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Chapter 7: Eligibility

Table of contents


This chapter considers the eligibility of sources under the Large-scale Renewable Energy Target (LRET) and technologies under the Small-scale Renewable Energy Scheme (SRES), with specific regard to the eligibility of waste coal mine gas and biomass from native forests under the LRET, and whether additional technologies including displacement technologies should be eligible under the SRES.

7.1. Eligibility framework and accreditation of power stations under the Large-scale Renewable Energy Target

Certain eligibility, registration and accreditation requirements must be met before certificates can be created under the Renewable Energy Target (RET) scheme. For the LRET, the energy source must be listed as “eligible” under the Renewable Energy (Electricity) Act 2000 (Cth) (REE Act), the owner (or nominated person) must be registered with the Clean Energy Regulator, and the power station must be accredited.

The LRET takes a ‘list’ approach to eligible sources. There are currently 19 eligible renewable energy sources listed in the REE Act including hydro, wind, solar, geothermal-aquifer, ocean, wave, certain biofuels and biomass sources, and landfill and sewage gas. Additional renewable sources may be added by regulations.

The REE Act specifically states that fossil‑fuels and materials or fossil‑fuel waste products derived from fossil‑fuels are not eligible renewable energy sources. This effectively means that these sources cannot be added through regulations; to do so would require an amendment to the REE Act. Although the RET is designed to promote renewable energy, there is one waste product derived from fossil‑fuels, waste coal mine gas, that is included as an eligible source until the end of 2020.

A number of submissions supported the list approach as an appropriate method of providing the basis for accrediting power stations. Further, those who commented on the approach in response to the discussion paper were also supportive. The Authority agrees that the list of eligible sources is extensive and allows for a variety of technologies to be deployed.

The Australian Geothermal Energy Association has commented that the definitions for two currently eligible sources, geothermal-aquifer and hot dry rocks, are out of date and should be changed to hot sedimentary aquifer and hot rock respectively. In the discussion paper, the Authority noted two considerations with regards to whether the current definitions should be changed:

  • whether the Clean Energy Regulator can accredit power stations based on current definitions with the view that they are broadly similar, as this would not require any legislative change; or
  • whether an amendment to the REE Act may be required, or if new definitions can be added through regulations, which may be a simpler way of updating the definition.

The Clean Energy Regulator has advised the Authority that it would interpret the current definitions to include hot sedimentary aquifer and hot rock. If greater clarity was required on application for accreditation, the Clean Energy Regulator also advised that this could be done using existing provisions in the REE Act that allow for regulations to be made to clarify eligible sources.

The view of the Authority is, therefore, that existing definitions for sources used for geothermal energy are satisfactory and no changes need to be made to the REE Act to incorporate new definitions.

7.1.1 Registration and accreditation process

The accreditation process establishes that a given power station is eligible to create large-scale generation certificates. The accreditation process is outlined in Box 9. The Authority has considered whether the process is robust and effective, accessible, and timely.

Requiring one point of contact ensures efficient communication throughout the application process and minimises processing time. Pre-approval arrangements provide flexibility for power stations that are in development or are seeking financial support on the basis that they will be approved.

The timeframes for approving applications are set out in legislation, which provides a level of confidence for applicants. The Clean Energy Regulator advised the Authority that decisions on some power stations can take longer than six weeks, however any delays are usually due to verifying supporting documentation.

One objective of the REE Act is that renewable energy generated is ecologically sustainable.

The requirement for applicants to provide evidence that their power station conforms to planning and environmental laws ensures that accredited renewable power stations relate to this objective.

Registration and accreditation fees are clearly set out in regulations, and are listed according to the size of the power station and related accreditation requirements. This approach is equitable for applicants, ensuring that they only pay for the cost associated with their circumstances.

The Clean Energy Regulator advised the Authority that it had not had any significant issues accrediting eligible power stations to date. Comments received by the Authority in response to the discussion paper supported the accreditation process.

Box 9

Establishing a power station under the Large-scale Renewable Energy Target

The Clean Energy Regulator is responsible for accrediting power stations under the LRET, and provides a step by step process on its website for applicants.

The Clean Energy Regulator requires one point of contact throughout the accreditation process, and applicants must register a nominated person prior to applying for accreditation. Applicants can register online, and a nominal registration fee of $20 applies.

A registered person may apply for a power station to be accredited based on renewable sources listed in the REE Act. Applicants can apply for accreditation by downloading relevant forms from the Clean Energy Regulator’s website. An application fee applies, and varies depending on the size of the power station and complexity of the accreditation process.

