On Friday 27 February 2010 the Minister for Climate Change announced some very positive changes to the prices of Renewable Energy Certificates (RECs, also known as Small-scale Technology Certificates or STCs). The changes add to options for the ways that RECs/STCs generated from the Solar Credits scheme can be traded.
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–Update 19 August 2011: This article has been updated and clarified. Please read our more recent article for a detailed explanation of the Enhanced Renewable Energy Target or read about federal solar credits and rebates.-
–Update 20 Sept 2011: The current REC / STC price can now be viewed on our Renewable Energy Certificates page.-
RECs/STCs are a special financial instrument created to boost the amount of renewable energy being generated in Australia to 20% by 2020. They work by providing a subsidy for the clean energy generated from renewable sources, making it more economical to build and install green power. Initially the scheme was designed for the big end up town – large wind farms, hydro electric power and industrial scale solar plants.
When domestic solar hot water and solar PV were later included in the scheme with additional incentives, a flood of certificates washed into the market, depressing the price of RECs/STCs and thus reducing the subsidy. The policy changes are an attempt to ameliorate this problem by creating two categories of REC–one for small-scale generators and one for large-scale.
What are the changes to the REC scheme?
From 1 January 2011 the Renewable Energy Target has been divided into two parts – the Small-scale Renewable Energy Scheme (SRES, from which STCs are generated, and the Large-scale Renewable Energy Target (LRET), from which LGCs (Large-scale Generation Certificates) are generated. The Small-scale Renewable Energy Scheme is the part of greatest interest to households and small business, as it covers technologies such as solar PV panels under 100kW.
REC/STC prices guaranteed at $40?
Under the changes to the Renewable Energy Target scheme, there is occasionally some confusion about the guaranteed $40 REC price. The Federal government has created a REC/STC Clearing House for those who are prepared to wait to sell their certificates. Please keep in mind that when the REC/STC price is low (it has fallen as low as about $16, and currently sits at the price you see on the right of this page–>) it is unlikely that you will find a buyer through the clearing house.
It is not entirely clear what the benefits of the clearing house are, except that it is a safe place to keep your certificates if you are waiting for the price to come back up before you sell them. (Most people usually choose to relinquish ownership of their certificates to their installers for an up-front discount on their system.)
The revised scheme will operate exactly as before, and all of the eligibility criteria are the same as in the Solar Credits program.
For more information on the proposed scheme, see the Department of Climate Change Enhanced Renewable Energy Target fact sheet here, or for up-to-date information with regard to RECs and the RET, please check the ORER website here.
What benefits would REC / STC price security provide?
(Please read this article for more information about the need for REC / STC price stability.)
All RECs / STCs are market instruments with prices that fluctuate regularly, making it difficult for consumers to understand how large a discount they will receive on their solar power system. In addition, the spot price (current market price) of REC’s has fallen below expectations to around $36 at the time this blog was posted, and as little as $23 in late 2009. The $40-per-REC guarantee will provide a rebate for those who are willing to wait for a buyer through the STC Clearing House instead of receiving an up-front discount.
Unfortunately, the non-Clearing House REC / STC market as it currently favours large installers who have the customer volumes to be able to negotiate REC prices directly with buyers and secure above market values. Smaller installers are forced to go through an agent, and hence can often not match the price of the larger players. With a guaranteed price of $40 from 2011, all installers would be able to offer this good rate.
The biggest beneficiary of a guaranteed price, though, would be the environment. The previous problems in the scheme had depressed the price of RECs to a point where large renewable energy projects are no longer feasible and have been put on ice.
Fortunately, the LGC price has stayed strong since the changes to the scheme (see a recent spot price on the right side of this page–>), has the potential to support Australia’s on its way to reaching its 20% renewable energy target. The new changes should work to remove these design flaws for large players and get things back on track.
Who is eligible?
The changes to the eRET scheme operate within the existing Solar Credits scheme, so all the usual rules apply. All solar PV systems with no more than 100 kW of installed capacity (massively more then any normal house would consume) and a total annual electricity output less than 250 MWh will receive RECs guaranteed at $40 under the Solar Credits scheme. The first 1.5kW of installed capacity will receive 3 times the usual number of REC’s allocated, to encourage every house to install solar cells. The number of systems receiving support under the SRES will also be uncapped to ensure small-scale installers have certainty.
Should I wait until next year to install a Solar Power System?
(Some of the information below is out of date. Please read about decision-making in the face of ever-improving solar PV efficiency and reducing prices.)
These changes to the REC market are proposed to only come into effect on the 1st of January 2011. Although waiting till this time could potentially benefit you with a REC price of $40 per certificate, prices of this magnitude are available now from many of the larger installers who have used their market power to secure better prices.
In addition, there is the considerable risk that by that time changes will have been made to the generous Feed In-Tariffs currently available. The NSW scheme is due for review after installed capacity reaches 50MW, and much of this capacity has already been booked for installation. The Victorian scheme has a cap of 100MW, and our best sources indicate that half of this has already been taken up. Hence, customers run the risk of missing out on the most attractive Feed In-Tariff subsidies.
Another possible strategy is to install your system now and either not create or not cash the REC certificates for your system. The Solar Credits scheme allows you up to one year from the date of install to create your certificates, and certificates have no requirement to be sold immediately. However, selling certificates is a complex task that most householders would not want to be burdened with, and would also mean you would have to wait almost a full year to receive the several thousand dollar subsidy, leaving you out of pocket in the meantime.
