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Renewable Energy Certificates

 

Wind and solar power is not intrinsically commercially competitive with fossil sourced energy in Australia. This is due to the very high up-front capital cost of the equipment required to capture the energy and the intermittent nature of the energy resource; so that the equipment is typically generating revenue for less than a third of the time. In addition there is a point at which peak energy delivery begins to exceed demand at different times, requiring equipment to be turned off even though the energy source is available; for example it is windy or sunny when consumers don't want the energy.

 

In Australia wind generated electricity, and to a lesser extent solar, is made economically viable by a system of Renewable Energy Certificates (RECs) that subsidise renewable energy producers.

 

RECs have been established to support the National Mandatory Renewable Energy Target (MRET) to 2030: ‘to encourage additional generation of electricity from renewable energy sources and achieve reductions in greenhouse gas emissions.’ It aims to meet a renewable energy target of 20% by 2020.

 
The National RET scheme:
 
  • places a legal liability on wholesale purchasers of electricity to proportionally contribute to an additional 17,150 gigawatt hours (GWh) of renewable energy per year by 2012 increasing annually until it reaches 45,000 GWh in 2020
  • sets the framework for both the supply and demand of renewable energy certificates (RECs) via a REC market.

 A REC is an electronic, tradable commodity similar to a share certificate as it represents a unit of value and may be traded for financial return. 1MWh of energy equals 1 REC. Electricity wholesalers need to buy RECs that are created by the accredited generators of electricity from renewable energy resources. Each calendar year wholesalers are required to surrender a number of registered RECs equal to their liability for the previous year; at an increasing rate (renewable power percentage (RPP)) each year.

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Following a politically driven debacle that gave small rooftop solar installations a fivefold REC allowance and temporally destroyed the REC market, in February 2010, the Australian Government announced changes to the national RET scheme, separating small-scale and large-scale renewable supply.  From January 2011, the scheme exists in two parts, the Small-scale Renewable Energy Scheme (SRES) and the Large-scale Renewable Energy Target (LRET). The SRES is a fixed price, unlimited-quantity scheme available only to small scale technologies such as solar water heating.

The LRET will retain the REC's existing floating price, fixed-quantity structure, and will be available only to large-scale power generation, such as wind, solar, biomass and geothermal energy. The LRET target will be 4,000 GWh less than the previous national RET scheme target, requiring the scheme to deliver 41,000 GWh of renewable energy by 2020.

The price of a REC fluctuates with supply and demand.

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The present price means that consumers presently pay around double the mean energy price for 'renewable' wind and solar energy. This cost of subsidising each MWh of renewable energy is passed on directly to the electricity consumer in their electricity bill.

 

Notwithstanding the subsidy the available, the economic wind resource in NSW is too limited and too small for wind to contribute more than a few per cent to projected NSW electricity needs. Consequently NSW wholesalers buy more RECs from Tasmania and South Australia than locally, even though the power can't practically be delivered to their customers due to very significant transmission costs and losses.

As will be seen later in this paper a significant issue is that the 20% renewables by 2020 target is a politically set  'stretch goal' - like 'no child to live in poverty by...'  It is extremely ambitious and very likely to be unachievable using current technology. 

It is important to realise that under the REC mechanism the price will continue to rise until the mandatory targets for renewable energy are met irrespective of the technical difficulties in delivering this power.  Thus if the proposed 'stretch'  targets are made mandatory it is quite possible for the subsidy to make the cost of renewable energy many times that of conventional , or nuclear, energy.  

 

As the REC price rises it might be reasonable to expect a significant increase in present wind generation in eastern Australia before resource limitations distance and demand management issues begin to limit further expansion. This additional capacity is more likely to be located in Victoria, Tasmania and SA than in NSW or Queensland. 
 
As discussed in more detail later, owners of existing accredited renewable power stations that are not located in new, more marginal locations, could then expect very substantial 'wind-fall' profits as the REC price is driven upwards.  Most hydro-power predated the REC arrangements and is excluded for these very reasons. 
 
To overcome this difficulty it was hoped that the REC scheme would be short lived and be replaced by a cap-and-trade emissions  trading scheme (ETS).  But this now appears to be politically untenable.   

 

 

 

 

 

 


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Travel

Argentina & Uruguay

 

 

In October 2011 our little group: Sonia, Craig, Wendy and Richard visited Argentina. We spent two periods of time in Buenos Aires; at the start and at the end of our trip; and we two nights at the Iguassu Falls.

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Fiction, Recollections & News

The Cloud

 

 

 

 

 Chapter 1 - The Party

 

 

 

This morning Miranda had an inspiration - real candles!  We'll have real candles - made from real beeswax and scented with real bergamot for my final party as a celebration of my life and my death. This brief candle indeed!

In other circumstances she would be turning 60 next birthday.  With her classic figure, clear skin and dark lustrous hair, by the standards of last century she looks half her age, barely thirty, the result of a good education; modern scientific and medical knowledge; a healthy diet and lifestyle and the elimination of inherited diseases before the ban on such medical interventions. 

It's ironical that except as a result of accidents, skiing, rock climbing, paragliding and so on, Miranda's seldom had need of a doctor.  She's a beneficiary of (once legal) genetic selection and unlike some people she's never had to resort to an illegal back-yard operation to extend her life. 

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Opinions and Philosophy

Frederick Sanger - a life well spent

 

 

I have reached a point in my life when the death of a valued colleague seems to be a monthly occurrence.  I remember my parents saying the same thing. 

We go thought phases.  First it is the arrival of adulthood when all one's friends are reaching 21 or 18, as the case may be.  Then they are all getting married.  Then the babies arrive.  Then it is our children's turn and we see them entering the same cycle.  And now the Grim Reaper appears regularly. 

As I have repeatedly affirmed elsewhere on this website, each of us has a profound impact on the future.  Often without our awareness or deliberate choice, we are by commission or omission, continuously taking actions that change our life's path and therefore the lives of others.  Thus our every decision has an impact on the very existence of those yet to be born. 

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