Commonwealth Numbered Regulations - Explanatory Statements

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RENEWABLE ENERGY (ELECTRICITY) AMENDMENT REGULATIONS 2011 (NO. 5) (SLI NO 222 OF 2011)

EXPLANATORY STATEMENT

Select Legislative Instrument 2011 No. 222

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

Renewable Energy (Electricity) Act 2000

Renewable Energy (Electricity) Amendment Regulations 2011 (No. 5)

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 the Renewable Energy Target (RET) scheme to encourage electricity generation from eligible energy sources. The RET is designed to ensure that the equivalent of 20 per cent of Australia's electricity supply is generated from renewable sources by 2020. From 1 January 2011, the RET has operated as two parts - the Large-scale Renewable Energy Target (LRET) and the Small-scale Renewable Energy Scheme (SRES).

Under the Act, wholesale electricity purchasers ('liable entities') are required to contribute to the RET in proportion to their share of the national wholesale electricity market. The Act provides for the creation of renewable energy certificates by renewable energy sources, such as from wind, solar hydro, various forms of biomass and geothermal energy. One certificate 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 SGUs, and calculation methods for determining the number of certificates.

The Regulations amend the Principal Regulations to exclude biomass from native forests as an eligible renewable energy resource, as announced as part of the Government's suite of new policies and initiatives under the clean energy future plan. This amendment means that the defined source of 'wood waste' no longer includes products, by-products and waste associated with or produced from clearing or harvesting of native forests, subject to appropriate transitional arrangements for existing RET accredited power stations under prescribed circumstances.

The Act and Principal Regulations will be reviewed by the Climate Change Authority in 2012.

Details of the Regulations are included in the Attachment.

Consultation

The decision to exclude native forest wood waste from eligibility under the RET was announced on 10 July 2011 as part of the Government's Clean Energy Future package. This issue had been raised in consultations over the RET a number of times since the legislation commenced in 2001. In developing these Regulations to implement that decision, the Department of Climate Change and Energy Efficiency conducted a formal stakeholder engagement process. This included engagement with impacted power stations following the policy announcement.

On 28 October 2011 a public exposure draft of the Regulations was released for consultation together with a commentary paper to provide context and explain the technical detail of the amendments. Stakeholders were invited to make submissions on the exposure draft of the Regulations by 11 November 2011. Feedback received through over 30 submissions was considered in finalising the Regulations.

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

Attachment

Details of the proposed Renewable Energy (Electricity) Amendment Regulations 2011 (No. 5)

Regulation 1 - Name of Regulations

This regulation provides that the title of the Regulations is the Renewable Energy (Electricity) Amendment Regulations 2011 (No. 5).

Regulation 2 - Commencement

This regulation provides for the Regulations to commence the day after they are registered.

Regulation 3 - Amendment of 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).

Regulation 4 - Transitional

Regulation 4 specifies the transitional arrangements to preserve existing eligibility provisions under the Principal Regulations for power stations already accredited by the Renewable Energy Regulator to use wood waste derived from native forest biomass subject to specified conditions.

These arrangements reflect the Government's policy intent to appropriately protect these power stations' legitimate expectations, investment and contractual decisions made in the context of the current Renewable Energy Target (RET) scheme rules relating to native forest biomass. They are also intended to support the principle of investment certainty for the RET scheme as a whole.

Subregulation 4 (1) specifies the conditions that must be met by power stations for the transitional arrangements to apply.

Paragraph  4 (1) (a) specifies the power station must have been accredited by the Renewable Energy Regulator under Division 3 of Part 2 of the Renewable Energy (Electricity) Act 2000 (the Act) on or before 10 July 2011, the date the Government announced its intent to exclude native forest biomass from eligibility under the RET. A power station must be accredited under the Act before a renewable energy certificate can be issued in relation to power generated by it. The last accreditation of a power station to use wood waste was in February 2007.

Paragraph 4 (1) (b) specifies that as part of its application for accreditation to the Renewable Energy Regulator, wood waste must have been one of the eligible energy sources, as specified under regulation 8 of the Principal Regulations, from which electricity was intended to be generated.

Paragraph 4 (1) (c) specifies that for these accredited powers stations, at least one renewable energy certificate must have been created and registered by the Renewable Energy Regulator from the electricity generated through the use of wood waste on or before 10 July 2011.

Subregulation 4 (2) specifies the circumstances under which amendments to regulation 8 of the Principal Regulations as specified in Schedule 1 of the Regulations do not apply to accredited power stations that meet the conditions under subregulation 4 (1).

Subparagraph 4 (2) (a) (ii) specifies 31 December 2020 as the end date for which the transitional arrangements are to apply. This has been set in recognition that all power stations currently accredited by the Renewable Energy Regulator under the RET scheme for wood waste were accredited to use this eligible energy source prior to the Government announcement in late 2007 to extend the RET scheme from out from 31 December 2020 to 31 December 2030.

Subparagraph 4 (2) (a) (i) together with paragraph 4 (2) (b) specify that in circumstances where the accredited power station increases its nameplate generation capacity above its generation capacity as of 10 July 2011, then a contingent annual cap would apply. 

The contingent annual cap ensures no incentive remains under the RET scheme for new capital investment (in higher generating capacity) to use wood waste derived from native forest biomass for generation.

The contingent annual cap limits the level of generation from which renewable energy certificates can be created under the proposed transitional arrangements using wood waste as defined under existing regulation 8, which would include wood waste derived from native forest biomass. The contingent annual cap is determined by the accredited power station's maximum historical annual generation level from the use of wood waste (as specified in subregulation 4 (3)). Once the contingent annual cap is triggered, it continues to apply each calendar year until 31 December 2020, when the transitional arrangements conclude. 

Where an accredited power station increases its nameplate generation capacity it must be reported to the Renewable Energy Regulator, as specified under regulation 18 of the Principal Regulations, which deals with electricity generation returns for accredited powers stations. In addition to reporting matters such as the amount of electricity generated from each eligible energy source used and the associated number of certificates created on an annual basis, any changes to information in relation to the power station, including generation capacity, must be provided (subparagraph 18 (1) (f) (v) refers).

To be clear, the application of the contingent annual cap will not preclude the affected accredited power stations from creating more certificates from generation using wood waste. Rather, any additional electricity generated from the use of wood waste, above the contingent annual cap, will be subject to the Principal Regulations including the definition of wood waste as in force from time to time. 

Subregulation 4 (3) specifies that contingent annual cap means the maximum amount of electricity generated using eligible wood waste in any one full calendar year that commenced after the power station was accredited to use wood waste as an eligible energy source, and the 2011 calendar year.

Schedule 1 - Amendment

Item 1 - Regulation 8

Item 1 substitutes regulation 8 - Meaning of wood waste. The regulation omits biomass derived from native forests from the eligible energy sources identified under the meaning of wood waste for the purposes of the RET scheme.

A carbon price will encourage the use of woody biomass as an energy source. This is because the use of biomass for electricity generation or heat energy will not attract any liability under a carbon price, which will assist the competitiveness of all power stations which use biomass as a fuel source.

This amendment seeks to ensure that the additional incentive from the RET for the burning of native forest wood waste does not lead to unintended outcomes for biodiversity and the destruction of intact carbon stores.

Under the new regulation 8, paragraphs 8 (a) and (c) remain unchanged.

Paragraph 8 (b) now specifies that only manufactured wood products or
by-products that are produced using non-native biomass would be an eligible wood waste stream. Where the product or by product includes both native forest and non-native forest biomass, only the non-native component would be considered as the eligible renewable energy source under the new wood waste definition.

Paragraph 8 (d) has been amended in line with paragraph 8 (b), by specifying that only sawmill residue that is not derived from biomass from a native forest would be an eligible wood waste stream. Where the sawmill residue includes both native forest and
non-native forest biomass, only the non-native component would be considered as the eligible renewable energy source under the new wood waste definition.

The Renewable Energy Regulator will provide guidelines to accredited power stations and power stations seeking accreditation on the application of the new meaning of wood waste under the Principal Regulations.     

In line with the existing rules, when a power station seeking accreditation plans to use wood waste to generate electricity, the applicant must be able to demonstrate this wood waste is one of the eligible wood waste streams set out in regulation 8. Where an applicant for accreditation is unable to demonstrate to the Renewable Energy Regulator that the wood waste meets the eligibility criteria, the power station may not create certificates for generation using wood waste.

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