With the pushing back of the CPRS to 2013, Australia will rely on the Renewable Energy Target (RET) scheme and the Federal Government's proposed Renewable Energy Future Fund to drive investment and R&D in renewable energy projects. The newly appointed Prime Minister Julia Gillard supports harnessing solar and wind power and the new emerging technologies in order to progress towards a low carbon economy.
The lower than anticipated price for renewable energy certificates (RECs) is impacting the ability of large scale project developers to finance their projects. Substantial changes to the structure of the RET scheme, introduced by the Renewable Energy (Electricity) Amendment Bill 2010 (Bill), will address concerns that small-scale technologies, such as solar PV, and associated government rebate schemes, are diluting the REC market.
The Bill has been passed by both houses of Federal Parliament with the changes to the RET scheme expected to take effect from 1 January 2011.
Modifications to the existing RET scheme will include:
- Splitting the RET scheme into two separate parts; the Small-scale Renewable Energy Scheme (SRES) and the Large-scale Renewable Energy Target (LRET)
- Creating two new categories of certificates; large-scale generation certificates and small-scale technology certificates
- Requiring the surrender of small-scale RECs from liable entities on a quarterly basis
- Establishing a REC clearing house mechanism for the SRES
- Revising annual renewable energy targets for LRET
- Permitting waste coal mine gas to be eligible for the RET scheme as determined by the regulations
- Introducing compliance and enforcement provisions, including civil penalties
The RET scheme is part of the Federal Government's plan to transform Australia's electricity sector to a low pollution model by incentivising investment in both small and large-scale renewable energy technologies. The RET scheme aims to deliver 20 per cent of Australia's electricity from renewable sources by 2020. The development of, and investment in, renewable energy technologies (e.g. wind, solar PV, landfill/biomass, geothermal and solar water heaters) will be an essential part of the climate change solution.
Large-scale Renewable Energy Target
Large-scale technology (mainly power stations) will continue to operate under the existing RET framework, however, the large-scale target will be adjusted each year to take into account legislated annual targets.
The Government is maintaining its commitment to achieve at least 45,000 GWh of renewable energy in 2020 with 41,000 GWh through the large-scale target and the remainder through fixed-price small-scale generation. Large-scale targets will be 4000 GWh per year less than current annual targets to take account of the support mechanism for small-scale technologies.
The process for REC creation for large-scale technologies under the LRET will not change. To be eligible for LRET RECs, an entity must be an accredited power station, that is, one that uses solar, wind, hydro, biomass or geothermal technology to produce energy.
Liable entities under the LRET will not experience any significant changes to business procedure. The Office of the Renewable Energy Regulator (ORER) will announce the Renewable Power Percentage (RPP) early each year to provide businesses with an indication of the number of RECs that they are likely to be required to surrender.
Small-scale Renewable Energy Scheme
Under the new SRES, RECs created by small-scale technologies (solar hot water and solar panels) (SRECs) will have a fixed price of $40. This means that households and small businesses will earn $40 for each REC created.
There will not be any limit on the number of small-scale technology RECs that may be created to ensure the continued adoption of these technologies. Liable entities will be required to surrender RECs from the SRES (quarterly) and LRET (annually). However, it will not be possible to use small-scale RECs from the SRES to meet LRET liability. Small-scale technologies that are eligible to participate in the existing RET scheme will continue to be eligible. COAG is currently considering other new small-scale technologies for eligibility to the scheme. It is anticipated that an independent review will be undertaken in 2012 to investigate possible methods for setting the fixed price for small-scale technology RECs.
SRES Clearing House
SRECs will be handled in the same way as RECs are currently handled where the creation, transfer and surrender of RECs are recorded on the registry. To facilitate the transfer of SRECs, a clearing house will be established and operated by the REC market regulator, ORER. Participation in the clearing house will be voluntary. The clearing house will set the SREC market price at no more than $44 (GST inclusive) and manage the sale of all RECs transferred to it onto purchasers.
Rollover of existing RECs to new scheme
Under the new regime, liable entities can use existing RECs for large-scale obligations but not SRES obligations. This provision is intended to supply the LRET market with liquidity in the early stages of its conception.
Where a contract has been entered into before 26 February 2010 for the transfer of RECs generated by small-scale technologies to meet large-scale liabilities after 1 January 2011, parties are able to apply to ORER to have these RECs deemed to be large-scale RECs for use in the LRET.
Emission-intensive, trade exposed entities
Once the LRET and SRES are implemented, the effective rate of assistance to emission-intensive, trade exposed (EITE) activities will be maintained in accordance with the current RET scheme. The Government will calculate a single partial exemption amount for each EITE activity to be used for both the LRET and SRES; these exemptions will be set out in the regulations.
Waste coal mine gas
The Bill proposes to amend provisions in relation to the eligibility of waste coal mine gas (WCMG). Under the current RET scheme, WCMG projects are able to start creating RECs as of 1 July 2011. This date has been pushed back indefinitely and will be set by future regulations.
New civil penalties
The Bill introduces new civil penalty provisions to further strengthen compliance, including liability for executive officers. Civil penalties may be imposed for the improper creation of RECs, providing false or misleading information to create RECs, and creating RECs during a period of suspended registration. If ORER enforces a breach of a civil penalty provision, the Court may impose a civil penalty order which becomes a debt payable to the Commonwealth.
How can DLA Phillips Fox assist?
DLA Phillips Fox can help renewable energy participants commercialise opportunities arising from changes to the RET scheme. Our national team has specific experience with the establishment of wind farms and geothermal plants across Australia and can:
- Advise on the commercialisation of established and emerging renewable energy technologies and IP protection
- Assist with the preparation of financing and commercial documentation for the construction of renewable energy projects
- Assist with environmental compliance and navigating through the development approval process
- Advise on contracting strategies for project agreements, tender documentation and off-take arrangements.
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This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances.