EXPLANATORY STATEMENT

Select Legislative Instrument 2010 No. 256

Issued by the Authority of the Minister for Climate Change and Energy Efficiency

Renewable Energy (Electricity) Act 2000

Renewable Energy (Electricity) Amendment Regulations 2010 (No. 7)

Section 161 of the Renewable Energy (Electricity) Act 2000 (the Act) provides, in part, that the Governor-General may make regulations prescribing matters required or permitted by the Act, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

 

The Act establishes a Renewable Energy Target (RET) scheme to encourage additional electricity generation from eligible energy sources. The RET scheme is designed to ensure that 20% of Australia’s electricity supply is generated from renewable sources by 2020.

 

Under the Act, wholesale purchasers of electricity (‘liable parties’) are required to meet a share of the RET 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 Regulations amend the Renewable Energy (Electricity) Regulations 2001 (the Principal Regulations) to support the provisions of the Act that deal with the provision of partial exemptions from liability in respect of the electricity acquired for use in carrying on activities that are defined as emissions-intensive trade-exposed (EITE) for the purposes of the Act. Examples of these activities include the production of silicon, aluminium smelting and printing and writing paper manufacturing.

 

The Regulations prescribe two additional EITE activities in the Principal Regulations to support these activities.

 

Details of the Regulations are set out in the Attachment.

 

Consultation

The Department of Climate Change and Energy Efficiency started a formal process for defining and determining the eligibility of EITE activities in February 2009. This has involved stakeholder workshops to assist in the creation of appropriate definitions and boundaries for activities. Activities were then formally defined by the relevant Minister for the purposes of data collection and published on the Department's website. Audited data has been submitted to the Government on the basis of the approved definitions and the activities in these regulations have been determined as eligible by the Minister for Climate Change and Energy Efficiency. Relevant industries who have submitted data to the Government have provided comment on the final wording of the definitions to be included in the Regulations to ensure that the structure of the definitions reflects the conduct of the activities at their individual sites.

 

Authority: Section 161 of the Renewable Energy (Electricity) Act 2000

Attachment

 

Details of the Renewable Energy (Electricity) Amendment Regulations 2010 (No. 7)

 

Regulation 1 – Name of Regulations

This regulation provides that the Regulations are the Renewable Energy (Electricity) Amendment Regulations 2010 (No. 7).

Regulation 2 – Commencement

This regulation provides that the Regulations commence on the day after they are registered on the Federal Register of Legislative Instruments.

Regulation 3 – Amendment of Renewable Energy (Electricity) Regulations 2001

This regulation provides that Schedule 1 amends the Renewable Energy (Electricity) Regulations 2001 (the Principal Regulations).

SCHEDULE 1 AMENDMENTS

Item [1] inserts new Parts 29 (Production of fused alumina) and 30 (Production of copper).

Part 29 Production of fused alumina

Division 1 Production of fused alumina

Clause 683 – Production of fused alumina

This clause provides that the production of fused alumina is the physical transformation of alumina (aluminium oxide (Al₂O₃)) by heating it to its fusion point to produce fused alumina that:

(a) has an alpha alumina crystalline structure; and

(b) has a concentration of aluminium oxide equal to or greater than 99.0%.

 

The activity as conducted during the period used to assess the eligibility of the activity involved heating alumina to its fusion point in an electric arc furnace. Emissions associated with the crushing and milling of cast fused alumina in order to produce saleable fused alumina were also considered part of this activity.

The activity description is not satisfied through the undertaking of alumina refining or through the production of brown fused alumina, where bauxite is transformed into brown fused alumina by heating it to its fusion point.

The fact that a batch of fused alumina does not have a purity equal to or greater than 99.0% does not mean that the activity is not conducted at times when the purity is equal to or greater than 99.0% in other batches.

The inputs of the activity have been defined to include any grade of alumina.

The output of the activity is saleable fused alumina (aluminium oxide, Al₂O₃) with an alpha alumina crystalline structure and a purity equal to or greater than 99.0%.

