Bills Digest No. 49 2002-03
Renewable Energy (Electricity) Amendment Bill
2002
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Endnotes
Contact Officer & Copyright Details
Passage History
Renewable Energy (Electricity)
Amendment Bill 2002
Date Introduced:
27 June 2002
House: House of Representatives
Portfolio: Environment and Heritage
Commencement:
The operational
aspects of the Bill commence on a day to be fixed by Proclamation,
or within six months of Royal Assent, whichever is the
sooner.
Purpose
To make various legislative adjustments to the
electricity from renewable energy sources scheme. These adjustments
include the creation of significant new penalties.
Background
The Renewable Energy (Electricity) Act
2000 (the Act) requires Australian electricity retailers and
other large buyers of electricity ('liable entities') to
collectively source an additional 9 500 GWh per annum of
electricity from renewable sources by 2010. This measure was
designed to push the level of renewables-based electricity
generation from 10.7 per cent in the late 1990s to a projected 12.7
per cent by 2010. It was also designed to increase investment in
the renewable energy sector and was estimated to potentially reduce
greenhouse gas emission by around 7 million tonnes per annum by
2010, through renewable energy electricity generation displacing
high emission intensity fossil fuel based power generation.
The scheme requires liable entities to surrender
to the Renewable Energy Regulator sufficient tradeable, renewable
energy certificates (RECs) to cover their required purchases of
electricity generated from renewable sources. The purpose of the
RECs is to enable liable entities to avoid or reduce the amount of
any renewable energy 'shortfall charge' that they would otherwise
have to pay when they acquire electricity from non-renewable
sources. Liable entities will generally acquire the RECs by
purchasing them. The RECs themselves are created by accredited
power stations that generate power from renewable energy sources in
excess of a 'baseline' amount. This baseline is set according to
how much power was generated by the relevant power station from
renewable sources in 1997.(1) One REC is generated for
every 1 MWh of renewable energy power generated in excess of the
baseline.
The number of RECs that must be surrendered in
order to avoid the shortfall charge are calculated as a percentage
of electricity purchased. In 2002, the 'renewable power percentage'
(RPP) was 0.62%. Thus if an electricity retailer buys 100 000 MWh
of liable electricity over 2002, it will be required to surrender
620 RECs (0.62% of 100 000) in order to avoid the charge. The RPP
increases year by year up to 2010: in 2001, it was
0.24%.(2) If liable entities do not surrender sufficient
RECs, the shortfall charge is $40 per MWh. Thus if the retailer in
the previous example had surrendered only 500 RECs for their 2002
purchases, it would be liable for a charge of $4 800.
The scheme is an example of demand stimulation
with the intention to accelerate the uptake of renewable energy in
grid-based electricity supply. A wide range of renewable energy
sources has been identified as being eligible for the purposes of
this measure. These are: solar, wind, ocean, wave and tidal, hydro,
geothermal, biomass, specified wastes, solar water heating,
renewable stand alone power systems and renewable fuels when
co-fired with fossil fuels.
Further background on the scheme is contained in
the Digest to the Act http://www.aph.gov.au/library/pubs/bd/1999-2000/2000bd198.htm
as well as the website of the Renewable Energy Regulator (the
Regulator)(3), the administrator of the Act.
The Regulator has indicated that in the Act's
first year of operation approximately 600 000 RECs were generated,
about twice the 2001 target(4) and that over one hundred
and twenty renewable energy power stations have been accredited.
The Regulator has also stated that that accredited stations
included those using 'hydro and sugar cane through wind and solar
to sewerage gas and waste chip fat' and new renewable energy
project proposals included 'wave power, chicken litter, and wastes
from weed control operations and even massive solar
chimneys'.(5)
Amendment of the
Administrative Decisions (Judicial Review) Act
1977
Item 1 inserts new
paragraph (gb) to Schedule 1 of the Administrative
Decisions (Judicial Review) Act 1977 (ADJRA). This will mean
that the Regulator's assessments as to a liable entity s shortfall
and shortfall charge cannot be subject to judicial review under the
ADJRA. The objection and appeal procedure set out in existing
sections 54-65 of the Act is unaffected. This procedure provides
for a review by the Administrative Appeals Tribunal (AAT) or an
appeal to the Federal Court.
