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Thursday, 12 December 2002
Page: 8067


Senator ALLISON (2:11 AM) —I want to make a couple of remarks about the minister's statements. The Democrats acknowledge that this is a technical bill, and I apologise to my colleagues for keeping them from going home through the debate and the amendments that the Democrats are proposing to this bill. The point needs to be made that there is not going to be a more appropriate time than this. Two years on, after the implementation of this bill, serious anomalies have been discovered and they have been pointed out to the government. I think that the Democrats would have been quite willing to allow this bill to proceed as a technical bill without trying to fix it had it not been for the fact that the government seems uninterested in the problems that have been very apparent to the whole industry.

We are sympathetic to Senator Macdonald's argument that this is a technical bill but it would have helped the Democrats and others in this place if the government had admitted that this is not the outcome that any of us anticipated at the time that the bill was dealt with. Whilst there is a review—thanks to the amendment that was agreed in the Senate and it does start at the beginning of next year—it may well take a whole year to complete and it could be another year after that before this act comes back into the Senate for us to see right again. That is the reason we are going through this process. It is not because we want to stay up all night. It is because there are not going to be other opportunities. Quite frankly, your government has not shown any willingness to fix the problems and that is why we are doing this. I move Democrat amendment (1) on sheet 2660 revised:

(1) Schedule 1, page 10 (after line 16), after item 39, insert:

39A After section 19

Insert:

19A Offsetting of renewable energy certificates

(1) This section applies to an accredited power station that:

(a) has a nameplate rating of more than 20 MW; or

(b) generates an amount of electricity that is less than the power station's 1997 eligible renewable power baseline in a calendar year.

(2) A registered person who operates a power station to which subsection (1) applies must notify the Regulator of the number of MWh by which the power station's 1997 eligible renewable power baseline exceeds the amount of electricity generated in that calendar year (a deficiency).

(3) When the Regulator is notified of a deficiency, the Regulator must offset the deficiency against any renewable energy certificates created in a subsequent calendar year.

Example: In year 1, an accredited power station creates 100 RECs in excess of its 1997 eligible renewable power baseline. In year 2, the power station produces a deficiency of 120MWh. The Regulator must offset the first 100 MWh of the deficiency against the 100 RECs created in year 1 and the remaining 20 MWh against any RECs created in year 3 or a later year.

Note: Nameplate rating is a defined term in the National Electricity Code and is “the maximum continuous output or consumption in MW of an item of equipment as specified by the manufacturer”.

(4) To the extent that the deficiency was caused by a plant breakdown or other major system failure that would not have been accounted for in determining the power station's 1997 eligible renewable power baseline then the renewable energy that relates to this event need not be offset against certificates created in a subsequent calendar year.

This amendment is about what is known as the `unders and overs'. It is a complex matter and I have a clear explanation for it, which I would like to work through. In their submission to the inquiry, the Sustainable Energy Authority Victoria explained the problem very clearly and neatly, and so I will quote from their submission. They said:

Seasonal variation in rainfall can provide short term increases in output for all hydro generators which have the excess capacity to take advantage of the extra resource available. In years where additional rainfall enables generators to produce electricity above their baseline, RECs can be produced. In some years however low rainfall will reduce output and generation will be below the baseline, preventing creation of any RECs. However, since the baseline is a long run average, generation in above average years produces RECs without any increase in the average amount of renewable energy generated in Australia.

The nature of the hydro resource means that the electricity generated from hydro generators can vary considerably. The structure of MRET means that a generator is able to create RECs when its output is above the baseline in any given year ... however there is no commensurate requirement for a generator to repay RECs in years where the generator is producing below the baseline.

... ... ...

It is estimated that RECs created from seasonal variations will account for approximately 0.8 million RECs per annum. These RECs do not represent any long term increase in the amount of renewable energy generated in Australia. As a result these RECs would not contribute at all to the MRET objectives of increased renewable energy generation and reduced greenhouse gas emissions.

The amendment seeks to address this problem by requiring registered persons to notify the regulator of the number of megawatt hours by which the power station's 1997 eligible renewable power baseline exceeds the amount of electricity generated in that calendar year. This will be called a deficiency and will have to be paid back, in a sense. However, a generator is not expected to surrender more RECs than they have produced. The magnitude of the unfair advantage created by the problem of unders and overs was highlighted in the report of the Australian EcoGeneration Association, now called the Business Council for Sustainable Energy. They found:

Using probability estimates for power generated as included in Transend's 2001 annual planning statement, on average Tasmania's hydro power stations can earn an additional 263,000 RECs on top of the 738,000 that an average yield would suggest. In Tasmania the average hydro yield is 10,186 GWh. However, 5 per cent of years 1 to 20 hydro production will be less than 7,000 GWh. Conversely, 5 per cent of years 1 to 20 hydro production will be above 13,000 GWh. On the basis that future hydro patterns are consistent with historical hydro patterns, then on average an additional 263,000 RECs could be produced on top of the 738,000 that the average yield would suggest.

This is a major problem. It is not just the baseline; it is the fact that, essentially, an average becomes the baseline. You are not penalised for achieving underneath that average; you are only given benefits and rewards for overproduction. This has been raised by numerous submissions to the inquiry into this bill. We think this amendment provides a sensible way of dealing with the unders and overs, so to speak. This amendment would lead to the use of an actual average, providing benefits for the overs and not for the unders.