What’s the Difference Between Small-Scale Subsidies and Large-Scale Subsidies?
30th Dec 17
Cameron Quin

The Australian Clean Energy Regulator have established a Renewable Energy Target, which has two main goals: reducing greenhouse gas emissions from the Australian electricity sector, while encouraging investment in cleaner and more sustainable energy sources such as commercial solar. The Clean Energy Regulator have broken renewable generation systems into two categories based on capacity, designing a different subsidy system for each: solar power systems above 100 kW of installed capacity or above 250 MWh of annual production get large-scale generation certificates (LGC), while installations up to 100 kW receive small-scale technology certificates (STC).

The main difference between both programs is that LGCs are calculated and accredited annually, while STCs are calculated when a renewable generation system is first installed. In other words, LGCs represent an annual incentive that increases income, while STCs represent an upfront incentive that makes residential and commercial solar easier to afford. However, there are also two marked similarities between LGCs and STCs:

  • One credit is awarded for each megawatt-hour of clean energy generation.
  • Their price is determined in a free market system, based on supply and demand. However, each type of credit has a separate market.

For most Australian homes and businesses, solar photovoltaic systems are the best option to generate their own energy and gain LGCs or STCs. Other renewable generation technologies such as wind turbine and hydroelectric power plants are also eligible for the subsidy, but they are more demanding in terms of site conditions, and only viable for some energy users.

Large-Scale Generation Certificates for Commercial Solar

The Clean Energy Regulator establish a renewable power percentage, and all liable entities must deliver an equivalent number of LGCs each year. The term “liable entity” is used to describe the first organization that purchases the output from a large-scale renewable generation system and with an installed capacity of at least 100 MW, so this normally applies for electricity retailers. Liable entities purchase these LGCs from renewable energy generators meeting the conditions previously described: at least 100 kW of capacity or 250 MWh of generation in the case of solar.

LGCs are traded in a free market, so there is no fixed price. However, regardless of their market price, the effect is the same: providing an extra stream of income for large renewable energy generators. The program started in 2001 with a modest target of 300 GWh, and the goal is to reach 33,000 GWh of additional renewable generation by 2020.

Small-Scale Technology Certificates for Residential and Commercial Solar

Electricity retailers and other entities subject to the renewable power percentage must also meet a small-scale technology percentage, which is met by delivering STCs to the Clean Energy Regulator. The STC subsidy targets installations below the threshold for LGCs, including commercial solar power up to 100 kW, and there are two key differences in how the incentive is calculated:

  • Instead of a yearly calculation, the incentive is based on the expected energy output between the year when the renewable generation system starts operating and 2030. As a result, you get less STCs for each year you wait before deploying solar power.
  • The full incentive is provided upfront, as opposed to year by year, which makes commercial solar easier to afford for smaller businesses, and residential solar also gets the benefit.

The STC program has been successful in helping the small-scale solar power market grow in Australia, and the last months of 2017 displayed remarkable growth. It is important to note that STC are also available for heat pump systems, which don’t generate electricity strictly speaking, but use it more efficiently than conventional resistance heaters.

Conclusion

Although STCs and LGCs target different market segments, they accomplish the same goal: increasing the financial return from each dollar spent upfront on solar photovoltaic arrays and other renewable generation systems.

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Cameron Quin

30th Dec 17
Cameron Quin

Cameron Quin has been heavily involved in business development from an early age. After founding and selling two online companies, Cameron found a strong passion for renewables and the opportunities it brings for the commercial and industrial sector. Sharing the possibilities of solar and the knowledge from the Solar Bay team is his favourite pastime.