The applicant is required to specify the components of the electricity generation system that make up the power station. The Clean Energy Regulator applies boundaries around the power station and determines which components are included in the power station, using guidelines outlined in regulations.

The Regulator is required to make a decision on an application within six weeks of it being properly made. Once accredited, LRET power stations may create large-scale generation certificates. Provisional accreditation is also available for projects in development to assist developers secure appropriate financing.

The accreditation process also establishes a power station’s baseline. The REE Act was designed to encourage additional renewable energy generation. Therefore, large-scale generation certificates are only issued for renewable generation above the existing generation at the time the Mandatory Renewable Energy Target (MRET) was established. The baseline is generally the average amount of electricity generated over the 1994, 1995 and 1996 calendar years. For power stations established after 1 January 1997 the baseline is zero.

As part of the accreditation process, applicants must provide evidence that their proposed power station conforms to State and Federal regulations including environmental laws. For example, applicants applying for accreditation for power stations using wood waste must meet additional eligibility requirements and are provided additional assessment criteria for this resource.

The Authority considers that the existing LRET eligibility and accreditation arrangements are appropriate, and ensure that power stations are established in accordance with relevant regulations and are registered to create large-scale generation certificates.

Recomendation

  • No change is necessary to the list of eligible sources or the accreditation process for the

     

    Large-scale Renewable Energy Target.

7.1.2 Adding additional non-renewable or non-generation technologies to the Renewable Energy Target

A key issue for the review is whether there are additional energy sources that should be made eligible. As discussed below, numerous submissions requested that eligibility be extended to either:

  • non-renewable (but low emissions) generation sources, such as new waste coal mine gas projects or cogeneration projects using waste industrial heat, originally created from non-renewable sources; or
  • additional ‘displacement’ technologies, which generate no electricity themselves, but displace the use of electricity.

In both cases, proponents argue that using such technologies will reduce greenhouse gas emissions from the electricity sector, in accordance with one of the objectives of the REE Act. Purely from an environmental effectiveness point of view, it is difficult to argue that eligibility should not be extended to these other activities.

These arguments highlight the differences between the use of a sector-based policy, such as the RET, compared with a broad-based measure like the carbon price. A chief advantage of the carbon price is that it automatically creates an incentive for all low-emissions or displacement technologies. Under the RET, however, boundaries are drawn. If they are not drawn, then the RET increasingly resembles a second broad-based carbon price – and it is difficult to see why such a mechanism could ever be justified alongside a carbon price.

Boundaries around eligibility under the RET are drawn to further the other key objective of the REE Act – to promote additional renewable generation. As discussed in Chapter 3, this is essentially an industry development objective, designed to promote the growth of an industry that is predicted to play a significant role in Australia’s electricity supply in a carbon constrained future, and whose growth may currently be curtailed by uncertainty regarding the future of a carbon price and the credibility of governments’ commitments to making long-term, deep cuts to greenhouse gas emissions.

The issue of boundaries around renewable generation eligibility is complicated by the fact that there are already exceptions to the rule – solar hot water systems (which have been included from the start of the scheme) and certain waste coal mine gas generation projects. These existing exceptions make it more difficult to argue that no further exceptions should be made, and encourage continual lobbying to this effect.

The Authority has taken the view that the RET is not a second broad-based carbon price, and eligibility should not be expanded to cover other non-generation or non-renewable technologies. The Authority’s deliberations on specific matters including waste coal mine gas, wood waste from native forests and eligibility of technologies under the SRES is considered as set out below.

7.1.3 Waste coal mine gas under the Large-scale Renewable Energy Target

A key issue that has been raised during the review is the eligibility of waste coal mine gas in the LRET. Waste coal mine gas is a by-product of coal mining and is not a renewable energy source. Nonetheless waste coal mine gas was added to the RET in 2009 as a transitional measure following the cessation of the New South Wales Greenhouse Gas Reduction Scheme on commencement of the carbon pricing mechanism. In reviewing the eligibility of waste coal mine gas under the LRET the Authority has considered:

  • whether to maintain eligibility for waste coal mine gas power stations that are currently eligible; and
  • whether additional waste coal mine gas power stations should also be made eligible.

