Small Renewable Energy Scheme - Still more questions than answers

17 Mar 2010

There’s still a lot of uncertainty about how the Small Renewable Energy Scheme (SRES) will be implemented and its impact.

What we do know about SRES

• SRES will start operating from 1 January 2011 and will be completely separate from the Large Renewable Energy Target (LRET).
• The certificates created under SRES, which we will refer to as SRECs, will be separate instruments to the RECs under the LRET.
• The scheme is uncapped, meaning that there is no annual target and no limit on the number of SRECs that can be created.
• The operation of both schemes (SRES and LRET) will be reviewed in 2014 as previously planned.
• The government aims to reduce the price risk for end consumers and has set a fixed price of $40 per SREC.
• SRECs will still need to be created and will need to be purchased and surrendered by liable parties.
• We expect that the creation rules and eligibility that currently apply will remain the same.
• The Government intends to use the current RET architecture for the scheme and aims to legislate the changes to the RET scheme in the winter sitting of Parliament this year.

What we’re not sure of...

• The way in which liable parties purchase SRECs from the parties that create them needs to be determined before SRES can be effectively implemented.
• If a $40 fixed price is to be available to consumers then the payment by liable parties would need to be more than $40 to cover the costs incurred in creating the SRECs.
• Because there’s no annual target, the liable parties won’t know how many SRECs they’ll need to purchase and surrender.

We don’t have all the information about the proposed changes yet, and like many people in the industry are waiting on the consultation paper to be released by the government shortly. We will update you as this becomes available.