Renewable Energy Legislation to Increase Electricity Costs

01 Aug 2001Archived News Climate Change Matters

Wondering what the Renewable Energy Legislation means and how it will effect energy costs?



Under the Federal government's Mandatory Renewable Energy Target (MRET) the renewable energy sector has received a significant boost. In order to meet the 9,500 GWh/annum target by 2010, $3-5 billion of capital investment in renewable energy generation will take place over the next ten years. Wind farms are being developed, sugar mills are changing old boilers to more efficient systems, and some agricultural companies are capturing the energy from their waste streams.

Renewable Energy Certificates (RECs) are the financial instruments being used to meet the 9,500 GWh target. One REC may be created for every 1 MWh of renewable energy generated, and subsequently sold to "liable parties" at prices of up to $40/MWh. Recent trades of RECs have seen prices hover around $30/MWh. This additional revenue stream has seen many companies revive previously discarded generation projects. It is important to note that by purchasing RECs you are only entitled to the certificate, not the electricity produced. Electricity must be purchased in addition to RECs.

Since most of the RECs will need to be purchased by electricity retailers, energy prices are projected to rise between 1-3% over the next 10 years as a direct result of MRET. Note that this will vary from retailer to retailer.

When comparing electricity offers from retailers, it is important to check whether the prices have their Renewable Energy obligations factored in. Currently, there is little consistency across retailers, and under some contracts it may be possible for these costs to be passed through at a later date.

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