Kobad Bhavnagri
Solar Energy Consultant
Solar Choice Pty Ltd
© 2010 Solar Choice Pty Ltd
Sources:
Office of the Renewable Energy Regulator website, updates to RET scheme: http://www.orer.gov.au/lret-sres-updates/index.html
Australian Department of Climate Change and Energy Efficiency: http://www.climatechange.gov.au/government/initiatives/~/media/publications/renewable-energy/enhanced-ret-fs-pdf
*This price may be subject to Ministerial review and therefore change, and RECs put up for sale through the ORER clearing house may not necessarily be guaranteed a buyer–this is still unclear. For up-to-date information on RECs and the RET scheme, please visit the ORER website.
Does your company buy REC’s?
Hi Cait,
No, we do not – this post was published to be informative only.
My question relates to those who installed the scheme the Govt had that Garrett stopped – the 1 Km scheme. That was about a year ago. It was said at the time that if you had the 1 Kw than you are not entitled to any more RECS.
Has that changed now? Can I upgrade and install another 15 or 1.5 or 2 Kw and still claim RECS? It seems unfair that we were allowed 1 Kw and now 1.5 Kw is allowed for RECS. I’d appreciate knowing what happens because I want to add another 1.5 or 2 Kw.
Ron
hi there, i intalled 1.5 kw pv solar system last week as on 25 novmenber2010, i am not sure what should i do the the recs? should i sell them now or should i wait until 2011? as recs is $30 today and it is very low. will the recs price go up 2011 for the system that installed 2010? thank you
I have just had a system installed and am holding off on trading the credits at a price below $33. Was this a mistake, do I not qualify as I have these RECs prior to 2011? Or will I be able to trade with the market at $40?
Hello David,
RECs created before the new system came into place will be treated as LGCs (large generation certificates) and are therefore not eligible to be traded as STCs (small technology certificates) through the STC clearing house (find out more by reading ORER’s FAQ). However, you may still sell them on the LGC market, in which there is no guaranteed price, only the market price. You did not make a mistake in deciding not to sell the credits–you’ll just need to wait until prices rise enough that you feel comfortable selling your certificates.
A quick clarification: the STC clearing house provides a place for STCs to be sold at a guaranteed price of $40, but does not guarantee a buyer. In periods when the number of STCs is in short supply relative to demand, one’s certificates are likely to be bought up through the STC clearing house if you are selling them there, but during such a period STCs are likely to be selling for more than $40 anyway. The STC clearing house is basically a way for folks who would rather wait until their certificates are valued at $40 dollars or more before they sell them.
Two things you need to ponder,
1. The Multiplier on RECs is under review, this could and I believe will change at any time, you could make people aware of this.
2. You are wrong in stating the REC prices are guaranteed at $40 next year
To clarify the Rec price is definitely not guaranteed at $40. It will be lucky to be $35 in January-
The market requirement has not been announced for STC’S so how can a price be set let alone fixed
There is no guarantee from ORER that they will sell your STC’S ( very important) $40 is the price that ORER will set for STC’S sold through them on a quarterly basis however there will be other trading platforms so the price will be much much cheaper and purchases via ORER will be a last resort, $40 will be a dreamtime Ceiling to a cement floor on the price.
The REC’s as of Jan 1 2011 are being divided as s large-scale generation certificates (LGCs) or small-scale technology certificates (STCs);
Solar systems as we know them will be called small scale technology certificates (STCs),to reiterate the Federal government have not told The Market what portion of the REC requirement are going to be STC so as above we do not know how big the market will be. Electricity companies are tearing their hair out.
TO CLARIFY WE DON’T KNOW WHAT THE OBLIGATION OF LIABLE PARTIES (POWER STATIONS ETC ) to buy STC TYPE RECs and note the market is oversupplied now.
The Liable parties have to purchase/ lodge their STC’S QUATERLY.
The important points here are the following
The Liable parties do not have to buy from the clearing House set up by ORER
The Market will be trading outside the ORER clearing house
The ORER clearing house does not guarantee a sale it just creates the RECS then puts them in a queue for the Liable parties to buy sold on a 1st lodged 1 s sold basis no guarantee of sale is given just that the price for any STC sold by them will be $40 SEE BELOW FROM ORER WEBSITE
“Amendments that support SRES under the Act include:
• the introduction of the clearing house under Part 2A of the Act. The clearing house allows agents and individuals that are registered owners of STCs to trade STCs in the clearing house for a set price of $40 per STC plus GST (if applicable). Note this does not preclude agents and individuals trading STCs outside the clearing house;â€
You really need to change what is on your site
1. you say a 1.5kw system will receive a $6,200 upfront subsidy. Is this correct? It seems too high at $40 per REC?
2. I have just installed a 10kw system. How do I create my RECs certificates?
1. The REC Registry is the best place to get an understanding of how many RECs you should be getting over a certain time period for your solar panel.
1.1 According to the REC-Registry, in this case the 1.5 kW system will recieve $6200 on the basis that over 15 years it shall generate 155 RECs or 155 MWh of electricity.
2. You create a REC every time you generate 1MWh of electricity.
2.1. The ‘subsidy’ is value of the REC at a future point in time (15 years usually) today.
2.2 Therefore when installing/signing a contract you can choose to keep the RECs and pay the full price on a panel (without a subsidy) or surrender the RECs to the installer who will give you the expected ‘subsidy’ that the installer would get if they owned the panels and generated the RECs themselves.
Hi,
I have already generated solar credits which were generated in 2010 from instal;ation of a solar Hot Water system.
I have not cashed in these credits as they had dropped in value.
Could I hold these credits until Jan 2011 and get the $40 ?
Brett keogh