Eligibility for waste coal mine gas began on 1 July 2012 and is limited to seven existing waste coal mine gas power stations that were operating in 2009 and receiving support under the New South Wales Greenhouse Gas Reduction Scheme, with separate annual targets of 425 gigawatt hours (GWh) from

1 July 2012 to 30 June 2013, and 850 GWh each year from 1 July 2013 to 2020.

These targets are in addition to the LRET target of 41 000 GWh. This is to ensure that waste coal mine gas does not displace renewable generation under the scheme. This means that the inclusion of these waste coal mine gas power stations has increased the cost of the RET. As a benefit to renewable generation, any unutilised waste coal mine gas allowance is added to the LRET target each year. Waste coal mine gas cannot receive certificates for any generation above its total allowance.

EnviroGen argued that while waste coal mine gas is not a renewable energy source, it should be eligible:

As [waste coal mine gas] generation can be classified as a zero additional emissions source of generation achieving the same reductions in greenhouse gas emission as other renewable generators, the outcome of [waste coal mine gas] generation is similar to that of other generation which is assisted by the RET. (EnviroGen Pty Ltd, sub.44, p.6)

Energy Developments Limited supported continuing to allow existing waste coal mine gas in the scheme, noting that waste coal mine gas has zero additional emissions (assuming the gas would otherwise have been flared) and its eligibility is consistent with one of the objectives of the REE Act. Conversely, a number of submissions to the issues paper (including IPART, WWF, and the Tasmanian Government) called for the removal of waste coal mine gas as an eligible source, primarily because it is not renewable. For example, the Conservation Council of South Australia submitted that:

The cost effectiveness of [waste coal mine gas] capture and use should be considered under fossil fuel policies not the RET…Only renewable energy should be eligible to create LRET certificates. (Conservation Council of South Australia Inc., sub.72, p.3)

The Authority is of the view, as a general principle, that waste coal mine gas should not be an eligible source under the RET because it is not a renewable source, and that the use of waste coal mine gas for power generation should be sufficiently encouraged by the carbon price.

Eligible waste coal mine gas power plants under the RET were, however, included because it was assessed that the financial returns to these projects would have been reduced by the introduction of the carbon price compared to the returns had the New South Wales Greenhouse Gas Reduction Scheme continued. The additional revenue from the RET was therefore intended to ensure these projects were not adversely affected by the change in policy framework. The removal of these projects from the RET would mean that the Government would need to consider alternative transitional arrangements for these projects not to be made worse off. It is not clear that any alternative arrangements would cost less than maintaining the existing arrangements under the RET.

Policy-makers have placed clear boundaries on the support for waste coal mine gas under the LRET. Only existing waste coal mine gas power stations are eligible to create renewable energy certificates and (only until 2020), with separate targets that are additional to the broader LRET target. Given this contained support, the Authority recommends maintaining the current LRET arrangements for existing waste coal mine power stations.

In response to the discussion paper, Macquarie Generation opposed the provision for unutilised waste coal mine gas allowance to be added to the LRET on the basis that any waste coal mine gas allowance increases the cost of the RET and should be minimised. On this matter, the Authority does not see a material benefit in the form of cost reductions by removing the transference of unutilised waste coal mine gas allowance. The additional target was calculated on the basis of existing power station generation so it is unlikely any material proportion of allowance would be transferred in any year.

In addition liable parties will have calculated their certificate requirements taking into account the additional target for waste coal mine gas.

7.1.4 Inclusion of new waste coal mine gas

Some waste coal mine gas generators have proposed allowing new waste coal mine gas projects into the RET. For example, EnviroGen supported the inclusion of new waste coal mine gas in addition to the 850 GWh allowance for existing waste coal mine gas on the basis that it ‘would make a further contribution to emission reductions’ and to ensure continued investment in the sector (Envirogen, sub.44, p.7).

On the other hand, while Energy Developments Limited supported the continued inclusion of existing waste coal mine gas, it did not consider that new waste coal mine gas projects should be eligible under the RET scheme:

… whilst support is warranted to promote the significant greenhouse gas abatement potential of new [waste coal mine gas] clean energy projects, the RET is currently not the appropriate mechanism for these new projects … (Energy Developments Limited, sub.75, p.3)

In its Review of Specific RET Issues, the Renewable Energy Sub Group recommended against including new waste coal mine gas on the grounds that it would increase the cost of the RET scheme and shift the focus of the RET scheme away from renewable energy (Renewable Energy Sub Group 2012, p.67).

Including new waste coal mine gas within the overall target could potentially reduce the overall cost of the scheme if waste coal mine gas displaced more expensive renewable energy. However, since waste coal mine gas is not renewable, inclusion of further waste coal mine gas in the RET would reduce the effectiveness of the scheme in relation to its objective of promoting additional renewable electricity generation.

