Renewable Energy Certificates – What Are They and How They Promote Energy Efficiency

Renewable Energy Certificates What Are They and How They Promote Energy Efficiency

Any individual or business that buys and installs a solar power system to generate solar electricity can not only lower electricity bills, but also reduce their cost of ownership through the benefits of renewable energy certificates (REC) if they live in countries such as Australia, which implements the Mandatory Renewable Energy Scheme. In essence, these certificates are as good as cash payments as they reduce the cost of owning a solar power system and directly promote energy efficiencythrough the use of renewable energy sources.

One REC is awarded for every one megawatt hour of electricity generated through solar panels. These certificates are generally assigned to the organisation doing your solar power installation and they sell them to energy companies as part of their obligations under mandatory renewable energy targets.

Different solar power systems generate varying amounts of REC according to each one's capacity and the location. In Australia, there are four distinct zones for both solar PV panelsand solar water heaters signifying the four different levels of sunlight each zone receives. Deeming periods of 1, 5, and 15 years may also be applied to system owners eligible for RECs. The deemed basis would depend on the installation date of the solar power systems.

How the REC System Works

The Australian government targets sourcing at least 20% of energy consumption from renewable sources by 2020, in compliance to a global mandate that involves other nations working towards the reduction of greenhouse gas emissions. Energy companies are working to meet the target, being required to surrender RECs into their respective holding accounts at the end of every calendar year. Failure to reach the target leaves them liable to pay a fine much higher than the REC value.

For individuals and businesses alike, RECs may be traded for cash. The values of RECs fluctuate, just like any other commodity, according to market conditions. Solar power system owners may claim the renewable energy certificates themselves or assign the right to claim the REC value to an agent in order to save time and avoid the inconvenience of undergoing the required process.

Implications

Naturally, the program has not received all positive feedback. There were claims that the REC system does not really result in the substantial reduction of greenhouse gas emissions. When an individual or a business owner sets up solar power systemsto generate solar electricity, and then sell their renewable energy certificatesto power companies, he forfeits the right to own the renewable energy to the power companies whose aim is to meet their environmental obligations.

People who are interested in tapping renewable energy resources through the use of solar power must never forget one important reason for doing so: which is to support the generation of energy from renewable sources and promote energy efficiency.

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