 

The activity does not include the upstream mining and processing of bauxite to produce alumina. As such, the relevant site for the application is that where the fused alumina is actually produced and does not extend to separate sites which may conduct upstream or downstream processing but not the activity as described. Generally, it is expected that where these processes are carried out at separate sites those sites would not be regarded as carrying out the emissions-intensive trade-exposed (EITE) activity for the purposes of subregulation 22A(9). However, it is understood that some upstream or downstream processing or ancillary processes may be conducted at the same site as an EITE activity and these processes do not impact the eligibility for partial exemptions of the EITE activity itself.

Division 2 Classification of activity

Clause 684 – Classification of activity

This clause provides that the production of fused alumina is classified as a highly emissions-intensive activity.

Division 3 Electricity baseline for calculating partial exemption

Clause 685 – Electricity baseline for product

This clause provides that the electricity baseline for calculating the amount of a liable entity’s partial exemption in respect of the production of fused alumina is 2.03 MWh per tonne of saleable fused alumina (aluminium oxide, Al₂O₃) with an alpha alumina crystalline structure and a purity equal to or greater than 99.0%.

The tonnage of the relevant fused alumina should be measured accordingly to ordinary measurement rules applicable in the industry.

 

To be eligible as a relevant product, the fused alumina must:

 

(a) have an alpha alumina crystalline structure; and

 

(b) have a concentration of aluminium oxide equal to or greater than 99.0%; and

(c) be produced by carrying on the emissions-intensive trade-exposed activity; and

 

(d) be of saleable quality.

The fused alumina must have been produced by carrying on the activity as defined by clause 683 to be eligible as a relevant product. For instance, where imported fused alumina is blended with the product produced from the activity, only the domestically produced fused alumina would be included in the tonnes of the relevant product.

The fused alumina must be of saleable quality. This is defined by regulation 22C. In particular, the tonnes of fused alumina which are scrapped, lost or discarded are not to be included in the tonnes of relevant product.

Part 30 Production of copper

Division 1 Production of copper

Clause 686 – Production of copper

This clause provides that the production of copper is either or both of the following:

 

(a) the physical and chemical transformation of concentrated mineralised copper compounds into either or both of:

(i) copper cathode that has a concentration of copper greater than 99.90%;

(ii) copper anode that has a concentration of copper:

(A) equal to or greater than 99.00%; and

(B) equal to or less than 99.90%;

(b) the physical and chemical transformation of copper anode into copper cathode that has a concentration of copper greater than 99.90% where the copper anode:

(i) has a concentration of copper of:

(A) equal to or greater than 99.00%; and

(B) equal to or less than 99.90%; and

(ii) was not produced as part of the transformation in paragraph (a)(i).

 

The activity as conducted during the period used to assess the eligibility of the activity involved two distinct processes for producing copper cathode from concentrated mineralised copper compounds, a pyrometallurgical process and a hydrometallurgical process. The pyrometallurgical process involved the smelting of copper sulphide concentrate to produce copper anode and the further electrolytic refining of the resultant copper anode to produce copper cathode. The electrolytic refining part of the activity included the refining of bought-in copper anode and equivalent products to produce copper cathode. Spent copper anode which was not transformed into copper cathode was also recycled back into copper anodes. The hydrometallurgical process involved the electrowinning of copper electrolyte solution to produce copper cathode.

It is intended that alternative processes to produce copper cathode and/or copper anode from concentrated mineralised copper compounds would be considered to fit within paragraph (a) of the activity description. It is also intended that alternative processes to produce copper cathode from copper anode would be considered to fit within paragraph (b) of the activity description. For the purposes of the activity, the definition of copper anode is also intended to include any equivalent copper product suitable for input into an electrolytic refining process, including copper scrap and copper cathode which does not meet industry measurement standards.

The activity description is not satisfied through the undertaking of copper production where the final product is not:

•                     copper cathode that has a concentration of copper greater than 99.90%; and/or

•                     copper anode that has a concentration of copper between 99.00% and 99.90% (inclusive).

The inputs of the activity have been defined to be concentrated mineralised copper compounds and/or copper anode. The definition of concentrated mineralised copper compounds includes: copper sulphide concentrates that have a concentration of copper of 20% or more on a dry weight basis and copper electrolyte solution that has a concentration of copper of 35 grams or more per litre of electrolyte.

