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Renewable energy certificate market

 

The Act effectively establishes a competitive market for registered renewable energy certificates. Electricity retailers’ liability under the Act provides the demand side of the market. The supply side is the creation of large-scale generation certificates and small-scale technology certificates.

‘Eligible parties’ create and sell certificates to liable entities and other buyers for a negotiated price. Eligible parties include:

  • large-scale power stations using ecologically sustainable renewable energy sources such as wind, hydro, landfill gas, solar or biomass
  • owners or ‘agents’ of small-scale systems, including small generation units and solar water heaters.

Large-scale generation certificates are created for eligible electricity generated above the accredited renewable energy power station’s baseline. Small-scale technology certificates are created for electricity generated or displaced by small-scale systems.

Figures 1 and 2 illustrate the main elements of the operation of the market for large-scale generation certificates and small-scale technology certificates.

The figures illustrate the role of the secondary market, which is the market for renewable energy certificates that occurs between two entities not including the Clean Energy Regulator. Secondary market participants include financial institutions, traders, and aggregators such as agents and installers. The secondary market has matured since 2001 and is quoted on a range of trading platforms.

Figure 1: Large-scale generation certificate market

Flow chart of Large-scale generation certificate market

LGC = large-scale generation certificate; REC = renewable energy certificate

Figure 2: Small-scale technology certificate market

Flow chart of Small-scale technology certificate market

REC = renewable energy certificate; STC = small-scale technology certificate

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