February 26, 2010 / 2:45 AM / 9 years ago

Australia overhauls troubled renewable energy scheme

CANBERRA (Reuters) - Australia moved to help unlock billions of dollars in stalled wind and solar energy projects on Friday, with the government reshaping a troubled scheme requiring 20 percent of energy to come from renewable sources by 2020.

Wind turbines operate at the newly built Capital Wind Farm near Tarago, about 35 kilometres (22 miles) north of Canberra October 29, 2009. REUTERS/Tim Wimborne

The government will split its clean energy scheme to separate the household market from large renewable project investments, Climate Change Minister Penny Wong said on Friday, in a move business said would drive investment in clean energy.

“These changes are expected to deliver more renewable energy than the original 20 percent target and will ensure we build the clean energy future Australia needs,” Wong said.

Australia, one of the largest per-capita emitters of greenhouse gases, last year introduced a scheme to lower reliance on coal-fired electricity and set a target 45,000 gigawatt hours of clean power, or 20 percent of energy, over the next decade.

The scheme required major energy companies to buy tradeable Renewable Energy Certificates, or RECs. The market for these in turn would help the financial viability of around A$22 billion ($19.5 billion) worth of planned wind farms and other large-scale renewable energy projects.

But the value of RECs has plummeted because the government used the scheme to reward households that installed solar hot water panels and heat pumps, flooding the market with cheap certificates and reducing their worth to large-scale projects.

The value of certificates slumped to around A$30, but climbed to around A$42.50 after the government announced the changes. That was still down on from a peak of A$53 when the scheme was introduced. Each certificate represents one megawatt-hour of electricity generated from renewable energy.

“It reeks as a little bit of a knee jerk reaction but I think what it may do is put a floor under the REC market at around A$40,” said Gary Cox, vice president of commodities and energy at Newedge Australia.

Cox said Australia might end up with a two-tier renewable energy market, but how it would actually work was still unclear.


The scheme failed to support a single major project in the six months since it was passed by parliament, prompting calls for the 20 percent to apply to large-scale plants only.

The government’s solution is to split the programme into the Small-scale Renewable Energy Scheme (SRES) and the Large-scale Renewable Energy Target (LRET). These would go into effect from Jan 1, 2011.

“The establishment of the large-scale RET is welcomed and will unlock billons of dollars of projects across Australia,” said Lane Crockett, Australia’s manager of global clean energy company Pacific Hydro Ltd.

The large-scale scheme would cover big renewable energy projects like wind farms, commercial solar and geothermal, and would deliver the vast majority of the 2020 target.

Wong said 41,000 GW/h of the total 45,000 GW/h by 2020 must now be met only by large-scale projects, giving additional certainty to investors.

Smaller-scale projects would make up the rest of the target and would cover technologies such as solar panels and solar hot water systems. It will offer a fixed price of A$40 per megawatt hour of electricity produced, providing direct support for households that reduce emissions.

The clean energy industry said the changes would unblock multi-million dollar commercial projects planned by companies including AGL Energy Ltd. and Pacific Hydro.

AGL Chief Executive Michael Fraser had previously warned more than A$1 billion worth of planned renewable projects were on hold because of problems with the RET scheme.

“These changes clear the path for the clean energy industry to play its crucial role in driving down the cost of clean energy whilst cutting Australia’s greenhouse emissions. This is good news for jobs and investment in the renewable energy industry,” Clean Energy Council chief executive Matthew Warren said. ($1 = 1.125 Australian Dollars)

Additional reporting by Bruce Hextall in SYDNEY; Editing by Sugita Katyal

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