Further, if new waste coal mine gas were to be added to the RET, there is the possibility that eligibility could be extended to other non-renewable sources. Bluescope Steel stated that if waste coal mine gas continued to be eligible, it would be logical to extend eligibility to other industrial gases that can be burned to generate electricity.

Other industrial waste energy sources have been proposed for eligibility on the basis that they reduce emissions and reduce demand for grid electricity (for example, Ai Group, sub.46, p.14). For example, waste heat has been proposed as it can be used as either a displacement heat source or to generate electricity via steam turbines. As discussed in Section 7.1.2, allowing additional non-renewable waste energy sources to be eligible would undermine the objectives of the RET. Industrial gases are largely covered by the carbon pricing mechanism, which in itself provides an incentive for businesses to find the most cost effective way of minimising emissions from these gases.

Existing waste coal mine gas power stations were only included in the LRET as a transitional measure following cessation of the New South Wales Greenhouse Gas Reduction Scheme and on the commencement of the carbon pricing mechanism. There is no strong rationale for new waste coal mine gas projects to be eligible under the RET because the carbon price will provide the incentive for these projects.

Recomendation

  • Existing arrangements for waste coal mine gas should be maintained under the Large-scale Renewable Energy Target.
  • There should be no change to the Renewable Energy (Electricity) Act 2000 (Cth) to allow for new waste coal mine gas to be eligible.

7.1.5 Wood waste from native forests under the Large-scale Renewable Energy Target

The Authority has received submissions calling for wood waste from native forests to be eligible under the RET.

Wood waste from native forests was originally eligible under the MRET, and was removed from the RET in 2011 following agreement of the Multi-Party Climate Change Committee as part of the Clean Energy Future plan (Multi-Party Climate Change Committee 2011). As part of its removal, regulations were added to provide for transitional arrangements to preserve existing eligibility provisions for power stations already accredited by the Clean Energy Regulator to use wood waste derived from native forest biomass subject to specified conditions (REE Amendment Regulations 2011 no.5).

Wood waste from plantation forests is eligible to generate certificates under the LRET, and this includes non-endemic native species, but must be taken from land that is cleared of native vegetation before 1 January 1990 to establish the plantation.

Under the original MRET, criteria were applied to wood waste from native forests requiring it to: comply with local government planning and approval processes, to be harvested under a Regional Forestry Agreement, and to demonstrate that the waste is genuine (that is, the native forest was logged for a higher value use and that the biomass used was a by-product of that logging) (REE Regulations 2001). Further to this, logging of native forests is managed under State Government forestry plans which place limits on the amount of logging activity allowed. This effectively caps the amount of wood waste that can be used for generation.

The eligibility of biomass from native forests has been a controversial issue. The 2003 MRET review received diverging submissions on the issue, and identified two options – removing wood waste from native forests from the scheme, or leaving it in but separating it from other eligible wood waste sources so that the value of RECs from plantation wood waste generation would not be affected. In support of removing the energy source, the 2003 MRET review noted that the objectives of the REE Act would be more easily achieved by removing such a contentious element. In support for leaving wood waste from native forests in the scheme, the 2003 MRET review noted that, at the time, there was no compelling evidence that it would alter forest management practices or accelerate the growth of logging. The Government decided to maintain the eligibility of wood waste from native forests under the RET at that time.

During the design of the enhanced RET in 2009, there were a number of submissions calling for the removal of wood waste from native forests. During the House of Representatives debate following the passing of the Clean Energy Future legislation an unsuccessful motion was put forward by

Rob Oakeshott MP to block the removal of wood waste from old native growth forests from the RET (Commonwealth, House of Representatives, 2012).

Arguments supporting its eligibility are that the use of native forest biomass is a zero-carbon emissions rated energy source that replaces fossil‑fuel generation and that wood waste from forests is generally burned anyway. Proponents argue that forests have a high level of regulation to ensure they are sustainably managed and there are no impacts on biodiversity by burning wood waste for electricity generation. The Australian Forest Products Association submitted that:

The objective of the RET is to create a guaranteed market for renewable energy therefore it should provide opportunities for all renewable energy sources, including sustainably managed natural forest biomass. (Australian Forest Products Association, sub.14, p.6)

It also stated:

The harvesting of native forests in Australia is supported by an existing regulatory framework that is internationally recognised as world’s best practice. (Australian Forest Products Association, sub.180, p.5)

The main concern about the eligibility of wood waste from native forests under the RET is that it would create an added incentive to log native forests, especially if the value of electricity generation becomes higher than other uses of native forest timber and wood waste.

It is not clear that allowing wood waste from native forests would encourage further logging of these forests for electricity generation. In practice, despite its eligibility under the MRET, very few certificates were ever created from native forest biomass. There was also a market preference against these certificates, which traded at a substantial discount to other renewable energy certificates.

A higher level of forestry and environmental regulation has, however, been necessary to ensure that wood waste from native forests is harvested in an ecologically sustainable manner. The Australian Network of Environmental Defender’s Offices recommended:

Maintaining the exclusion of native forest waste, and re-evaluating the ongoing eligibility of wood waste as a renewable energy source, and whether it should be further limited to ensure the RET does not contribute to the environmental impacts of logging – such as loss of biodiversity, loss of ‘carbon sinks’, and particulate pollution from burning sawmill waste. (Australian Network of Environmental Defender’s Offices, sub.141, p.6)

In terms of public interest, the protection of native forests is of high importance in Australia, which is captured in a recent report to the Commonwealth Government titled Social Values and Considerations for Effective Reserve Management. The report noted:

The social value of natural forests is more than the direct uses of their resources. Many people gain satisfaction from knowing that an area, including its landscapes, plants, animals and cultural heritage, is sustained in a certain condition. Such satisfaction can be intensely personal and simply related to the existence of an area (and hence is often termed existence value). It can also stem from a conviction that forests should be retained for future generations to appreciate and enjoy. (Independent Verification Group Report, 2012, p.3)

An objective of the RET is to encourage additional renewable generation that is ecologically sustainable. The Authority’s preliminary view set out in the discussion paper was that, without a clear process to ensure that electricity generation using wood waste from native forest would be ecologically sustainable, it should not be re-included in the RET.

Taking this view a step further, the Authority’s final view is that the key issue is the incremental environmental impact of allowing wood waste back into the RET. If a forest would have been logged in any event, then burning the wood waste in a power station is a better environmental outcome – in greenhouse gas emission terms – than burning the waste alone or allowing it to decompose.

The Australian Forest Products Association has argued that inclusion in the RET will not lead to more logging than would have occurred in any event:

Waste is defined as a by-product of normal forestry operations, which are primarily are for integrated sawlog and pulpwood production and incentives for energy generation will not replace these higher value market drivers. (Australian Forest Products Association, sub.14, pp.6-7)

The Authority recommends that the Government should consider commissioning a new study of the likelihood that the logging of native forests would increase if wood waste were an eligible fuel under the RET. If LRET eligibility is not likely to increase the rates of native forest logging, then eligibility should be reinstated, subject to appropriate accreditation processes.

Recomendation

  • The Commonwealth Government should explore whether the Renewable Energy Target eligibility for native forest wood waste is likely to increase the rate of logging of native forests. If it is not, then wood waste eligibility should be reinstated, subject to appropriate accreditation processes designed to ensure that no additional logging occurs as a result.

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7.2. Eligibility and accreditation arrangements under the Small-scale Renewable Energy Scheme

Eligible technologies under the Small-scale Renewable Energy Scheme (SRES) are set out in the

REE Act, which provides that ‘solar water heaters’ and ‘small generation units’ may generate small‑scale technology certificates. There are three types of small generation units – solar photovoltaic (PV) with a capacity limit of 100 kilowatts (kW), micro hydroelectric systems up to 6.4 kW, and small wind turbine systems up to 10 kW. Solar water heaters are eligible if they meet relevant Australian and New Zealand standards, which cover both solar water heaters and air source heat pumps. To be eligible, a heat pump cannot have a volumetric capacity of more than 425 litres. Eligible technologies must meet certain standards.

Small-generation units must be installed by qualified technicians. The Clean Energy Council, a peak national industry body representing the clean energy sector, is solely responsible for managing the accreditation of designers and installers of small generation units under the SRES. Installers and designers of small generation units must be accredited with the Clean Energy Council in order for the owners of those systems to be eligible to create small-scale technology certificates under the SRES.

In addition, solar PV and solar water heaters require accredited components, while small wind and hydro systems do not (see Table 6).

Table 6 Technology type and accreditation arrangements
Small-scale technology Accredited installer? Accredited components?
Solar PV Yes Yes
Wind Yes No
Hydro Yes No
Solar water heaters No Yes

Source: Climate Change Authority, 2012.

To become accredited with the Clean Energy Council a minimum level of training is required.

