The Large-scale Renewable Energy Target (LRET) would cover large scale renewable energy projects like wind farms, commercial solar projects and geothermal projects.

The LRET would deliver the 'vast majority' of the Renewable Energy Target (RET), which Federal Climate Change Minister Penny Wong has said will be approximately 41,000 GW hours. The RET aims to deliver a total of 45,000 GWh, or 20 per cent of Australian energy, from renewable sources by 2020.

The Small-scale Renewable Energy Scheme would deliver the remainder of the RET (approximately 4,000 GWh), and would include small scale technologies such as solar panels and solar hot water systems. It would provide a fixed price of $40 per MW hour of electricity produced.

The Climate Institute has welcomed the changes, predicting that they will provide greater investor certainty for large-scale renewable energy projects.

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“We don’t yet have all the details of the proposed changes, but it appears many of the problems of the old RET scheme will be ironed out,” said John Connor, CEO of The Climate Institute.

The Clean Energy Council (CEC) supported the Government's announcement.

“Our main concern was to improve the design of the RET to ensure that it delivered both industrial scale generation projects as well as the continued development and deployment of household technologies like solar panels and hot water. Today’s announcement addresses this problem," said CEC CEO Matthew Warren.

The Australian Geothermal Energy Association Chief Executive Susan Jeanes said that while the full details were yet to be seen, it appeared that the changes would not benefit the geothermal industry. Ms Jeanes said that the changes only made a distinction between small are large scale projects, failing to provide support for emerging technologies such as geothermal power.

Ric Brazzale, Managing Director of Green Energy Trading, also said that the initial announcement lacked detail, and that it was not clear how the changes would be implemented.

"The market is confused. It is unclear how the small-scale system will work with both a fixed price and a fixed target."

The Government said it will release an industry consultation paper shortly, with the intention of legislating the changes in the Winter Sitting of Parliament.

The Government will also continue to work with the states and territories on other issues being considered by the Council of Australian Governments’ Review of Specific RET Issues, such as the issue of ‘phantom credits’, or multiplied credits that are not backed by actual generation.

By introducing a separate system for large scale renewable energy projects, the Government's proposal aims to avoid small scale installations such as heat pumps and solar hot water systems flooding the Renewable Energy Certificate (REC) market. The Government hopes that this will bring the price of RECs back up, and relieve the uncertainty that is hampering the renewable energy industry.

Several large scale projects have recently been put on hold due to financial issues surrounding the current low price of RECs (which is currently at $36.10, according the Green Energy Markets). These include projects by Roaring 40s, such as the Musselroe Wind Farm; and Pacific Hydro, which has announced the temporary halting of all of its Australian wind developments.

Another factor contributing to uncertainty in the industry is the failure of the Carbon Pollution Reduction Scheme (CPRS) to be passed.

Debate in the Senate of the Federal Government’s CPRS was adjourned this week until the next period of sittings in May.