The Renewable Energy Target underpinned by the Renewable Energy (Electricity) Act 2000 (the Act) works by creating a market for renewable energy certificates. Like any market, it is based on supply and demand.
Scheme participants create renewable energy certificates for every megawatt hour of electricity generated from renewable sources. This creates the supply side of the market.
Wholesale purchasers of electricity (mainly electricity retailers) buy these certificates to meet their liability obligations under the Act. This creates the demand side of the market. The amount of certificates required is set each year based on annual percentages. These percentages are known as the small-scale technology percentage and the renewable power percentage.
We validate and register these certificates as part of our role regulating the market.
The figure below illustrates the main elements of the operation of the market for large-scale generation certificates and small-scale technology certificates.
There is also a secondary market for certificates that does not involve the Clean Energy Regulator, and includes financial institutions, traders, agents and installers. This secondary market has matured since 2001 and is quoted on a range of trading platforms.
The Clean Energy Regulator liaises with market participants to help them understand the workings of the scheme and ensure an efficient market for renewable energy certificates.
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The Clean Energy Regulator is a Government body responsible for accelerating carbon abatement for Australia.