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Details: Written by: Richard_McKie; Parent Category: Economy; Category: Energy; Published: 26 December 2010; Hits: 81415

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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.

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.

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

Laos

The Lao People's Democratic Republic is a communist country, like China to the North and Vietnam with which it shares its Eastern border.

And like the bordering communist countries, the government has embraced limited private ownership and free market capitalism, in theory. But there remain powerful vested interests, and residual pockets of political power, particularly in the agricultural sector, and corruption is a significant issue.

During the past decade tourism has become an important source of income and is now generating around a third of the Nation's domestic product. Tourism is centred on Luang Prabang and to a lesser extent the Plane of Jars and the capital, Vientiane.

Fiction, Recollections & News

A Secret Agent

If you have an e-book reader, a version of this story is available for download, below.

Chapter 1

- news flash -

Body in River

Monday

The body of a man was found floating in the Iguazú river this morning by a tourist boat. Mary (name withheld) said it was terrible. "We were just approaching the falls when the body appeared bobbing in the foam directly in front of us. We almost ran over it. The driver swerved and circled back and the crew pulled him in. The poor man must have fallen - or perhaps he jumped?"

The body was discovered near the Brazilian side but was taken back to Argentina. Police are investigating and have not yet released details of the man's identity...

Iguazú Herald

Everywhere we look there's falling water. Down the track to the right is a lookout. Over the other side of the gorge is Brazil, where the cliff faces are covered by maybe a kilometre of falling curtains of white, windswept water. Here and there the curtains hang in gaps or are pushed aside by clumps of trees and bushes, like stagehands peeking out into a theatre before the performance.

Opinions and Philosophy

A Carbon Tax for Australia

12 July 2011

It's finally announced, Australia will have a carbon tax of $23 per tonne of CO₂ emitted. This is said to be the highest such tax in the world but it will be limited to 'about 500' of the biggest emitters. The Government says that it can't reveal which these are to the public because commercial privacy laws prevent it from naming them.

Some companies have already 'gone public' and it is clear that prominent among them are the major thermal power generators and perhaps airlines. Some like BlueScope Steel (previously BHP Steel) will be granted a grace period before the tax comes into effect. In this case it is publicly announced that the company has been granted a two year grace period with possible extensions, limited to its core (iron and steelmaking) emissions.

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