Australia's Renewable Energy Target (RET) is a Federal Government policy designed to ensure that at least 33,000 gigawatt-hours (GWh) of Australia's electricity comes from renewable sources by 2020.
About the Renewable Energy Target
The RET consists of two main schemes:
- The Large-scale Renewable Energy Target (LRET) requires high-energy users to acquire a fixed proportion of their electricity from renewable sources. This occurs in the form of large-scale generation certificates (LGCs), which are created by large renewable energy power stations (such as solar or wind farms) and then sold to high-energy users who must surrender them to meet their obligations under the LRET.
- The Small-scale Renewable Energy Scheme (SRES) provides a financial incentive for individuals and businesses to install small-scale renewable energy systems such as rooftop solar, solar water heaters and heat pumps. This occurs in the form of small-scale technology certificates (STCs), which are issued up front for a system’s expected power generation (based on its installation date and geographical location) until the SRES expires in 2030. Similar to the LRET, large energy users are required to purchase a fixed proportion of STCs and surrender them to meet their obligations under the RET.
Progress towards the RET
In January 2018, the Clean Energy Regulator announced that it expected the LRET to be met before the 2020 deadline due to strong investment in renewable energy.
This is a remarkable achievement considering that just over half of the target had been met at the beginning of 2017.
Future of the RET
While the LRET’s 33,000 GWh target is expected to be met before the 2020 deadline, the scheme will continue to require high-energy users to meet their obligations under the policy until 2030.
As more renewable energy is produced beyond the 33,000 GWh target, the number of LGCs generated will continue to increase, leading to an oversupply in the market that will significantly reduce their value. Futures markets indicate that LGC prices will fall significantly over the next ten years, with some analysts predicting that their value will fall to zero by the time the RET expires in 2030.
The SRES is scheduled to run until 2030, with the level of subsidy available falling each year between now and the end of the scheme. There is no limit on the amount of renewable energy that can be produced under the SRES.
However, a July 2018 report by the Australian Competition and Consumer Commission into electricity prices recommended that the SRES be abolished in 2021 rather than 2030 to reduce electricity costs.
The Clean Energy Council is strongly opposed to the abolition or any changes being made to the SRES. The solar industry is regulated through an accreditation scheme that is linked to the SRES through legislation. The accreditation scheme has been instrumental in maintaining high safety and quality standards during a decade of massive growth.
Rooftop solar is also one of the few direct ways that households and businesses can reduce their power bills.
Benefits of the Renewable Energy Target
In its modelling for the National Energy Guarantee, the Federal Government found that of the $550 that will be saved on electricity bills between 2020 and 2030, $400 is due to new renewable investment under the RET.
Three facts about the Renewable Energy Target:
- Australian households will save hundreds of dollars on their power bills thanks to the Renewable Energy Target.
- It generates investment in homegrown Australian industry.
- It has created tens of thousands of Australian jobs, with thousands more on the way.
The 2015 RET review
The RET was reviewed by the Government and reduced in June 2015 from the previously legislated 41,000 GWh to 33,000 GWh. The deal was a compromise brokered by the Clean Energy Council following 15 months of lost investment confidence caused by the review of the policy.
While the Clean Energy Council was disappointed by the level of the reduction of the target, an agreement on the RET opened the way to unlock massive investment and job opportunities in Australia. The RET agreement also removed previously legislated RET reviews which were to occur every two years which compounded the lack of investment confidence.
The RET has been operating since 2001.