STCs are a mechanism used in Australia to incentivize the adoption of renewable energy sources, such as Solar power. The certificates are created under the Small-scale Renewable Energy Scheme (SRES), which is a part of the government’s Renewable Energy Target (RET).
When a Solar power system is installed, the system owner can create STCs based on the expected electricity generation over a 15-year period. The number of STCs generated depends on factors such as the system size, location, and the amount of Solar energy it is expected to produce.
Once the STCs are created, they can be traded on the open market. Electricity retailers are obligated to purchase a certain number of STCs each year to meet their renewable energy targets. The demand for STCs is driven by this obligation, as well as by investor demand for environmental benefits and compliance with renewable energy regulations.
The price of STCs is determined by market forces of supply and demand. If the supply of STCs is greater than the demand, the price may decrease. Conversely, if the demand surpasses the available supply, the price may increase. This fluctuation in price provides an economic incentive for individuals and businesses to invest in renewable energy systems.
Overall, STCs provide a way for Solar power system owners to monetize the environmental benefits of their renewable energy generation. By selling these certificates to electricity retailers or other entities, system owners can offset the upfront costs of installing Solar power systems, making renewable energy more financially attractive. Additionally, the creation and trading of STCs contribute to the growth of renewable energy capacity in Australia.