The training is provided by registered training organisations throughout Australia. Once the required training has been completed a practical assessment of an installer’s work is undertaken before full accreditation is granted. Accredited installers are required to renew their accreditation annually, and this is supported by a continuous improvement program the Clean Energy Council has introduced that installers must follow to stay up to date with developments in the industry.

The Clean Energy Council also maintains a list of solar panels and inverter products that meet relevant Australian standards. Accredited installers can only install products from this list otherwise they are in breach of the Clean Energy Council’s Code of Conduct.

7.2.1 Opening accreditation to competition

Under legislation, the Clean Energy Council is the sole organisation that can accredit small generation unit designers and installers for the purposes of creating small-scale technology certificates.

The appropriateness of a single accreditation body has been raised in submissions by the solar industry. The Australian Solar Council stated:

The Act creates a legislated monopoly for the accreditation of small-scale renewable energy technologies, ensuring that only one non-government agency has been given that power. Legislated monopolies are poor public policy, and the lack of competition appears to have resulted in some less than best practice outcomes. (Australian Solar Council, sub.62, p.10)

In the discussion paper, the Authority’s preliminary view was that accreditation should be opened up to certified bodies beyond the Clean Energy Council. The Authority suggested that introducing such competition could allow installers and designers to choose the accreditation provider that best meets their needs, rather than imposing one particular model of quality assurance. It could also help ensure that an accreditation body remains focused on enhancing the relevance, quality and value of the services for their members.

There is a risk of opening up accreditation to multiple organisations, as greater competition could drive poor outcomes for customers. This could occur if accreditation bodies competed on the basis of price at the expense of quality or rigour. In response to the discussion paper, LMS Energy noted:

Whilst more accreditation bodies could reduce accreditation wait times, the accreditation bodies could also have the incentive to relax the robustness of their accreditation standards in an effort to attract more business away from other accreditation bodies – resulting in a market failure. (LMS Energy, sub.208, p.6)

In addition, it could be difficult for the Government to administer multiple accreditation bodies, as a strict set of provisions would need to be implemented to ensure that the quality of installations is maintained. In response to the discussion paper, CSR noted:

Experience with building codes enforcement and the proliferation of private assessors suggests that broadening the accreditation is likely to weaken and not strengthen accreditation based on CSR experience. Building industry enforcement of codes is now beyond the ability of Government and a “super” enforcement model is unlikely to be successful with solar. The [Clean Energy Council] should be required to strengthen its enforcement program nationally before alternative models are considered. [The] Government has only one point of contact today and that is the great strength of the present model.

(CSR, sub.195, p.4)

In order to allow others to become accreditation bodies it would be necessary to have common guidelines that any accreditation body would be required to use. Common guidelines would need to ensure consistency and create a minimum quality of training. The guidelines would need to represent industry best practice and be dynamic in nature to respond to changes in the industry.

The Clean Energy Regulator would be required to put in place an effective regime to ensure that accreditation bodies are of an appropriate standard. This would need to include a transparent process by which the Clean Energy Regulator could approve and revoke an accreditation body’s participation in SRES.

In addition, the RET, and consequently the Clean Energy Regulator, does not have oversight for electrical safety, which is the responsibility of relevant state and territory safety authorities. Any new accreditation bodies would need to ensure that accredited installers comply with relevant laws. It was raised in roundtable discussions that the current accreditation process managed by the Clean Energy Council provides sufficient safeguards for systems that create small-scale technology certificates.

The Clean Energy Council has advised the Authority that it seeks to continually improve its accreditation process, and has established an installer reference group which provides advice and feedback on the accreditation scheme and overall industry enhancements. The Clean Energy Council has a process in place to manage any disputes that may arise, and is currently consulting with members with the aim of improving this process.

On further investigation, at this time, the Authority considers that the potential benefits of allowing multiple bodies to accredit installers and products do not outweigh the additional administrative costs and potential risks. In addition, no organisations indicated particular interest in taking on accreditation, and the Clean Energy Council has introduced measures to improve the accreditation process.

The Authority considers that the risks associated with opening up accreditation to multiple bodies in terms of possible poor standards and higher costs of oversight, appear too large to warrant changing the current arrangements of a single national accreditation body at this time.

Recomendation

  • Maintain the Clean Energy Council as the sole accreditation body for installers under the Small-scale Renewable Energy Scheme.

7.2.2 Additional small-scale technologies

The two key issues to be considered in the review relating to additional small-scale technologies relate to:

  • the addition of new small-scale renewable generation technologies; and
  • the inclusion of (existing and new) displacement technologies.

