equity Research estimates a glut of about 12.6 million certificates worth A$504 million ($440 million) will accumulate by the end of 2010, before tapering down to about 1.5 million by 2014.
FIXED PRICE FOR HOUSEHOLDS
The small-scale scheme offers A$40 for each REC created by small-scale technologies such as solar panels and solar water heaters, effectively providing a floor price for RECs.
The number of systems receiving support under the SRES will be uncapped to ensure small-scale installers have certainty. (A$1=87 U.S. cents) (Source: Office of the Renewable Energy Regulator and the Australian Department of Climate Change) (Reporting by David Fogarty; Editing by Clarence Fernandez)