FACTBOX: Main points of Australia's draft renewable energy laws

(Reuters) - Australia has drafted laws that mandate the generation of 20 percent renewable energy by 2020 and the government aims to have the legislation passed within months.

The Mandatory Renewable Energy Target legislation aims to expand the target under an earlier scheme to 45,000 GWh by 2020 from 9,500 gigawatt-hours (GWh) in 2010.

Following are some of the main steps the government hopes to achieve this, and industry concerns.

-- RENEWABLE ENERGY CERTIFICATES (RECs)

Created under the earlier MRET scheme, each REC represents 1 megawatt-hour (MWh) of green energy produced and are sold to wholesale electricity buyers. These firms are legally bound to meet a share of the renewable energy target in proportion to their share of the national wholesale power market.

RECs are trading around A$50 per MWh and will continue to be used under the expanded renewable target legislation.

Eligible projects that can earn RECs include solar water heaters and small generation units, such as solar panels on household roofs, small wind turbines and micro-hydro.

-- CERTIFICATE MULTIPLIER

Instead of simple cash rebates, the new legislation proposes a complex system of issuing large amounts of RECs upfront for clean-energy installations up to the first 1.5 kilowatts (KW) capacity. Under the scheme, householders can receive up to 15 years of RECs based on the amount of energy calculated to be generated over the 15-year period.

As an extra incentive, the scheme has what is called a REC multiplier during the initial years.

For example, during the first two years between July 1, 2009 and June 30, 2011, householders can earn one-off subsidies of five times the 15 years' worth of RECs. Once these are issued, no more RECs are given for a particular installation for the deemed 15-year life of the generating unit.

The multiplier declines to four times for the 2011/12 financial year and by 2015/16 only one times the 15 years of RECs are paid.

INDUSTRY CONCERN: Three issues. Firstly, industry says the 1.5 KW limit is far too small, since Australian households consume between 3 and 5 KW, while the nation's peak clean-tech industry body, the Clean Energy Council, says the limit should be raised to 200 KW to really get green investment going.

Second, the scheme favors investment in the cheapest clean-energy systems instead of quality, long-term assets since it rewards people no matter what they buy.

Third, the creation of "phantom" RECs. For each REC, extra certificates are created under the multiplier scheme for the same output. The scheme target should be increased by the number of additional RECs created by the multiplier, the Council says, to ensure the extra RECs are fully taken into account.

LONG-TERM TARGET

The MRET scheme runs until 2030 but the 45,000 GWh target, set to be reached by 2020, remains the same until 2024, then quickly declines to 23,000 GWh by 2030. In effect, this will lead to a substantial drop in the number of RECs issued.

INDUSTRY CONCERN: Creation of a boom-and-bust market. The Clean Energy Council fears the trajectory will spook investors and lead investment to stall by 2014 because there will be only a small period in which to recoup their money by 2024.

(Sources: Australian government, here

The Clean Energy Council, www.cleanenergycouncil.org.au

Australian and New Zealand Solar Energy Society, www.anzses.org )

(Writing by David Fogarty; Editing by Clarence Fernandez)