This section will discuss the addition of any new technologies into the scheme generally, displacement technologies both currently eligible and the proposition of adding new displacement technologies.

As the RET scheme has progressed, new small-scale technologies have been added to the scheme, and more recently new technologies have been proposed for inclusion.

The Regulatory Impact Statement attached to the Explanatory Memorandum of the Bill to split the RET identifies the RET Review as a possible mechanism for recommending the addition of new technologies. As part of recommendations from the Regulatory Impact Statement, the review would also consider a framework for determining eligibility under the RET, particularly for small-scale technologies.

The Authority has considered if, in principle, new small-scale technologies should be considered for inclusion in the RET and, if so, what framework should be used to assess potential technologies. It has then considered if there are currently any new technologies that could be considered for inclusion.

The scheme was originally intended to be technology-neutral as a way of ensuring the target was met at the lowest possible cost, and that the mix of technologies used to generate energy from renewable sources could evolve over time.

The uncapped nature of the SRES means that cost minimisation is no longer automatic: additions of new technologies could potentially add to the cost of the scheme as new technologies would not necessarily displace existing small-scale technologies, but may be deployed in addition to them.

This will always mean that a judgement would need to be made when adding new technologies to the scheme.

The addition of new technologies was considered in the Renewable Energy Sub Group’s Review of Specific RET Issues to the Council of Australian Governments in 2012. The review recommended that no new small-scale technologies should be eligible, on the basis that the SRES is uncapped, so any additional small-scale technologies would add to costs for electricity consumers. The extent of uptake of these new technologies was highly uncertain, and hence so was the potential impact on consumer prices.

It is also important to consider any implications eligibility arrangements might have on competition.

For example, if a new small-scale technology was developed that would directly compete with those

small-scale technologies that are eligible; it would be at a competitive disadvantage if it was not also made eligible.

The Authority is of the view that, in principle, new small-scale technologies should be allowed to be included in the SRES. It may already be possible to add new technologies, as there is a general provision under the RRE Act for the Minister to include by regulations “emerging renewable energy technologies” in the RET scheme.

It is not clear, however, that this provision applies specifically to small-scale technologies under the SRES or whether it is sufficient to allow for the addition of small-scale renewable and displacement technologies under the SRES. The Authority is of the view that the Government should consider whether a new regulation making power is necessary for the REE Act to explicitly allow for the addition of new small-scale technologies.

An alternative approach would be to include any new small-scale technologies into the LRET.

The advantages of this approach are that it would not add to the overall cost of the RET and it would be easier to add technologies by regulations.

The Authority proposes that new small-scale technologies could be considered by the Minister on a case by case basis for inclusion in the SRES, and that a framework to guide the decision could be developed, based on the following considerations:

  • is the proposed technology currently not eligible (that is, is it truly a new type of technology);
  • does the proposed technology generate renewable energy;
  • is the proposed technology a small-scale technology; and
  • is the proposed technology commercially ready.

In addition, a judgement would need to be made taking into account the likely cost implications of making the technology eligible and any competitive distortions of not making the technology eligible.

A clear process taking into account the above considerations would effectively assist proponents of new small-scale renewable energy technologies for proposing their technology for eligibility under the SRES. The Minister could receive proposals for new technologies directly or refer them to the appropriate accreditation body for detailed consideration and advice.

While the Authority recommends that new small-scale technologies should be allowed to be included, no new technologies that would satisfy the above criteria have been proposed to the Authority. The only new technologies that have been proposed are displacement technologies and are discussed in the following section.

Recomendation

  • New small-scale technologies should be considered on a case by case basis for inclusion in the

     

    Small-scale Renewable Energy Scheme.

  • No additional new small-scale technologies should be made eligible in the Small-scale Renewable Energy Scheme at this time.

7.2.3 Displacement technologies

Displacement technologies are alternative forms of energy generation that displace electricity consumed from the grid. For example, a solar water heater uses the sun to directly heat water, without the need for a solar PV electricity generation system to convert the suns energy into electricity that would create heat through electrical resistance.

There are two technologies eligible to create small-scale certificates under the SRES are displacement technologies – solar water heaters and heat pumps, both of which have been eligible since the MRET was established. Solar water heaters were historically the most popular small-scale technology under the RET; however, they were overtaken by solar PV units in 2010 (see Chapter 2).

