On 28 August 2014 the Renewable Energy Target Scheme – Report of the Expert Panel was released, with recommendations to significantly reduce Australia’s Renewable Energy Target (RET). The review is available from the Department of the Prime Minister and Cabinet’s RET Review website.
Embark representatives attended consultation meetings in both Sydney and Melbourne to discuss the important role that community ownership plays in the renewable energy sector. We also made our own submission to the RET Review.
Recommendations for the large-scale renewable energy target (LRET)
- option 1 – closed to new entrants (‘grandfathering’)
- option 2 – share of growth in electricity demand
Recommendations for the small-scale renewable energy scheme (SRES)
- option 1 – abolition
- option 2 – bring forward the phase-out of the SRES
Given the conflicting public positions of the Abbott Government and the majority of the Senate, it is unlikely that the Abbott Government’s response to the non-statutory panel’s report will result in a certain outcome for the RET and the renewable energy industry in Australia in the near future.
A detailed analysis of the report is available from Norton Rose Fulbright.
Background to the review
On 17 February 2014 the Australian Government released the much anticipated terms of reference for an additional non-statutory review of the Renewable Energy Target (RET).
The following update provides a brief background on the RET, summarises the current statutory review process (including the 2012 Review), the impact on the community energy sector and the content of the new non-statutory review process.
The Howard Coalition Government introduced the original Mandatory Renewable Energy Target (MRET) through the Renewable Energy (Electricity) Act 2000 (Cth) (REE Act).
The objectives of the REE Act are:
- to encourage the additional generation of electricity from renewable sources
- to reduce emissions of greenhouse gases in the electricity sector
- to ensure that renewable energy sources are ecologically sustainable
The current RET scheme commenced on 1 January 2011 and replaced the MRET. It was designed to fulfil the Australian Government’s (then bipartisan) commitment that the equivalent of at least 20% of Australia’s electricity would come from renewable sources by 2020.
The RET is now split into two parts:
- the Large-scale Renewable Energy Target (LRET)
- the Small-scale Renewable Energy Scheme (SRES)
Rather than setting a 20% LRET, the REE Act now includes a legislated target of 41,000 GWh of large-scale generation by 2020.
Current review arrangements
Currently the REE Act provides for two-yearly reviews by the Climate Change Authority (CCA).
The CCA was established on 1 July 2012 by the Climate Change Authority Act 2011 (Cth) as an independent advisory body on climate change.
In addition to reviewing the RET, the CCA is responsible for periodic reviews on issues such as carbon pollution caps, progress towards meeting national emissions reduction targets (this report is due on 28 February 2014), the Carbon Pricing Mechanism and the Carbon Farming Initiative.
The legislated requirements for the review of the RET are to consider:
- the operation of the Act and the scheme constituted by the Act
- the operation of the regulations
- the operation of the Renewable Energy (Electricity) (Large-scale Generation Shortfall Charge) Act 2000
- the operation of the Renewable Energy (Electricity) (Small-scale Technology Shortfall Charge) Act 2010
- the diversity of renewable energy access to the scheme constituted by the Act, to be considered with reference to a cost benefit analysis of the environmental and economic impact of that access
The 2012 Review
The CCA published its first review of the RET in December 2012.
Recognising its legislative obligations, the CCA’s 2012 Review covered the following issues:1
- the capacity of the RET arrangements to support additional generation of electricity from renewable sources to contribute reductions in greenhouse gas emissions at a reasonable cost
- the role of the RET and its relationship to other policy measures
- the LRET, including the level and trajectory of the target
- the SRES, including its design, architecture, and administration
- the liability and exemptions framework, and the shortfall charge of both the large-scale and small-scale schemes
- the eligibility framework for both schemes and the diversity of renewable energy
the frequency and scope of future reviews under the REE Act
In undertaking the 2012 Review, the CCA recognised that the policy landscape and indeed the electricity industry had changed significantly since the introduction of the MRET over a decade previously. As a result, the 2012 Review attempted to balance the promotion of investment in renewable generation with the containment of costs for electricity users.
