STCs are a form of financial incentive provided by the Australian government to promote the installation of small-scale Solar systems. The creation of STCs is based on the idea that small-scale Solar systems produce clean and renewable electricity, which helps reduce greenhouse gas emissions and dependence on fossil fuels.
The process of creating STCs involves calculating the amount of electricity generated by a small-scale Solar system over its lifetime. This is done by estimating the number of megawatt-hours of electricity the system will produce based on its capacity and expected annual Solar radiation at its location.
Once the STCs are created, they can be traded and sold in the market. Electricity retailers are obligated by the government to purchase a certain number of STCs each year, known as the Small-scale Renewable Energy Scheme (SRES) target. This creates a demand for STCs and incentivizes the installation of small-scale Solar systems.
The value of STCs is determined by various factors. The size of the Solar system plays a role, as larger systems generate more electricity and therefore create more STCs. The location is also important, as areas with higher Solar radiation potential tend to have higher STC values. Additionally, market demand and supply dynamics influence the price of STCs, with higher demand driving up the value.
The value of STCs can fluctuate over time due to changes in market conditions, government policies, and the overall demand for renewable energy. This creates opportunities for individuals and businesses to benefit financially from the sale of STCs, providing an additional incentive to invest in small-scale Solar systems.