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RENEWABLE ENERGY (ELECTRICITY) AMENDMENT REGULATIONS 2009 (NO. 4) (SLI NO 379 OF 2009)
The Renewable Energy (Electricity) Act 2000 (the Act) establishes a Renewable Energy Target (RET) scheme to encourage additional electricity generation from eligible energy sources. The RET creates a guaranteed market for 12,500 gigawatt‑hours (GWh) of renewable energy in 2010 rising to 45,000 GWh in 2020, and staying at that level until 2030. The RET scheme is designed to deliver the Australian Government’s commitment that the equivalent of at least 20 per cent of Australia’s electricity supply is generated from renewable sources by 2020.
Section 161 of the Act provides, in part, that the Governor-General may make regulations prescribing all matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed, for carrying out or giving effect to the Act.
Under the Act, wholesale purchasers of electricity (‘liable parties’) are required to meet a share of the renewable energy target in proportion to their share of the national wholesale electricity market. The Act provides for the creation of Renewable Energy Certificates (RECs) by generators of renewable energy. One REC generally represents one megawatt‑hour (MWh) of electricity from eligible energy sources.
The Renewable Energy (Electricity) Regulations 2001 (the Principal Regulations) provide an administrative framework to implement the Act in relation to power station accreditation, eligibility requirements for renewable energy sources, eligibility requirements for solar water heaters and small generation units, and calculation methods for determining the number of RECs.
The Regulations make changes to combat collusive behaviour designed to generate RECs without an equivalent increase in the amount of electricity from renewable energy sources (a ‘gaming arrangement’) amongst power stations.
Section 30D of the Act allows for the suspension of the accreditation of a power station where ‘gaming’ of RECs has taken place. However, subsection 30D(4A) of the Act states that the Renewable Energy Regulator (‘the Regulator’) must have regard to any matter prescribed in the regulations when considering whether or not a gaming arrangement has taken place. A gaming arrangement under the RET involves interconnected power stations co‑ordinating the distribution of a shared renewable energy resource (for example, water used by hydro-electric stations) to intentionally increase the number of RECs.
The Regulations amend the Principal Regulations to support the Act by prescribing particular matters that the Regulator must have regard to when considering whether a gaming arrangement has taken place.
In addition, the Regulations amend the solar zone classification for two locations – on Lord Howe Island and Norfolk Island. The solar zone classification is part of the method in the Principal Regulations for calculating the number of RECs able to be created for eligible installations of small-scale solar photovoltaic systems. The amended classification would better reflect the solar energy generation potential of eligible systems installed at these locations.
Consultation meetings were conducted with industry stakeholders during development of the Regulations.
Details of the Regulations are set out in the Attachment.
The Act specifies no conditions that need to be satisfied before the power to make the proposed Regulations may be exercised.
The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.
The Regulations commence on the day after they are registered on the Federal Register of Legislative Instruments.
Authority: Section 161 of the Renewable Energy (Electricity) Act 2000
Attachment
The details of the Regulations are as follows.
Regulation 1 – Name of Regulations
This regulation provides that the name of the Regulations is the Renewable Energy (Electricity) Amendment Regulations 2009 (No. 4).
Regulation 2 – Commencement
This regulation provides that the Regulations commence on the day after they are registered.
Regulation 3 – Amendment of the Renewable Energy (Electricity) Regulations 2001
This regulation provides for Schedule 1 to the Regulations to amend the Renewable Energy (Electricity) Regulations 2001 (the Principal Regulations).
SCHEDULE 1 - AMENDMENTS
This item inserts a new regulation 20DA into the Principal Regulations which outlines matters relevant to a decision to suspend the accreditation of a power station under subsection 30D of the Act. Subregulation 20DA(1) prescribes eight matters that the Regulator must have regard to when considering whether a gaming arrangement has taken place under subsection 30D(4A) of the Act.
