The Renewable Energy Target, or RET, is a federal government scheme designed to cut carbon emissions in the electricity sector by encouraging generation from renewable sources such as solar power.
The Renewable Energy Target was first set up as the Mandatory Renewable Energy Target in 2001, with an initial aim to source 2 per cent of the nation’s electricity generation from renewable sources. In 2009, this was increased to the equivalent of 20 per cent of Australia’s electricity demand (41,000 GWh).

The Renewable Energy Target operates to subsidise the capital cost of renewables. This subsidy is effectively funded by retailers of electricity produced from fossil fuels such as coal-fired power stations.

Both large renewable power stations, such as wind and solar farms, and the owners of small-scale systems create renewable energy certificates for every megawatt hour of power they generate .

In 2010 the government split the large scale and small scale schemes because of a glut in small-scale certificates. The two RET schemes are summarised below.

  • Small Scale RET: For example 100kW Solar Systems or less which are eligible for Small Scale Technology Certificates (STCs). For example of the value of STCs associated with a 100KW Solar Power System in Sydney is around $75,000.00. A 50kW Solar Power System in Sydney would be around $37,000.00.
  • Large Scale RET: For example solar systems over 100kW which are eligible for Large Scale Renewable Energy Certificates (LGCs). Large scale solar farms are eligible for LGCs for every MWh they produce annually.

Both LGC and STC Renewable Energy Certificates are bought by electricity retailers who sell the electricity to householders and businesses. The RET imposes legal obligations on electricity retailers to surrender renewable energy certificates to the Clean Energy Regulator, in percentages set by regulation each year. This creates a market which provides financial incentives to both large-scale solar power stations and the owners of small-scale systems solar power systems.

For small-scale solar systems, such as rooftop solar panels, all renewable energy certificates are provided “upfront” for expected power generation over 15 years. In most cases, householders assign their certificates to the seller of the system in return for a lower purchase price.

Maher, s 2014, ‘The Renewable Energy Target Explained’, The Australian, 29 August 2014, http://theaustralian.com.au

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