Legislation Promotes use of Renewable Energy - International Law Office

Background
Implementation
Defining Renewable Energy
Liability
Certificate Issue and Transfer
Compliance and Registration

On June 22 2000 the federal government introduced the Renewable Energy (Electricity) Bill 2000 to the House of Representatives. The Renewable Energy Act (as it will become) is intended to encourage the development of additional electricity from renewable energy sources.

Background

The bill is being introduced to implement one of the national greenhouse response measures, which the Prime Minister introduced in his Statement 'Safeguarding the Future: Australia's Response to Climate Change (on November 20 1999). This specifies that "electricity retailers and other large electricity buyers will be legally required to source an additional 2% of their electricity from renewable or specified waste-product energy sources by 2010".

This statement was one of Australia's responses to the objectives laid down in the United Nations Framework Convention on Climate Change. These were first adopted at the 1992 Earth Summit in Rio de Janeiro, with the addition of further protocols (eg, the Kyoto protocol agreed in December 1997).

The Renewable Energy Act is intended to take effect from January 1 2001.

Implementation

Retailers and certain other legal buyers of electricity will be required to obtain renewable energy certificates for the equivalent of up to 2% of the electricity that they acquire each year from all other sources. These certificates will represent actual generation of electricity from renewable energy sources by a generator. The holder of a certificate will not, however, have to physically purchase the electricity represented by the certificate.

If retailers and other large buyers of electricity fail to obtain enough certificates to match their targets, they will be liable for a charge at a rate of $40 per megawatt, per hour for the shortfall. The first date on which a party may be liable will be February 14 2002.

The system is intended to create an incentive for generators to supply electricity from renewable energy sources. This is because it will be primarily generators who will be able to issue these certificates. However, the maximum price that a liable entity will be prepared to pay for certificates is likely to be $40 per mWh, the limit of the charge it incurs if it fails to obtain sufficient certificates. These measures alone are unlikely to stimulate demand for electricity from renewable energy sources, especially if the price of electricity from these sources is greater than $40 per mWh above the price of electricity from non-eligible sources.

Defining Renewable Energy

Details of eligible renewable energy sources of electricity will be specified in a regulation. Fossil fuels and waste products derived from fossil fuels will not be considered eligible as renewable energy sources. Eligible renewable sources are likely to include:

• solar;
  
  
• wind;
  
  
• hydro;
  
  
• biofuels; and
  
  
• certain other renewable energy sources.

Liability

In general terms, any person (referred to in the bill as a 'liable entity') who acquires electricity from the wholesale electricity market will be liable under these measures. A liable entity will include all retailers of electricity and most persons who acquire electricity directly from a generator or a 100mW grid.

A liable entity will not include:

• a person who acquires electricity from an electricity grid that has a capacity of less than 100mW and that is not directly connected to a grid that does have a capacity of greater than 100mW;
  
  
• a person who acquires electricity from a transmission or distribution line that is used solely to transport electricity to it (rather than, for example, from a grid);
  
  
• a person who acquires electricity from a generator that is less than one kilometre from the point at which the electricity is used; and
  
  
• acquisitions of electricity by the National Electricity Market Management Company.

The act will provide a liable entity with some leeway before placing a charge on it for failing in a year to achieve its annual target. For example, an entity will not be liable to pay a charge if its shortfall in a year is less than 10% of its target. This shortfall is carried forward to the next year or until a liable entity has a shortfall of greater than 10% of its target.

Conversely, a liable entity will be able to carry forward any electricity that it acquires from renewable energy sources in excess of its required renewable energy for a particular year. This will be represented by the entity holding a surplus of certificates.

A liable entity will be entitled to a refund from the regulator if it has a surplus of certificates that it wishes to surrender within three years of paying a renewable energy shortfall charge.

Certificate Issue and Transfer

Certificates are "created by generators who generate power from accredited power stations using eligible renewable energy sources where the amount generated exceeds the relevant eligible renewable power baseline". Certificates are also created for approved installations of solar hot water heaters. They will be created in denominations of one mWh per certificate and will be created in electronic form. Certificates will be transferable and able to be traded among liable entities and other persons. Prices may be published and certificates may be traded through brokers accredited by the Australian Securities and Investment Commission.

A generator will only be able to issue certificates for each mWh of electricity from eligible renewable energy sources that an accredited power station generates in excess of its 1997 eligible renewable power baseline.

Owners of solar water heaters installed on or after January 1 2001, and which displace non-renewable electricity, will also be able to issue renewable energy certificates.

Compliance and Registration

The provisions of the act will be administered by the renewable energy regulator, who will be supported by the Office of the Renewable Energy Regulator. The regulator's function will include maintaining a register of registered persons, a register of accredited power stations and a register of certificates. A person who fails to provide a document (including a statement or return) to the regulator or to another person within a time specified under the act will be guilty of an offence.

All liable entities will be required to lodge an energy acquisition statement by February 14 each year. The first energy acquisition statement to be lodged will be on or before February 14 2002. A liable entity will be required to disclose various details (eg, the amount of electricity that it has acquired in the calender year).

Generators or owners of solar water heaters who issue certificates will need to be registered with the regulator and comply with the registration and disclosure requirements contained in the act. A fee, to be prescribed by regulation, will be payable. Once registered, the registered person will be obliged to submit an annual return to the regulator each year . A person who issues a certificate will be criminally liable if not registered. A generator will also be required to submit to the regulator an electricity generation return each year.

The regulator will have the power to make an assessment of a person on or after February 14 if it thinks that such a person is a liable entity, and is liable to pay a renewable energy shortfall charge. A person will either (i) be liable to pay the shortfall charge, or (ii) must appeal against the determination of the regulator within 60 days of the assessment being made.

For further information on this topic please contact Chris Fogarty at Allen Allen & Hemsley by telephone (+61 2 9230 4000) or by fax (+ 61 2 9230 5333) or by e-mail (Chris.Fogarty@allens.com.au).

The materials contained on this web site are for general information purposes only and are subject to the disclaimer.