Paragraph 20DA(1)(a) prescribes that the Regulator must have regard to whether the excess of Renewable Energy Certificates (RECs) compared to the
1997 eligible renewable power baseline above which power stations are permitted to create RECs, is material. Paragraph 20DA(1)(b) prescribes that the Regulator must have regard to whether the shortfall of RECs compared to the baseline is material.
Paragraph 20DA(1)(c) prescribes that the Regulator must have regard to whether changes in the availability or amount of the relevant supply were for a reason that was beyond the control of the electricity generator. Reasons that would indicate gaming may not have occurred include: low rainfall; timing of rainfall; crop disease and regulatory obligations such as for irrigation, which could force more generation at a particular power station and less at another in a group.
Paragraph 20DA(1)(d) prescribes that the Regulator must have regard to whether the pattern of movement of the relevant supply between operating plants was taking place before commencement of the Mandatory Renewable Energy Target (MRET) scheme. If the movement of the relevant supply was occurring in a similar pattern prior to MRET’s commencement, this suggests that gaming may not have occurred.
Paragraph 20DA(1)(e) requires the Regulator to have regard to whether additional RECs created were the result of redirecting the energy source primarily to produce a core product more efficiently. For example, the primary driver for moving sugar cane between mills is to juice the cane as quickly and efficiently as possible to maximise the production of sugar. Movement of sugar cane between mills could lead to increased electricity generation at a particular mill through accumulation of additional sugar cane waste, known as bagasse, which can be burned to generate electricity. On these grounds, movement of sugar cane rather than bagasse would indicate gaming may not have occurred.
Paragraph 20DA(1)(f) requires the Regulator to have regard to whether additional RECs were created by directing the relevant supply to fuel a substantially more efficient electricity generating plant. For example, burning bagasse in a more efficient plant generates more renewable electricity than would otherwise be the case, which is consistent with the objectives of the Act. For the purposes of the Regulations, to be substantially more efficient in converting renewable fuel to electricity, the excess power station(s) should be at least twice as efficient as the shortfall station(s) in the group.
Paragraph 20DA(1)(g) requires the Regulator to consider the reasons for the permanent closure or temporary non-operation of a particular power station, with the consequent re-routing of relevant supply or reduced power station output. Reasons that would indicate gaming may not have occurred include: the price of sugar may force some cane growers off the land which may be converted to other uses, rendering a mill uneconomic to run; change of ownership or industry rationalisation with respect to mills and/or resource catchments, with subsequent restrictions and concurrent expansions to supply to different mills in a group; a natural disaster damages or closes a plant; and/or mechanical breakdown.
Paragraph 20DA(1)(h) requires the Regulator to consider whether the relevant supply has been transported to another power station in order to offset the overall use of fossil fuel at that power station. Reasons for such action could include transporting bagasse to another mill connected to a sugar refinery where the bagasse is used to replace fossil fuel used in operating the sugar refinery. This situation can occur where one sugar mill has a sugar refinery that operates in the non-crushing season and would normally utilise coal for a boiler fuel, but where this coal has been displaced through transportation of bagasse from another mill. This is an example that would indicate gaming may not have occurred.
Note 1 clarifies that the meanings of excess station, shortfall station and relevant supply have the same meanings as section 30D of the Act. Note 2 clarifies that the meanings of renewable energy certificate and eligible renewable energy source have the same meanings as in subsection 5(1) of the Act.
Subregulation 20DA(2) clarifies the meaning of ‘material’ in new regulation 20DA. To provide guidance to the Regulator in this context, ‘material’ means an excess or a shortfall of two per cent of the baseline of the power station concerned, or the amount electricity needed to create 2,000 RECs under the Act, whichever is less.
This item replaces the figure ‘4’ with ‘3’ in the field entitled ‘Zone’ in item 32 of the table in Part 2 of Schedule 5 to the Principal Regulations. This zone classification is used in the method to calculate the number of RECs that may be created for eligible installations of small-scale solar photovoltaic (PV) systems. Item 32 provides the solar zone classification for two postcodes on Norfolk Island and Lord Howe Island.