Amendment of the
Renewable Energy (Electricity) Act 2000
Item 21 substitutes a
new subsection 13(1). It allows a person to apply
for accreditation of the components of an electricity generation
system (considered to collectively constitute a single power
station) even where they operate those components jointly with
others or where they only own some of the components. According to
the Explanatory Memorandum to the Bill, this amendment,
along with related items 25, 32, 34, and
58 is intended to 'concentrate responsibility and
authority for accreditation, REC creation, and reporting in a
single person and provide that all other co-owners and co-operators
must unanimously agree to this person assuming these powers and
responsibilities'.(6)
Existing subsections 14(1)-(2) set out the
circumstances under which a power station is eligible for
accreditation.(7) Item 28 inserts
new subsection 14(2A) that provides that a 'new'
power generation system is not eligible for accreditation
if the Regulator decides that the system in the application
effectively represents an expansion or modification to an
already-accredited power station rather than a new, separate power
station. Presumably this amendment is designed to prevent
'unwarranted' generation of RECs, based on the possibility that the
Regulator may not currently have the legislative power to refuse
accreditation as a new power station in cases where a generating
system either is actually a refurbished system or replaces an
existing system within a power station that has 1997
baseline.(8) If, under this scenario, the system was
accredited as a new power station, no baseline would apply, and
RECs could be created for all electricity generated from this
system, even if no net additional renewables-based electricity was
generated as a result of the system's replacement /
refurbishment.
Item 33 substitutes a
new section 17 which makes changes to the list of
eligible renewable energy sources under the Act. A number of items
in the list have been removed. These include:
-
- Photovoltaic and photovoltaic renewable stand alone power
supply systems
-
- Wind and wind hybrid renewable stand alone power supply
systems
-
- Micro hydro renewable stand alone power supply systems;
-
- Solar hot water
-
- Co-firing, and
-
- Fuel cells.
The explanatory memorandum to the Bill
describes these as 'redundant and/or not sources, but rather
processes or technologies for transforming energy sources into
electricity'.(9) For example, 'wind and wind hybrid
renewable stand alone power supply systems' is removed but 'wind'
stays. Fossil fuels and waste products derived from fossil fuels
remain excluded from the meaning of eligible renewable energy
sources.
Item 44 and 45 remove the
current requirement that installation of a solar water heater must
'displace' non-renewable electricity in order for RECs to be
generated. The existing provision was a controversial item in
passing the Act because of the dominant role of hydro power (a
renewable source of electricity) in Tasmania. Enforcing regulations
were the subject of a disallowance motion tabled by Senator Brown,
although the motion was defeated.(10) The
explanatory memorandum to the Bill describes the rationale
for items 44 and 45 thus: 'given
the complexity of electricity generation and dispatch in the
National Electricity Market and on other state grids, it is
generally not possible to establish clearly whether or not
electricity displaced by a particular solar water heater is in fact
non-renewable electricity. On these grounds the requirement that a
solar water heater displace non-renewable electricity is for
practical purposes impossible to enforce'. (11)
Item 50 amends the
circumstances under which RECs can be created for small generation
units (small-scale solar photovoltaic, wind or hydro electricity).
