Encouraging renewable energy

The purpose of the Renewable Energy Target is to encourage investment in renewable energy and reduce greenhouse gas emissions. It does this by creating a market for renewable energy certificates, which drives investment in the renewable energy sector. On the supply side of the market, participants create certificates for each megawatt hour of renewable energy generated or displaced (no longer required from the grid). On the demand side, electricity retailers source these certificates to meet their renewable energy obligations in proportion to the total electricity sold to their customers.

The 2020 Renewable Energy Target is one of the Government's policies that contributes to reducing Australia's emissions to meet Australia’s international climate change commitments.

The Department of the Environment and Energy said in its 2017 Emissions Projections⁹ update that Australia will overachieve on its 2020 emissions reduction target.

The Government is currently working on the design of the National Energy Guarantee, which proposes to integrate energy and emissions policy in a way that will encourage new investment in clean and low emissions technologies while allowing the electricity system to continue to operate reliably.

Why it is important

Renewable energy has an important role to play in reducing Australia's greenhouse gas emissions.

Since its beginning in 2001, the Renewable Energy Target has significantly increased the number of installations of small-scale renewable energy systems, and successfully stimulated material investment in renewable energy power stations.

The Renewable Energy Target has two parts:

• The Large-scale Renewable Energy Target is to generate an additional 33,000 gigawatt hours of electricity from renewable sources in 2020, compared with 1997 levels. This scheme encourages companies to invest in new large-scale renewable energy power stations, including solar and wind farms, and hydro and biomass power stations.
• The Small-scale Renewable Energy Scheme provides incentives for households and small businesses to install small-scale systems. This includes solar panels, solar water heaters, small scale wind or hydro systems and air source heat pumps.

Our role

Our role as the Clean Energy Regulator is to administer the Large-scale Renewable Energy Target and Small-scale Renewable Energy Scheme. This includes:

• accrediting large-scale renewable energy power stations
• setting eligibility criteria in the Small-scale Renewable Energy Scheme
• validating renewable energy certificates
• providing the secure system for creating, surrendering and trading certificates via the REC Registry
• advising the Minister on setting the statutory demand for certificates by determining the amount of certificates electricity retailers must surrender each year
• working with liable entities (electricity retailers) to encourage compliance, and
• providing market data to help inform investment decisions.

Legislation

The Large-scale Renewable Energy Target and Small-scale Renewable Energy Scheme are set in law through the Renewable Energy (Electricity) Act 2000. The objectives of the Act are to encourage additional generation of electricity from renewable sources, reduce emissions of greenhouse gases from the electricity sector and ensure that renewable energy sources are ecologically sustainable.

The Renewable Energy Target operates on a calendar year, so key data and analysis in this report reflects the operations of the Act from 1 January to 31 December 2017, as required by legislation.