The findings of the 2012 Review were delivered in four broad themes:
- increasing confidence and predictability
- managing overall costs to electricity users and providers
- providing flexibility and choice
- streamlining administration and compliance costs
The Gillard Labor Government largely endorsed the CCA’s 2012 Review in its formal response in March 2013.2
However, since the change of Federal Government in September 2013, the Coalition Government has attempted to abolish the CCA (though the passage of Climate Change Authority (Abolition) Bill 2013 was unsuccessful in December 2013).
The Abbott Coalition Government is expected to attempt to abolish the CCA shortly after the new senate sits after 1 July 2014.
Despite the tabling of the repeal bill and the announcement of a terms of reference for a separate panel to review the RET, the CCA nevertheless continues to have a statutory obligation to undertake the 2014 Review.
Terms of reference for the 2014 Review
Notwithstanding the provisions of the REE Act and the CCA’s on-going responsibility for the 2014 Review, the Federal Ministers for Industry and the Environment jointly announced the terms of reference for a separate review of the RET by a government-appointed panel.3
As with the statutory requirements for the review under the REE Act, the terms of reference for this additional review include examination of the operation, costs and benefits of the RET Scheme, as embodied in the REE Act and associated legislation and regulations.
The RET Review terms of reference can be found at www.pmc.gov.au.
The terms of reference specifically require consideration of:
- the economic, environmental and social impacts of the RET scheme, in particular the impacts on electricity prices, energy markets, the renewable energy sector, the manufacturing sector and Australian households
- the extent to which the formal objects of the Act are being met
- the interaction of the RET scheme with other Commonwealth and State/Territory policies and regulations, including the Commonwealth Government’s commitment to reduce business costs and cost of living pressures and cut red and green tape
- the Direct Action policies under development
The terms of reference also seek advice on:
- whether the objective of the RET scheme, to deliver 41,000 GWh and small scale solar generation by 2020, is still appropriate
- the extent of the RET’s impact on electricity prices, and the range of options available to reduce any impact while managing sovereign risk
- the operation of the small-scale and large-scale components of the RET and their interaction
- implications of projected electricity demand for the 41,000 (GWh) target
- implementation arrangements for any proposed reforms to the RET, including how to manage transition issues, risks and any adjustment costs that may arise from policy changes to the RET
Again, when reviewing the CCA’s 2012 Review, these topics were generally covered in 2012 and it would be expected that they would be revisited by the CCA’s 2014 Review.
Under the REE Act, the CCA is to deliver its 2014 Review by 31 December 2014.
The terms of reference for the non-statutory review provide that the panel is to provide a report to the Prime Minister, the Treasurer and the Ministers for Industry and the Environment by mid-2014.
Interestingly, the joint media release of the Ministers for Industry and the Environment also noted that the review will form part of the broader Energy White Paper process, which is expected to continue throughout 2014.
The REE Act requires the CCA to ‘make provision for public consultation.’ When considering the CCA’s 2012 Review process, it released an Issues Paper in August 2012, received submissions in September, released a discussion paper in October, undertook consultation and feedback in November and then released its final report in December 2012. We can expect that a similar process would occur for this year’s statutory review.
Correspondingly, the terms of reference require the panel to “undertake public consultations (and) seek submissions.”
Hepburn Wind entered a submission4
into the 2012 Review, which covered many of the issues and opportunities for the community energy sector. Within this, was the recommendation for the ‘Community Power Builder’ whereby a modest LGC multiplier of 1.5 be applied to community energy projects — meaning that 1.5 LGCs would be created for each MWh generated by a community energy project. Hepburn Wind also enabled 720 members to have their voices heard via an online template submission form.
Embark encourages community energy groups to make submissions to the 2014 review and support campaigns that aim to protect and grow the RET.