Small generation units are systems not large enough to be
classified under the Act as accredited power stations. The existing
provision requires such units must 'displace' non-renewable
electricity in order for certificates to be generated. The
explanatory memorandum indicates that this was an
'unintended restriction' in comparison to accredited power stations
using eligible renewable energy sources which are not required to
displace non-renewable electricity. This discrimination is
'inconsistent with the intent of the Act' and is therefore
removed.(12)
Item 57 inserts new
section 30A. Existing section 30 enables the Regulator to
suspend a person's registration for up to 2 years if that person
has been convicted under existing subsection 24(3) for the
'improper creation' of a certificate.(13) New
section 30A creates additional grounds for suspension by
the Regulator. These are
-
- if the Regulator believes on 'reasonable grounds' that the
person has committed an offence against the Act or the Regulations,
or
-
- if registration is 'obtained improperly'.
In the first case (new subsection
30A(1)), suspension may be for a maximum of 12 twelve
months. In the second case (new subsection
30A(3)), it can be permanent. The Explanatory
Memorandum comments that 'this section enables the Regulator
to act to more proactively manage the risk of renewable energy
certificates being created contrary to the intent of the Act.'
These additional suspension grounds are reviewable by the AAT under
section 66 in the same way as existing section 30.
It is notable that, unlike existing section 30,
a person does not have to be first found guilty of a criminal
offence(14) for the Regulator to suspend registration
under either new subsection 30A(1) or new
subsection 30A(3). This is potentially a significant
enhancement of the Regulator's power.
Item 58 adds a number of new of
sections to existing Part 2 of the Act. New
sections 30D and 30E
allow for a power station's accreditation to be suspended by the
Regulator. Potentially, new section 30D is the
most far-reaching in that it attempts to combat collusive behaviour
amongst power stations designed (at least in part) to generate
certificates without an equivalent increase to the amount of
electricity from renewable energy sources. Essentially, the
Regulator will be able to suspend accreditation if they are
satisfied that a 'gaming arrangement' has occurred. The
Explanatory Memorandum comments that 'gaming has the
potential to significantly dilute the effectiveness of the measure
to stimulate the growth of the renewable energy industry and abate
greenhouse gas emissions'.(15) The Regulator must 'have
regard' to any information available to him or her that
demonstrates that level of electricity generation by one or more of
the relevant power stations were not the result of a
gaming arrangement. A new section
30D suspension is reviewable by the AAT.
In practice, it is possible that the application
of the anti-collusion provisions of new section
30D could involve some degree of subjective judgment by
the Regulator as to whether certain REC generation is a result of
gaming behaviour. Neither the second reading speech nor the
Explanatory Memorandum provides any evidence on why this
provision is required other than a brief reference to maintaining
the 'integrity' of the legislation.
New section 30E allows the
Regulator to suspend accreditation where the Regulator believes on
'reasonable grounds' that the power station is being operated in
contravention of a Commonwealth, State or Territory law or other
grounds that may be prescribed by the Regulations. A
new section 30E suspension is reviewable by the
AAT.
New section 30F allows the
Regulator to vary the 1997 baseline in the circumstances prescribed
in the Regulations. According to the explanatory memorandum, this
section addresses 'an inflexibility in the Act' that prevents a
1997 baseline which has been set for an accredited power station
from being subsequently amended.(16) New
subsection 30F(2) provides an indication under what
circumstances the Regulator might exercise this proposed power. It
states that 'regulations may make provision for the 1997 eligible
renewable power baseline for an accredited power station to be
varied if an action or policy of the Commonwealth Government
reduces the power station s ability to generate electricity for a
sustained period'.
Item 92 inserts a new
subsection 54(2) which specifies that a liable party that
has received an assessment of a penalty charge cannot make an
objection under the existing section 54-65 process. This means a
dispute about the Regulator's decision as to a penalty charge can
only be reviewed by the AAT as provided for in existing section
66.
Item 102 amends existing
subsection 66(1). This amendment provides that decisions made under
the various new provisions contained in items 58
and 77(17) are reviewable by the
AAT.
