6. Market Mechanisms
6.1 Solar Credits
In September 2009, the Australian Government introduced Solar Credits, a scheme providing support to households and businesses that install rooftop solar panels.
Solar Credits specifically support the installation of rooftop solar panels, and are available to households, businesses and community groups for eligible small-scale renewable energy systems, including rooftop solar panels and small-scale wind and micro hydro systems.
Solar Credits are provided in the form of additional renewable energy certificates or 'RECs' for eligible small-scale solar PV, wind and hydro electricity systems installed between 9 June 2009 and 30 June 2014. REC is a tradable instrument under the Government's Renewal Energy Target (RET) legislation, under which energy retailers are required to purchase RECs. RET was passed by Parliament in August 2009, and is designed to deliver on the Government's commitment to ensure that 20 per cent of Australia's electricity supply is from renewable sources by 2020.
In December 2010, the Australian Government announced that support for household solar installations will begin to be phased out a year earlier than previously planned, as the cost of installing solar systems is expected to decline further over time.
The level of support has also been reduced. Householders will continue to receive support through Solar Credits equivalent to more than half the upfront out-of-pocket costs for a typical 1.5 kW PV system. For systems installed after 1 July 2011 with the multiplier reduced from five to four, support for a 1.5 kilowatt (kW) system in Sydney, Brisbane, Perth or Adelaide, would be reduced from about $6,200 to about $5,000.
On 5 May 2011, the Australian Government announced that the Solar Credits multiplier would be reduced to three for small-scale systems installed from 1 July 2011. The multiplier will phase down by one each year consistent with the original intent of the Solar Credits multiplier reducing over time, until the multiplier is phased out by 1 July 2013.
Solar Credits is expected to still provide a substantial level of support to assist with the cost of installing solar panels and other small generation units. See below for more information on the benefits.
For systems installed from 1 July 2011 to 30 June 2012, the multiplier will be three, and will reduce by one each financial year until the standard rate of STC creation (a multiplier of one) applies for systems installed from 1 July 2013.
The Australian Government intends to put in place transitional arrangements in regulations to recognise written contracts entered into prior to 5 May 2011, for system installation from 1 July 2011 to 30 June 2012, where the contract was made on the basis of the previous multiplier of four, but only where a number of conditions have been met.
It is the Australian Government’s intention that regulations to give effect to the reduction in Solar Credits multiplier, including the transitional arrangements, will be made prior to the end of June 2011.
6.2 National Authority for the Clean Development Mechanism
In September 2009, the Australian Government established Australia's National Authority for the Clean Development Mechanism (CDM) and Joint Implementation (JI). CDM and JI are two project-based flexibility mechanisms that help developed countries achieve their emission-reduction targets under the Kyoto Protocol, by providing access to cost-effective abatement opportunities that exist internationally, especially in developing countries. These mechanisms are based on the principle that the benefit to the climate of reducing greenhouse gas emissions is the same regardless of where they are reduced.
The CDM allows developed countries or authorised private entities to undertake projects that reduce emissions in developing countries. CDM projects generate Certified Emission Reductions (CERs). Similarly, JI allows developed countries or authorised private entities to implement projects in other developed countgries. JI projects generate Emission Reduction Units (ERUs).
CERs and ERUs are carbon credits generated that can be traded on international carbon markets.
The National Authority approves participation by businesses in CDM and JI projects - except nuclear projects - under the Kyoto Protocol. This would stimulate investment in clean energy, renewables, and energy efficiency and provide financial and technical support for such projects in developing countries.
6.3 Carbon Price Mechanism
On 10 July 2011, the Government released its Clean Energy Plan, which includes a carbon pricing mechanism.
The mechanism will introduce a carbon permit, equivalent to one tonne of CO2e emissions. The initial price for these permits will be $23 per tonne. The Government estimates that around 500 corporations will be required to pay for their emissions because they have one or more facilities in operation that emit 25 kilotonnes CO2e or more. The carbon emissions will be measured under the National Greenhouse Emissions Reporting Scheme rules for Scope 1 emissions (those which occur directly from a facility).
A fixed price period of $23/tonne (increasing by increments of 2.5% annually for three years) will be in effect until 1 July 2015 when a restricted market system will be introduced. 2018 will see the final step towards an emissions trading scheme (ETS) with a completely floating price.
