Small-scale technology certificates (or STCs) are electronic certificates created under the national small-scale Renewable Energy Scheme (SRES).
Each certificate represents either one (1) MWh of renewable energy that is generated by a small-scale solar, wind or hydro system or one (1) MWh of non-renewable energy that is displaced by a solar water heater or heat pump system.
The SRES aims to incentivise small customers, typically households and small businesses, to install eligible renewable energy systems.
Total creation of STCs depends on the geographic location, installation date and the MWhs of electricity generated over one (1) or five (5) years, or a single maximum deeming period, for small-scale generating systems. For solar water heaters or heat pumps, the amount of electricity displaced over a single maximum deeming period determines the number of STCs.
The deeming period is the maximum number of years for which a system can create STCs and depends on the installation date. For solar PV systems it decreases by one year, every year, until 2030.
Demand for STCS is created by placing an obligation on Renewable Energy Target liable entities to surrender STCs to the Clean Energy Regulator quarterly.
Liable entities are typically electricity retailers or companies who make ‘relevant acquisitions’, that is acquiring wholesale electricity for their own use or to supply end use customers.
The number of certificates that are required to be surrendered by retailers each year is determined by the small-scale technology percentage (STP) and the amount of relevant acquisitions. The STP must be set by 31st of March, and if not, a default percentage is applied.
Mandatory quarterly surrender establishes a minimum buying demand for STCs and sets a non-zero price floor. Liable entities can purchase direct from other counterparties or can buy certificates through the STC Clearing House at a fixed price of $40 (excl of GST).
The clearing house mechanism effectively puts a ceiling on the STC price and provides a means for liable entities to avoid paying the shortfall charge of $65 per STC.
In short, the combination of lower electricity demand from the grid and the market price of STCs allows households and businesses to recoup installation costs of renewable energy systems.
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