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Thursday, 2 March 2006
Page: 3


Mr HUNT (Parliamentary Secretary to the Minister for the Environment and Heritage) (9:09 AM) —I move:

That this bill be now read a second time.

The Renewable Energy (Electricity) Amendment Bill 2006 amends the Renewable Energy (Electricity) Act 2000 (the act) to implement the government’s agreed response to a statutory review into the operation of the act held in 2003.

The Renewable Energy (Electricity) Act 2000 establishes Australia’s mandatory renewable energy target, or MRET, measure. MRET came into operation in 2001 and is scheduled to end in 2020. Australia was the first country in the world to introduce such a nationally mandated renewable energy target backed by legislation.

MRET places a legal liability on wholesale purchasers of electricity (retailers and large users) to contribute proportionately towards annual targets for additional renewable energy which ramp up to 9,500 gigawatt hours in 2010 and remain at that level until the measure expires in 2020. An additional 9,500 gigawatt hours represents an increase of over 50 per cent above the 16,000 gigawatt-hour level of renewable electricity generated in 1997, when the initiative was announced.

On current projections, achieving the 9,500 gigawatt hours target would bring the renewable share of electricity consumption in 2010 to around 11 per cent, which is comparable with renewable energy targets committed to by other countries.

MRET uses a market based approach to drive higher renewable energy uptake. Renewable energy generators accredited under the measure may create one tradeable renewable energy certificate for each megawatt hour of energy they produce. The measure creates an incentive for electricity retailers and large users to purchase these certificates and surrender them to demonstrate their compliance. The act and regulations create the structure and rules for the market to operate effectively and are administered by the renewable energy regulator.

Following the 2003 review of the act, the government agreed to make improvements to the legislation that enhance market transparency and improve business certainty in the measure. The government also agreed to increase opportunities for bioenergy and solar technologies, encourage innovation through recognising emerging renewable electricity generation technologies and make a range of administrative amendments to improve the effectiveness and efficiency of operation of the scheme. This includes adopting provisions of the Renewable Energy (Electricity) Amendment Bill 2002 that sought to improve the administrative integrity, effectiveness and efficiency of the measure.

The 2003 review identified that issues of market transparency and business certainty were of significant concern to the renewable energy industry and also parties that incur a liability under the measure. This bill includes a number of amendments to deal with these issues.

To assist market transparency, the bill introduces a time limit following renewable energy generation during which renewable energy certificates for that generation must be created.

The bill also enhances market transparency by allowing for the publication of additional data relating to renewable energy generation, the baselines allocated to power stations that were in operation prior to the announcement of the measure, and additional information on a liable party’s renewable energy certificate shortfalls.

These improvements will facilitate a more efficient renewable energy certificate market in which participants are able to make better informed investment and trading decisions and better manage their MRET liabilities.

Renewable energy project developers in their submissions to the 2003 review flagged that power station accreditation procedures were a significant impediment to attracting financial backing. To help address this issue the bill provides a process for granting provisional accreditation from the renewable energy regulator at the pre-commissioning stage. Provisional accreditation would be provided on the basis of what is known at the time of application and, while it would not replace the required accreditation process within the act, is expected to assist in defining and managing investors’ risks.

To further assist business certainty, the bill introduces a time limit for the regulator’s consideration of applications for accreditation of generators. This will help streamline development by minimising delays in project approvals.

The government has recently made amendments to the MRET regulations that provide more opportunities for bioenergy and solar energy technologies under the MRET scheme. These changes expand the meaning of energy crops and provide the vast majority of new solar electricity systems with an option to create 15 years of tradeable renewable energy certificates in a single up-front transaction.

The bill provides further opportunities for the participation of bioenergy by enabling renewable energy certificates to be created for a broader range of renewable material that would otherwise have gone to landfill, and broadening the scope of wood from plantations that is eligible as a renewable energy source under the measure.

Amendments in this bill increase opportunities for solar energy technologies by allowing more solar water heater systems installed to be eligible to create renewable energy certificates. By simplifying the rules and expanding the range of eligible installations it will be easier for home and building owners to participate in the measure.

Further amendments in the bill clarify the provisions in relation to claiming renewable energy certificates associated with solar water heaters and small generation units, and expedite the process by which certificates can be claimed for new solar water heater models as they become commercially available. The solar water heater manufacturing industry has welcomed the changes as they provide further opportunities for the industry.

In addition to these improvements the bill provides for the surrender of renewable energy certificates by persons who do not have a liability under the act. This will allow interested individuals or organisations to purchase certificates and voluntarily retire them from circulation.  This could be done for a wide range of reasons, including for philanthropic purposes. It should be noted that the legislation does not compel or pressure businesses or individuals to take such action.

The bill also contains a range of administrative amendments. The clarification of definitions is particularly important from the standpoint of investors in renewable energy. The amendments will provide greater clarity about what is an eligible renewable energy source, what is an accredited power station and what is a relevant acquisition of electricity. Similarly, the capacity to vary or amend documentation or decisions meets a pragmatic need of the regulator to address mistakes made by participants or to respond to changing circumstances, additional information or the results of monitoring and compliance actions.

The power to gather information and documents will allow the efficient administration of the legislation and is a means by which informed decisions about the participants in the trading of renewable energy certificates can be made. Information will be confined to that which is relevant to the operation of the act.

The suspension of an accredited power station is particularly important to ensure that the operators of these businesses conduct themselves in a manner in keeping with the objectives of the legislation. A power station’s accreditation can be suspended in a range of circumstances including where a power station contravenes or is suspected of contravening a law of the Commonwealth, a state or a territory or where the renewable energy regulator is reasonably of the opinion that a gaming arrangement has occurred. Gaming involves generators manipulating their output to increase their eligibility for renewable energy certificates without increasing renewable generation, and the powers foreshadowed in this bill ensure that such action cannot pose a threat to the integrity of the legislation.

Decisions by the renewable energy regulator to vary or amend decisions or assessments or to suspend entitlements under the act will be subject to review by the Administrative Appeals Tribunal.

The Renewable Energy (Electricity) Act 2000 was a world-leading piece of legislation and a number of countries have identified it as a model for promoting renewable energy through a market based trading system. The measure has been in operation since April 2001, and I am pleased to be able to report that it is delivering significant benefits.

Total renewable energy investment stimulated by MRET to date amounts to some $3 billion. The measure is expected to increase renewable energy generation by more than 50 per cent compared to pre-MRET levels. In addition, MRET has been the principal driver in the recent expansion of the renewable energy industry in Australia.

To date over 230 power stations, representing a wide range of renewable energy technologies, have been accredited under the measure and all interim annual targets have been comfortably met with nearly 100 per cent compliance by liable parties.

Australia’s wind power industry has grown strongly under the MRET scheme with more than 800 megawatts of wind energy capacity installed or under construction. Significant investment has also occurred in other sectors of the industry such as the refurbishment and expansion of pre-existing hydroelectric power stations and the development of new biomass co-firing and landfill gas power plants.

By 2010, MRET is expected to contribute around 6½ million tonnes of carbon dioxide equivalent abatement per annum, or around 10 per cent of total current projected abatement for the Kyoto commitment period of 2008 to 2012.

The package of amendments comprising this bill will help streamline the operation of the measure for the benefit of the industry and the Australian community to enable ongoing opportunities to encourage the additional generation of electricity from renewable energy sources and reduce emissions of greenhouse gases.

I commend the bill to the House. I present the explanatory memorandum.

Debate (on motion by Mr Bevis) adjourned.