The Small-scale Renewable Energy Scheme (SRES)
The Small-scale Renewable Energy Scheme creates a financial incentive for owners to install eligible small-scale installations such as solar water heaters, heat pumps, solar panel systems, small-scale wind systems, or small-scale hydro systems. It does this by legislating demand for Small-scale Technology Certificates (STCs). STCs are created for these installations according to the amount of electricity they produce or displace. RET liable entities have a legal requirement to buy STCs and surrender them on an quarterly basis.
- Solar water heater or heat pump installations are eligible if the system is new and listed in the Register of Solar Water Heaters managed by the Clean Energy Regulator.
- Small-scale solar, wind and hydro systems are eligible if:
- Documentation for small-scale systems, demonstrating compliance with the legislated requirements, must be completed and signed by the owner, installer, and/or Registered Agent (as appropriate), and able to be produced if requested by the Clean Energy Regulator.
- A Registered Agent is eligible to create STCs if the owner has correctly signed over the certificates to them and this signed documentation can be provided to the Clean Energy Regulator.
Certificate creation and assignment – benefits for owners
Eligible small-scale systems are entitled to create small-scale technology certificates (STCs) based around how much renewable electricity the systems produce or displace.
- The number of certificates a system can create is based on the amount of electricity in megawatt hours (MWh):
- generated by the small-scale solar panel, wind or hydro system, over the course of its lifetime of up to 15 years; or
- displaced by the solar water heater or heat pump, over the course of its lifetime of up to 10 years.
- This number may vary depending on geographic location, what kind of system is being installed, Solar Credits eligibility, and/or the size and capacity of the installed system.
- STC ownership is generally vested in the owner of the small-scale system being installed, but STCs can be assigned using a STC Assignment Form to a third-party agency, such as a retailer or installer.
- These agencies must be registered with the Clean Energy Regulator and are known as “Registered Agents”.
- Registered Agents co-ordinate the purchase and installation of systems for the owners. They provide a financial benefit (such as a discount off the invoiced price of purchase and installation) to owners in exchange for the right to create and sell the STCs.
- This financial benefit, which is generally based around the price of STCs at the time, ensures that the price of small-scale systems remains within reach of householders, and encourages the installation of more systems.
- STCs are created by owners directly in the online REC Registry. They must be correctly created and validated in the REC Registry before they can be made available for purchase and surrender.
Solar Credits is a mechanism which increases the number of STCs able to be created for eligible installations of small-scale solar panel, wind or hydro systems by multiplying the number of certificates for which the system would normally be eligible. Solar Credits apply to the first 1.5 kilowatts (kW) of on-grid capacity installed in an eligible location (known as the “eligible premises”) OR to the first 20kW of capacity for off-grid systems (if the legislated annual cap for off-grid certificates has not yet been reached).
Generation from capacity above 1.5 kW (on-grid), or 20kW (off-grid), either on the original system or on any additional capacity installed at a later date, is eligible for one (1) STC per MWh of generated power.
How demand for certificates is created
- The SRES places a legal liability on RET liable entities an amount of small-scale technology certificates (STCs) each year.
- The number of STCs to be purchased is calculated using the Small-scale Technology Percentage (STP), set annually in the Regulations.
- The STP is calculated on the estimated:
- value, in megawatt hours, of small-scale technology certificates that will be created for the year;
- amount of electricity that will be acquired by RET liable entities for the year; and
- amount of all partial exemptions expected to be claimed for the year.
- This is done each year as, under the Act, there is no target on the number of STCs to be generated for any given year.
- RET liable entities apply the annual STP to the total megawatt hours of relevant electricity that they acquire from relevant electricity grids. This determines how many STCs they will need to purchase for each quarter of that year.
- The Clean Energy Regulator also provides RET liable entities with an estimate of required surrender amounts for quarters 1 – 3 of each calendar year.
- The RET liable entity may purchase their STCs through an Agent who deals with STCs, or transactions may occur at $40 or under. There is a Government-guaranteed price of $40/STC (excl. GST) if the seller uses the STC Clearing House. However, certificates may take some time to clear, thus delaying payment to the seller.
- RET liable entities must surrender to the Clean Energy Regulator the STCs that they have purchased during the year to prove they have met their required surrender amount.
- When certificates are surrendered, they are marked as invalid in the REC Registry. They cannot any longer be sold, traded, or purchased.
- RET liable entities need to surrender STCs in April, July, October and February of each calendar year, to meet their quarterly liability requirements.
- If a RET liable entity does not surrender its required number of STCs in a quarter, it will be liable to pay a shortfall charge, currently set at $65 per STC not surrendered.
- Owners of STCs may also voluntarily surrender their STCs at any time. Any person with STCs registered to them in the REC Registry can voluntarily surrender their STCs; this includes owners, Agents, and RET liable entities.
- RET Liable entities may voluntarily surrender STCs separately to their mandatory liability set by the STP. For example, when a householder opts to use electricity from renewable energy sources the liable entity can buy certificates equivalent to the householder’s electricity usage and voluntarily surrender these certificates to the Clean Energy Regulator.
- Voluntary surrender creates further demand in the market for renewable energy, over and above the mandated requirement.
What is the purpose of the schemes?
The schemes aim to:
- encourage the additional generation of electricity from renewable sources;
- reduce emissions of greenhouse gases in the electricity sector; and
- ensure that renewable energy sources are ecologically sustainable.
This is achieved by:
- the creation of online certificates by eligible renewable energy sources based on the amount of electricity in megawatt hours (MWh):
- generated by a renewable energy power station, or small-scale solar panel, wind or hydro system; or
- displaced by a solar water heater or heat pump; and
- placing a legal obligation on RET liable entities (usually electricity retailers) to purchase and surrender a certain amount of these certificates each year.
The trade in these certificates thereby provides financial incentive for investment in renewable energy power stations, and for the installation of solar water heaters, heat pumps, and small-scale solar panel, wind, and hydro systems.
The certificates are created and traded through the REC Registry, an Internet-based registry managed by the Clean Energy Regulator.
Since 2001, this mechanism has increased the number of installations of small-scale renewable energy systems, and stimulated investment in renewable energy power stations.
At the end of 2010, total investment in large-scale renewable energy power stations stood at around $9 billion. The generating capability of renewable power stations was around 12,200 gigawatt hours (GWh) of eligible renewable energy per typical year. This is equivalent to the residential electricity needs of over 1.9 million households.
From 2001 to 2009, 86,000 solar panel systems were installed with a combined capacity of 123 megawatts (MW). In 2010 there were over 158,000 solar panel installations with a combined capacity of 305 MW.
What underpins the schemes?
The Renewable Energy (Electricity) Act 2000 and the accompanying Renewable Energy (Electricity) Regulations 2001 define the requirements of the Large-scale Renewable Energy Target and Small-scale Renewable Energy Scheme.
The Act, Regulations, and all associated requirements are administered by the Clean Energy Regulator, which is a statutory agency under the Department of Climate Change and Energy Efficiency.
About the certificates
From 2001 to the end of 2010, the commodity in the market was called a “Renewable Energy Certificate” or REC.
From 1 January 2011 RECs were reclassified into two certificate types: “Large-scale Generation Certificates” (LGCs) and “Small-scale Technology Certificates” (STCs).
Large-scale generation certificates
Large-scale generation certificates (LGCs) are created in the online REC Registry by renewable energy power stations. One LGC is equivalent to 1 MWh (megawatt hour) of eligible renewable electricity generated above the power station’s baseline.
Small-scale technology certificates
Small-scale technology certificates (STCs) are created in the online REC Registry for correctly installed eligible solar water heaters, heat pumps, and small-scale solar panels, wind, and hydro systems.
One STC is equivalent to 1 MWh (megawatt hour) of:
- renewable electricity generated by the solar panel, small-scale wind or small-scale hydro system (unless the Solar Credits multiplier applies); or
- electricity displaced by the installation of a solar water heater or heat pump.
For more information about the schemes, please see the following booklets:
Date last updated: 04 Jun 2014