EXPLANATORY STATEMENT
Select Legislative Instrument 2008 No. 263
Issued by authority of the Minister for Climate Change and Water
Renewable Energy (Electricity) Act 2000
Renewable Energy (Electricity) Amendment Regulations 2008 (No. 1)
Section 161 of the Renewable Energy (Electricity) Act 2000 (the Act) provides that the Governor-General may make regulations prescribing all matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.
The Act provides the legislative framework for the implementation of the Government’s mandatory renewable energy target, announced in 1997. The mandatory renewable energy target is designed to increase the amount of electricity in Australia that has been generated from renewable energy sources. By 2010, an additional 9,500 gigawatt hours (GWh) of electricity will be required to be supplied from renewable energy sources.
Under the Act, wholesale purchasers of electricity (the ‘liable parties’) are required to meet a share of the renewable energy target in proportion to their share of the national wholesale electricity market. The Act provides for the creation of renewable energy certificates by generators of renewable energy. One renewable energy certificate represents the equivalent of one megawatt hour of electricity generated from eligible renewable energy sources. The renewable energy certificates, once registered, are traded and sold to the liable parties, who, in turn, surrender the renewable energy certificates to the Renewable Energy Regulator, or pay a penalty. The number of renewable energy certificates to be surrendered by a liable party is determined by multiplying the amount of electricity purchased by the liable party by that year’s Renewable Power Percentage (RPP), as prescribed in the Renewable Energy (Electricity) Regulations 2001 (the Principal Regulations).
The purpose of the Regulations is to amend the Principal Regulations to specify the RPP for 2009. The RPP for 2009 will be 3.64 percent, increasing from 3.14 percent in 2008 and 2.70 percent in 2007. The RPP:
- establishes the rate of liability and is the mechanism that liable entities use to determine the number of renewable energy certificates (RECs) needed to discharge their liability each year. Individual REC liabilities are determined by multiplying the total liable or relevant acquisition in MWh for a year by the RPP;
- is set to achieve the interim targets specified in the Act which will achieve the overall target of 9,500 GWh of renewable energy required by 2010; and
- is determined by analysing the amount of total liable purchases, assumed growth in electricity, under and over compliance, and the estimated liability for the future year.
Subsection 39(1) of the Act provides that the RPP for a given year must be specified in the regulations on or prior to 31 March in that year. However, subsection 39(3) provides that, before the Governor-General makes a regulation under subsection 39(1), the Minister must take into consideration the required amount of renewable electricity for the year, the estimated amount of electricity to be acquired for the year, and the amount by which the required GWh of renewable source electricity for previous years has exceeded, or has been exceeded by, the amount of renewable electricity required under the scheme in those years.
The Regulations allows the 2009 RPP of 3.64 percent to be set under Regulation 23. Regulation 23 to the Principal Regulations is amended every twelve months and the amendments are machinery in nature and do not substantially alter the existing operation of the Principal Regulations. Consequently a public consultation period was not conducted for the Amendment Regulations.
The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.
The Regulations commenced on the day after they were registered on the Federal Register of Legislative Instruments.
Overview
The Renewable Energy (Electricity) Amendment Regulations 2008 (No. 1) were introduced to address the need for a legislative instrument that would specify the Renewable Power Percentage (RPP) for the year 2009, in accordance with the Renewable Energy (Electricity) Act 2000. This Act established the legislative framework for implementing the Government’s mandatory renewable energy target, which aims to increase the amount of electricity generated from renewable energy sources in Australia. The Regulations were enacted by the Governor-General and issued under the authority of the Minister for Climate Change and Water, with the policy objective of achieving the interim targets set out in the Act, leading to the overall target of 9,500 gigawatt hours (GWh) of renewable energy by 2010. The Regulations amend the Renewable Energy (Electricity) Regulations 2001 to set the RPP for 2009 at 3.64 percent, up from 3.14 percent in 2008, and establish the rate of liability for wholesale purchasers of electricity, determining the number of renewable energy certificates they need to surrender each year.
Scope and Application
The Renewable Energy (Electricity) Amendment Regulations 2008 (No. 1) pertain to the Renewable Energy (Electricity) Act 2000, which applies to entities involved in the wholesale electricity market across Australia, including the Australian Capital Territory, states and territories. Specifically, the Act requires wholesale purchasers of electricity, known as liable parties, to meet a share of the national renewable energy target in proportion to their share of the national wholesale electricity market. This framework is intended to increase the amount of electricity generated from renewable energy sources, with an overall target of 9,500 gigawatt hours (GWh) by 2010. The Act facilitates this through the creation and trading of renewable energy certificates, which represent one megawatt hour of electricity generated from eligible renewable sources. The certificates are purchased by liable parties and surrendered to the Renewable Energy Regulator, or a penalty is paid. The Renewable Energy (Electricity) Regulations 2001, as amended by the Amendment Regulations, prescribe the Renewable Power Percentage (RPP) that determines the rate of liability and the number of certificates needed each year. The RPP is set to achieve interim targets that contribute to the overall goal. These Regulations, which set the RPP for 2009 at 3.64 percent, do not substantially alter the operation of the Principal Regulations and therefore did not require a public consultation period.
Key Provisions
The Renewable Energy (Electricity) Amendment Regulations 2008 (No. 1) amend the Renewable Energy (Electricity) Regulations 2001 to set the Renewable Power Percentage (RPP) for 2009 at 3.64 percent, as per Regulation 23 (subs.(39(1))). This percentage is integral for determining the proportion of electricity that wholesale purchasers, referred to as liable parties, must source from renewable energy sources. The RPP, established under section 39(1) of the Renewable Energy (Electricity) Act 2000, is crucial for calculating the number of renewable energy certificates (RECs) that liable parties need to meet their obligations. This percentage is calculated based on several factors, including the amount of total liable purchases, estimated growth in electricity, and under and over compliance from previous years.
Under these regulations, liable parties must ensure they acquire the correct number of RECs to cover their electricity purchases for the year. The RPP provides a straightforward method for determining the required number of RECs by multiplying the total electricity purchased by the RPP. Each REC represents one megawatt hour of electricity generated from eligible renewable sources, and these certificates are traded among generators and liable parties. The liable parties must then surrender the appropriate number of RECs to the Renewable Energy Regulator or face penalties. These certificates are a mechanism for tracking and ensuring compliance with the renewable energy target, which aims to increase the renewable energy contribution to the national grid.
The regulations impose several obligations on the parties they govern. Liable parties must accurately calculate their renewable energy requirements based on the RPP for the relevant year and acquire the corresponding number of RECs. Failure to do so results in non-compliance with the Act. Generators of renewable energy must produce RECs that can be traded to liable parties. The Renewable Energy Regulator oversees the certification and trading of RECs, ensuring that the renewable energy target is met. Both liable parties and generators must keep accurate records of their transactions and compliance with the regulations.
Breaches of the Renewable Energy (Electricity) Act 2000 and the associated regulations can lead to significant consequences. Liable parties that fail to meet their renewable energy obligations may be required to pay a penalty. The exact amount of the penalty is determined based on the shortfall in the number of RECs surrendered. Additionally, ongoing non-compliance can result in further financial penalties and legal action. The Act does not specify maximum penalties within the explanatory statement, but penalties for breaches of similar environmental legislation can be substantial, often involving fines that are significant enough to deter non-compliance.