When a solar power (or hot water) system is installed Renewable Energy Certificates (or RECs) can be created. Each REC represent one megawatt hour of renewable energy that the system is deemed to produce over its lifetime. The number of RECs generated for each system is dependent on the system size and location (and also the Solar Credits multiplier – see below for more details). There are two different zones in Victoria which give slightly different factors for calculating the number of RECs which are generated, the reason being that some areas receive more sunshine than others on average. Zone 4 is for central through to southerly areas of Victoria, and Zone 3 is for northern areas. The Zones are defined by postcodes. The RECs initially belong to the solar system owner but are usually sold or assigned to someone else upon installation of the system in exchange for a discounted price or cash rebate. Certain companies which produce high amounts of carbon emissions are required by law to purchase RECs, in what is essentially a form of carbon trading that has already been operating for many years.

On 1 January 2011 the federal government’s Office of Renewable Energy Regulator (now called Office of the Clean Energy Regulator) changed the REC creation system by separating small and large scale renewable energy generators and making the certificates applicable to each one different. They are now referred to as Small-scale Technology Certificates (STCs) and Large-scale Generation Certificates (LGCs). Both are a type of REC. Domestic solar power falls into the STC category.

In order to create the STCs a registered agent with the Clean Energy Regulator (such as Bayly Solar) must obtain all the required documentation, serial numbers, photos etc. proving that the new installation is compliant.  The agent then enters the details into on on-line system called the REC registry. The Clean Energy Regulator performs various checks in order to validate the information and then approves the creation of the STCs. Once the creation of the STCs has been approved, and a processing fee paid, the certificates are registered and can then be traded. This process usually takes 2-4 weeks but agents may offer payment terms shorter than this.