In brief

  • The government has announced proposed RET scheme amendments to separate small-scale and large-scale projects.
  • The proposed amendments are intended to provide greater price certainty for Renewable Energy Certificates (RECs), and therefore commercial support for renewable energy projects, especially large-scale projects.  
  • However, uncertainty will remain until greater detail is available on the proposed amendments and they are effectively legislated. The government plans to pass legislation in May/June 2010.  

Proposed RET scheme amendments

On 26 February 2010 the Federal Government announced proposed amendments to the RET scheme. The proposed amendments are to separate the RET scheme, with effect from 1 January 2011, into two parts:

  1. a standalone Large-scale RET (LRET) – with a target of 41,000GWh of the full 20% by 2020 RET of 45,000GWh, and  
  2. a Small-scale Renewable Energy Scheme (SRES) – for small scale technologies such as solar panels and solar hot water systems, with fixed price of $40 for each REC created (1 REC for each MWh) and an uncapped target of 4,000GWh by 2020.  

It is proposed that liable entities under the RET scheme, such as electricity retailers, will be obliged to purchase RECs from both the LRET and SRES.

Limited detail is available, and it is uncertain:

  • how the obligation on liable entities will work, and  
  • how RECs issued to small-scale renewable technologies prior to the amendments will be treated. They will most likely remain valid and will therefore continue to lower the REC price.  

The government has stated it will shortly release an industry consultation paper.

Passage of the amendments

The government plans to pass legislation for the amendments during Parliament’s winter sittings, expected to be May or June 2010. The amendments would need to be supported in the Senate by either:

  • the Opposition, or  
  • the Greens and two of the independents, Nick Xenophon and Stephen Fielding, or other Opposition Senators.  

The amendments are expected to be supported, at least in principle, by the Greens and Opposition, who have recently called for such amendments.

History

The Federal Parliament passed legislation to amend the RET scheme in August 2009. That legislation, amongst other things1, increased Australia’s renewable energy target to 20% by 2020 and provided for RECs:

  • to be issued in greater amounts for hydro, wind and solar household small generation units (known as ‘Solar Credits’) than for other technologies and larger generators (up to five times as many), and also to be issued up-front for up to 15 years operation, and  
  • to continue to be issued for solar water heaters, issued up-front for up to 10 years operation. The amendments took effect from 1 January 2010.

These amendments were designed to replace former means-tested rebates for household units. However, they have attracted considerable adverse comment from the renewable energy industry. The increased availability of RECs, primarily due to the Solar Credits, caused REC prices to fall substantially and thereby jeopardise the financial viability of many current and proposed large-scale renewable projects.

Other issues

The Council of Australian Governments (COAG) is also reviewing other aspects of the RET scheme, including:

  • eligibility of new small-scale technologies and heat pumps  
  • self-generation provisions  
  • support for small-scale off-grid renewable generation, and  
  • treatment of new waste coal mine gas power generation.

It is uncertain when and what further RET scheme amendments may be proposed from these processes.

Considerable uncertainty also still remains regarding the future of the Carbon Pollution Reduction Scheme or other carbon regulation in Australia.2