On the back of an exciting, and at times confusing, process of amendments in the Senate, the Enhanced Renewable Energy Target (RET) legislation became law in late June. From 1 January 2011 the new legislation will divide the existing Renewable Energy Certificate (REC) market into two separate markets; one for large scale projects, as well as all RECs created up to generation year 2010, and another for small scale projects.

While the large-scale market will go on operating in much the same way as the existing REC market, the Small-scale Renewable Energy Scheme (SRES) will operate slightly differently. Compliance under SRES will go from annual to quarterly with liable parties forced to acquire and surrender RECs four times each year.

Buyers and sellers will have the option of participating in a ‘clearing house’ once each quarter. The settlement date for the clearing house will take place 28 days after the end of each quarter for the first three quarters.

Those who prefer not to wait until the settlement dates can trade at a discount to the $40 settlement date.

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To the current REC market, the spot market has traded exclusively between $39.50 and $41.00. At the close of trading on Wednesday 27 July the spot market was at $39.90.

Trading volumes in the over-the-counter REC market remain strong with June having recorded the largest ever trading volume on the spot with approximately 1.1 million certificates changing hands.

In New South Wales, the NGAC market has continued its gradual recovery both in terms of price and trading volumes. Across most of July the spot price was steady at $5.20. With trading volumes having fallen in late 2009 and early 2010, activity in the market has recovered in recent months as the delay to the CPRS extends the life of the NGAC market till at least the end of 2012.