Items 125-138 insert a generic
series of amendments that allows various existing
information-gathering powers contained in the Act to be exercised
in relation to ensuring compliance with regulations as
well as the Act itself. For example, item 125
inserts a new subsection 110(1) which extends the
monitoring powers of an authorised officer to enable him or her to
enter premises under warrant or with the agreement of the occupier
to determine whether the regulations have been complied with.
Currently they can only enter with the purpose of determining
compliance with the Act.
Item 139 adds a new
Part 11A (sections 125A-125F). Currently, many
information-gathering powers under the Act may only be exercised
when premises have actually been entered under warrant or with the
agreement of the occupier. For example, under existing section 112,
where entry is by warrant, persons may be required to produce
documents relevant to compliance matters.(18)
New Part 11A extends existing
information-gathering powers so the Regulator can use them without
having to enter premises. The key provision is new section
125A which allows the Regulator to require certain persons
to give him or her information and evidence and produce documents
'relevant to the operation of the Act'. As for existing section
113, it creates an offence for failing to comply with a
requirement, although in this case it is only a fine - 20 penalty
units ($2 2000) for an individual.
New section 125B deals with
self-incrimination. Unlike existing section 113, it provides that
an individual is not excused from providing information,
evidence or documentation under new Part 11A on
the grounds of self-incrimination, or of exposure of the individual
to a penalty. However, the information, evidence or documentation,
or anything obtained as a direct or indirect
consequence(19) of the information, evidence or
documentation provided cannot be used in evidence against the
individual in criminal proceedings except for a
prosecution for failing to provide information or giving false or
misleading information. Note that the information given could be
used to criminally prosecute a company. Of course it could also be
used to suspend a person's or company's registration, accreditation
etc under the Act.
Item 148 adds a new
ground,(20) which, if it occurs, the Minister
must terminate the Regulator's employment. The ground is a
failure, without reasonable excuse, to notify the Minister of any
conflicts of interest. This is a relatively standard ground for
termination in similar Commonwealth legislation dealing with
regulatory or advisory bodies. Item 149 inserts a
new section 147A which provides that the Regulator
must give the Minister written notice of all his or her interests
(financial or otherwise) that could conflict 'with the proper
performance' of his or her function as Regulator.
-
- The baseline is zero for post-1997 power generators.
- The 2003 percentage has not been set as yet.
- See http://www.orer.gov.au/. The ORER is
a separate statutory authority located within the Commonwealth
Environment and Heritage portfolio.
- The target for 2002 is 1.1 million RECs. See Press
Release, 'First Year Renewable Electricity Targets', 10
January 2002 at http://www.orer.gov.au/about/mr10jan02.html
- ibid.
- At p. 6.
- These are expanded upon in Division 2.1 of the Renewable Energy
(Electricity) Regulations 2001.
- As previously mentioned, RECs are created by accredited power
stations that generate power from renewable energy sources in
excess of amount they generated in the 'baseline' year of 1997.
- At p. 8.
- See Senate debates 27 March 2001, pp. 23112 23126.
http://www.aph.gov.au/hansard/senate/dailys/ds270301.pdf
- At p. 10.
- At p. 11.
- The relevant 'fault' element for a subsection 24(3) is
recklessness - ie there does not have to be an specific
intention to improperly create a REC.
- That is, convicted under existing section 24(3). Obviously,
such a conviction would require a finding of that it was 'beyond
reasonable doubt' (the criminal standard of proof) that the person
committed the offence.
- At p. 14.
- At p. 14.
- That is, changing the nominated person for an accredited power
station, varying what constitutes a power station, suspending the
accreditation of a power station and varying 1997 eligible
renewable power baselines.
- Failure to produce such documents is punishable by six months
imprisonment, although a person is excused from the production
obligation if the documents would tend to incriminate them or
otherwise expose them to a penalty: existing section 113.
- Thus new section 125B provides what is called
'derivative use immunity'.
- The existing grounds are standard provisions dealing with
bankruptcy.
Angus Martyn and Mike Roarty
18 October 2002
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