A mandatory renewable energy target (MRET) is a set percentage, or
an amount of electricity (expressed as either a percentage of total
electricity generated or as a set amount of electricity) that is required
to be generated from renewable sources, such as solar, wind, biomass
or hydro.
The Commonwealth
Government's MRET commenced on 1 April
2001. The Renewable
Energy (Electricity) Act 2000 (the
Act) currently requires the generation of
9,500 gigawatt hours (GWh) of extra renewable
electricity per year by 2010.
Interim annual targets have been set to
ensure that there will be consistent progress
towards achieving the 9,500 GWh target
by 2010 and that all of the investment does
not occur in the final years of the scheme.
Annual targets set in Section 40 of
the Act are enforceable on 'liable entities'
and apply to calendar years up to and including
2020.
The aim of the renewable energy target
is to increase the production of renewable
energy. Under section 31 of the Act,
all electricity retailers and wholesale
buyers who make 'relevant acquisitions'
have a legal liability to contribute towards
the generation of additional renewable energy.
They are called liable entities, and meet
their legal obligation by acquiring renewable
energy certificates. The liable parties
then surrender renewable energy certificates
(RECs) in proportion to their acquisitions
of electricity. Each REC represents one
megawatt hour (MWh) of eligible renewable
electricity.
If a liable party does not discharge their
liability by surrendering RECs, then the
Renewable Energy Shortfall Charge of $40 per
REC applies. Penalties can be redeemed if
the appropriate number of RECs are surrendered
within the next three years of the penalty
being paid and there are sufficient RECs
offered for surrender against the compliance
year being assessed.
For liable parties to meet their proportion
of the interim targets they need to know
their total amount of relevant acquisitions.
The total liable purchases are multiplied
by the Renewable Power Percentage (RPP).
The RPP is specified in the relevant regulations.
The RPP for 2008 is 3.14 per cent.
This figure reaches 10 per cent in
2010.
There are two different ways for renewable energy to be eligible
under the Act:
Owners of deemed systems are eligible for RECs by
directly creating their RECs or assigning their right to create RECs
to an agent once. Agents, who must be registered under the Act, can
create RECs from individuals who have assigned their right to create
RECs to the registered agent from their deemed output systems.
The Rudd Government has set a target of
20 per cent share for renewable energy
in Australia's electricity supply by 2020.
This requires the government to increase
the current MRET from 9,500 GWh in
2010 to 45,000 GWh in 2020. The expanded
measure is to be phased out between 2020
and 2030 as the proposed Australian emissions
trading scheme matures and prices become
sufficient (i.e. high enough) to ensure
that an MRET is no longer required to drive
deployment of renewable generation technologies.
At the Council
of Australian Governments (COAG) meeting
in December 2007, the Commonwealth
and states agreed to work cooperatively
to bring the existing MRET and the various
state-based targets into a single, expanded
national MRET scheme by early 2009. An implementation
plan and interim report on progress was
put to COAG at its March
2008 meeting. The final design is to
be provided to COAG for consideration at
its October 2008 meeting.
A review, titled Renewable
opportunities—a review of the operation
of the Renewable Energy (Electricity) Act
2000, was conducted in the third year
of the MRET's operation by a panel independent
of the government which assessed various
issues associated with the MRET and its
legislation. The review made some thirty
recommendations.
Costs to the economy
The initial development of the Commonwealth’s
MRET was informed by a number of studies,
one of which directly focused on the effects
of the MRET on the wider economy. The Econtech
report found the long-run effect of the
MRET on gross domestic product (GDP) would
be slightly negative, at –0.03 per
cent per annum. The Consumer Price Index
(CPI) was predicted to grow slightly (0.05 per
cent per annum), while employment was predicted
to remain effectively stable, with initial
decreases in employment offset by later
employment growth. The report concluded
there would be small and negative macroeconomic
consequences from the measure, but also
recognised the review was being concluded
early in the MRET's lifecycle, making assessments
of its economic impact diffucult.
Benefits
The review of the Commonwealth’s
MRET scheme suggested that it had the following
benefits:
