Commonwealth Numbered Regulations - Explanatory Statements

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RENEWABLE ENERGY (ELECTRICITY) AMENDMENT (SOLAR WATER HEATER ELIGIBILITY) REGULATIONS 2018 (F2018L01683)

EXPLANATORY STATEMENT

Issued by authority of the Minister for Energy

Renewable Energy (Electricity) Amendments (Solar Water Heater Eligibility) Regulations 2018

The Renewable Energy (Electricity) Act 2000 (the Act) establishes the Renewable Energy Target (RET) scheme. The RET scheme creates a market for renewable energy to deliver around 23.5 per cent of electricity from renewable sources by 2020.

The RET is administered as two schemes:

*         The Large-scale Renewable Energy Target (LRET), which encourages investment in renewable power stations to achieve a legislated target of 33 000 gigawatt hours of additional renewable electricity generation by 2020, and

*         The Small-scale Renewable Energy Scheme (SRES), which supports installations of small-scale renewable energy systems like household solar panels and solar hot water systems.

The RET scheme operates by allowing accredited renewable energy power stations and owners of eligible small-scale renewable energy systems to create a certificate for each megawatt-hour (MWh) of renewable electricity they produce (or displace). Liable entities (mainly electricity retailers) acquire these certificates which they must surrender annually to the Clean Energy Regulator (the Regulator) to comply with their RET obligations and to avoid payment of a shortfall charge.

Section 161 of 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 purpose of Renewable Energy (Electricity) Amendment (Solar Water Heater Eligibility) Regulations 2018 (the proposed Regulations) is to amend the Renewable Energy (Electricity) Regulations 2001 (the Principal Regulations) to clarify the eligibility of solar water heaters.

Subsection 5(1) of the Act provides for the Principal Regulations to prescribe what constitutes a small generation unit and a solar water heater.  Section 3(2) of the Regulations limits an eligible solar photovoltaic (PV) small generation unit (SGUs) to a device that has a capacity limit of no more than 100 kilowatts (kW), and that generates no more than 250 megawatt hours (MWh) of electricity each year. At present, there are no size limits for solar water heaters (SWHs) other than air source heat pump water heaters which are limited to a volumetric capacity of 425 litres or less. This means that large-scale SWHs may seek to participate in the SRES.

Insufficient clarity around the eligibility criteria for SWHs is creating challenges in maintaining the original intent of the scheme to support small-scale renewable energy systems under the SRES. The lack of clarity is creating uncertainty for scheme participants and resulting in time and costs for both scheme participants and the Regulator in preparing and assessing applications to determine the eligibility of solar water heaters. Providing clearer guidance will ensure the integrity of the scheme is maintained and the regulatory burden on participants in interpreting requirements is reduced. The proposed Regulations would prescribe an explicit limit to the size of SWHs. This would mean that only small-scale SWHs can participate in the SRES.

An exposure draft of the proposed amendments was released to key industry stakeholders for comment. The industry respondents indicated support for the proposed Regulations and their overall intent. One stakeholder suggested changes to allow large-scale SWHs to participate in the SRES but to cap the number of certificates they could create at 2,500 certificates. This change is outside the scope of proposed Regulations as the Renewable Energy (Electricity) Act 2000 would need to be amended to allow the Principal Regulations to prescribe a cap to the amount of certificates that may be created by SWHs.

Details of the proposed Regulations are set out in Attachment A.

The Act specifies no conditions that need to be satisfied before the power to make the Regulations may be exercised.

The proposed Regulations will be a legislative instrument for the purposes of the Legislation Act 2003.

The proposed Regulations will commence on the day after they are registered on the Federal Register of Legislation.

A statement of the Regulations' compatibility with human rights is set out in Attachment B.

ATTACHMENT A

Details of the Renewable Energy (Electricity) Amendment (Solar Water Heater Eligibility) Regulations 2018

Regulation 1 - Name

This regulation will provide that the title of the instrument is the Renewable Energy (Electricity) Amendment (Solar Water Heater Eligibility) Regulations 2018.

Regulation 2 - Commencement

This regulation will provide for the Regulations to commence on the day after they are registered on the Federal Register of Legislation.

Regulation 3 - Authority

This regulation will provide that the Regulations are made under the authority of the Renewable Energy (Electricity) Act 2000. In particular, section 161 of that Act provides the power for the Governor-General to make regulations that are required or permitted to be made or necessary or convenient for carrying out or giving effect to the Act.

Regulation 4 - Schedules

This regulation will provide for the amendments to be set out in a Schedule. Schedule 1 clarifies the eligibility requirement for solar water heaters.

SCHEDULE 1 - RENEWABLE ENERGY CERTIFICATES

Part 1 - Solar water heaters

Renewable Energy (Electricity) Regulations 2001

Item 1 After subregulation 3A(1)

At present, there are no size limits for solar water heaters (SWHs) other than air source heat pump water heaters which are limited to a volumetric capacity of 425 litres or less. This item will add an explicit limit to the size of SWHs.

SWHs will be limited to those with the capacity to create no more than 2,500 certificates if a 10 year deeming period is applied. The limit for SWHs is based on the system's capacity to generate certificates rather than setting a limit based on the litres of volumetric capacity so as to prevent SWHs from being structured to avoid a component limit (e.g. larger solar collectors to compensate for a smaller tank).

As a transitional arrangement, any SWHs entered into the Register of solar water heaters before 1 December 2018, which could exceed the limit, will remain eligible under the scheme. Although unlikely to occur, if a SWH above this limit was entered onto the register on or after 1 December 2018, from the commencement of the regulation it will no longer be eligible under the Scheme. The Regulator will then remove the device from the register under subregulation 19C(3A). This will not impact any certificates created while the device was eligible under the scheme.

Item 2 At the end of regulation 19BB

This item will prevent the Regulator from varying the determination of the number of certificates a particular model of solar water heater may create if the device was entered onto the Register of solar water heaters before 1 December 2018 and the effect of the variation will be to:

*         increase the number of certificates that could be created to more than 2,500 (with a 10 year deeming period in any one or more of the zones) if the device was previously determined to create less than 2500 certificates; or

*         increase the number of certificates for a device already determined to create more the 2,500 certificates (with a 10 year deeming period in any one or more of the zones).

Items 3 Subregulation 20AAA(7) (paragraph (b) of the definition of contract documentation)

This item will correct a previous drafting error in the location of the word "means".

ATTACHMENT B

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Renewable Energy (Electricity) Amendments (Solar Water Heater Eligibility) Regulations 2018

The Regulations are compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Legislative Instrument

The Renewable Energy (Electricity) Amendments (Solar Water Heater Eligibility) Regulations 2018 (the Regulations) amends the Renewable Energy (Electricity) Regulations 2001 in order to clarify the eligibility of solar water heaters. These amendments are minor in nature and consistent with the intent of the existing regulations.

Human rights implications

The Regulations do not engage any of the applicable human rights or freedoms.

Conclusion

The Regulations are compatible with human rights as it does not raise any human rights issues.

The Hon Angus Taylor MP, Minister for Energy