 

The outputs of the activity are copper anode that has a concentration of copper of 99.00% or higher; and 99.90% or lower, and/or copper cathode that has a concentration of copper of more than 99.90%.

 

Where anodes are produced at one site and transferred to another site for processing into cathodes, it is intended that paragraph (a) of the activity description could be satisfied by the activity being conducted across two sites (and thus forming an activity group) or that an activity may be conducted at one site through paragraph (a) and at the second site through paragraph (b). The important issue is that production is not doubly allocated through the differentiated electricity baselines which are then applied.

 

The activity does not include the mining, ore preparation, treatment and/or concentrating of mineralised copper compounds to produce copper concentrate or electrolyte; the production of any other copper products apart from copper anode or copper cathode as defined; or the post-cast rolling, extruding, re-forming or alloying of copper cathode. As such, the relevant site for the application is that where the copper anode or copper cathode are actually produced and does not extend to separate sites which may conduct mining, ore preparation, treatment and/or concentrating of mineralised copper compounds to produce copper concentrate or electrolyte; the production of any other copper products apart from copper anode or copper cathode as defined; or the post-cast rolling, extruding, re-forming or alloying of copper cathode but not the activity as described. Generally, it is expected that where these processes are carried out at separate sites those sites would not be regarded as carrying out the EITE activity for the purposes of subregulation 22A(9) . However, it is understood that some upstream or downstream processing or ancillary processes may be conducted at the same site as an EITE activity and these processes do not impact the eligibility for partial exemptions of the EITE activity itself.

Division 2 Classification of activity

Clause 687 – Classification of activity

This clause provides that the production of copper activity is classified as a highly emissions-intensive activity.

Division 3 Electricity baseline for calculating partial exemption

Clause 688 – Electricity baseline for product

This clause provides that the electricity baselines for calculating the amount of a liable entity’s partial exemption in respect of the production of copper activity are:

•                     for copper cathode produced from concentrated mineralised copper compounds, 1.69 MWh per tonne of copper cathode that has a concentration of copper greater than 99.90%;

•                     for copper anode produced from concentrated mineralised copper compounds, 1.31 MWh per tonne of copper anode that has a concentration of copper between 99.00% and 99.90% (inclusive); and

•                     for copper cathode produced from bought-in copper anode, 0.387 MWh per tonne of copper cathode that has a concentration of copper greater than 99.90%.

The tonnage of the relevant outputs should be measured according to measurement techniques in practice in the industry.

To be eligible as relevant product:

(a)    the copper anode or copper cathode must be produced by carrying on the emissions-intensive trade-exposed activity; and

(b)   the copper anode or copper cathode must be of saleable quality.

 

The copper anode or copper cathode must have been produced by carrying on the activity as defined by clause 686 to be eligible as a relevant product.

The copper anode or copper cathode must be of saleable quality. This is defined by regulation 22C. Copper anode or copper cathode which is scrapped, recycled, remelted lost or discarded are not to be included in the tonnes of relevant product. It is intended that only copper cathode meeting industry standard BS:EN 1978:1998 Copper cathode should be considered as a relevant copper cathode product.

It is intended that paragraphs 688(1)(c), 688(2)(c) and 688(3)(b) ensure that production of copper anodes and cathodes is not doubly allocated and each of the subclauses is mutually exclusive. In particular:

•                     paragraph 688(1)(c) ensures that subclause 688(1) relates to copper cathode which is produced from concentrated mineralised copper compounds (whether across one or two sites) but does not relate to copper cathode attributable to ‘bought-in’ anodes (such as imported anodes or anodes produced at a site which is not part of the activity the subject of the application);

•                     paragraph 688(2)(c) ensures that subclause 688(2) relates to copper anode that is not then transformed into copper cathode which is allocated under subclause 688(1) in relation to the application; and

•                     paragraph 688(3)(b) ensures that subclause 688(3) relates to copper cathode which comes from copper anode that is not produced from carrying out the activity the subject of the application.