The Federal Government has responded to feedback from industry, announcing the Enhanced Renewable Energy Target (ERET) Scheme. The changes, to be affected from January 1 2011, will isolate incentives for utility-scale renewables from those offered to households who invest in small wind and solar systems.The adjustment is a move to stabilise the price of Renewable Energy Certificates (RECs), which has fallen sharply following the introduction of Solar Credits scheme for small generation units.

The Renewable Energy Target (RET) Scheme is a market-based mechanism to drive Australia's electricity supply toward a target of 20 per cent renewable energy by 2020. Under the scheme electricity retailers must meet a mandatory Renewable Power Percentage (RPP) each year, a requirement they can fulfil by purchasing sufficient RECs at market price; each Certificate represents 1 MWh of renewable energy.

The Solar Credits scheme, introduced in June 2009, applied a 5-times multiplier to the RECs deemable against the first 1.5 kW of small wind, solar or hydro systems. An unintended consequence of this market-based system, which was designed to replace direct Federal rebates, was a severe drop in the price of RECs and a subsequent loss of investor confidence in large-scale renewable projects. In recent weeks both Pacific Hydro in South Australia, and Roaring 40s in Tasmania, had announced holds on wind farm projects as a direct result of falling REC prices.

The Enhanced Renewable Energy Target Scheme stabilises the REC market by separating incentives for small generation units (SGUs) from the market system which applies to utility-scale generators and retailers. The Large-scale Renewable Energy Target (LRET) will continue trading RECs at market price, and will meet the majority of the renewable energy target by 2020, while RECs earned by small generation units will be sold at a fixed price of $40 per MWh under the Small-scale Renewable Energy Scheme (SRES).

The adjustment is expected to restore confidence in the REC market and re-start progress on utility-scale wind farms, while increasing incentives in the small wind and rooftop solar markets. To learn more about the Enhanced Renewable Energy Target Scheme, read the Department of Climate Change Fact Sheet.