Since the establishment of the SRES, displacement technologies have made up a small amount of deemed certificates that have been created. In 2012, heat pumps and solar water heaters accounted for 1.1 per cent and 4.7 per cent of small-scale technology certificates generated, respectively.

In some submissions, it has been proposed that other displacement technologies should be eligible under the SRES, such as ground sourced heat pumps. Arguments for including displacement technologies include that they provide similar benefits to small-scale electricity generation technologies, and that they compete directly with those technologies.

Conversely, a number of submissions have called for removing displacement technologies from the RET. The main arguments against the inclusion of displacement technologies in the RET are that they are not electricity generation technologies, that they increase the cost of the scheme for consumers, and that they should be supported through other incentives outside of the RET. A group of individual participants submitted that the inclusion of displacement technologies does not reflect the policy intent of the RET:

As the RET was developed as a means to achieve the Commonwealth commitment to “at least 20 [per cent] of Australia’s electricity from renewable sources by 2020”, displacement technologies would not be included in this definition. (Hallenstein et al, sub.19, p.20)

One objective of the RET is to encourage additional electricity generation from renewable sources. Including displacement technologies in the SRES raises a question about whether the objective is to add electricity generation only or also to displace electricity use. If the SRES remains uncapped, additional technologies including displacement technologies could increase the cost of the RET. Moreover, the policy objective of the RET to drive renewable electricity generation is diluted by adding additional displacement technologies.

There may also be overlaps with energy efficiency schemes. Some states and territories have energy efficiency certificate schemes (commonly known as ‘white certificate schemes’) in place, some of which cover solar water heaters and heat pumps (see Table 7). These schemes are certificate trading schemes similar in form to the RET, except that each certificate relates to an amount of energy saved, rather than renewable energy produced.

Table 7 Current state-based energy efficiency schemes

State/territory Energy efficiency scheme in place? Coverage of renewable water heaters?
New South Wales Energy Efficiency Scheme (ESS) No
Victoria Victorian Energy Efficiency Target (VEET) Yes
Queensland No No
South Australia Residential Energy Efficiency Scheme (REES) Yes
Western Australia No No
Australian Capital Territory Energy Efficiency Improvement Scheme (from 1 January 2013) Yes
Tasmania No No
Northern Territory No No

Source: Climate Change Authority, 2012.

The Commonwealth Government is also considering whether it should seek to implement a national energy efficiency white certificate scheme (a National Energy Savings Initiative), which would subsume existing state-based schemes. If it were implemented, a National Energy Savings Initiative would be a more obvious home for displacement technologies (new and existing) than the RET.

In its Review of Specific RET Issues, the Renewable Energy Sub Group recommended against the addition of two new technologies – geothermal ground-source heat pumps and solar-assisted cooling systems – on the grounds they were displacement technologies. The Renewable Energy Sub Group recommended that:

[these technologies] would be better suited for support under an energy efficiency scheme rather than a scheme that is primarily designed to support renewable electricity generation. (Renewable Energy Sub Group 2012, p.35)

In response to the discussion paper, the Gas Industry Alliance submitted that:

… a simple proactive option would be to remove solar and heat pump water heaters from the SRES and include them, together with gas water heaters in a new national water heater replacement scheme. (Gas Industry Alliance, sub.201, p.2)

The Authority is also aware that existing displacement technologies compete with electric and gas water heaters, but still at much higher equipment costs. Electric water heaters are being phased out in most states and territories, and the inclusion of renewable forms of water heating in the SRES supports this transition. While gas competes with electric water heaters and renewable water heaters that are eligible under the SRES, it is not readily available in all parts of Australia. Supporting renewable water heaters either through the RET or through other incentives also encourages the take up of these technologies in gas-exclusive areas.

The Authority considers that existing displacement technologies should remain in the SRES, and should be phased out if and when a national energy efficiency scheme that would cover them is established. Similarly, if the broader regulatory framework that applies to these technologies at the state and territory level changes in the future, so that any of these technologies no longer needs the RET to encourage uptake, then the technology should be phased out of the RET.

The Authority considers that additional displacement technologies should not be added to the SRES. While it is recognised that this potentially places these technologies at a competitive disadvantage to existing displacement technologies, they do not contribute to the objective of the REE Act of additional generation of electricity from renewable energy sources, and given the uncapped nature of the SRES their inclusion would increase the cost of the scheme to consumers.

Recomendation

  • Existing arrangements for displacement technologies should be maintained.
  • No change should be made to the Renewable Energy (Electricity) Act 2000 (Cth)to allow additional displacement technologies.

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