Chapter 3Views on the bills' provisions
3.1This chapter discusses key views on the provisions of the Future Made in Australia (Guarantee of Origin) Bill 2024 (the bill); Future Made in Australia (Guarantee of Origin Charges) Bill 2024 (Charges bill); and Future Made in Australia (Guarantee of Origin Consequential Amendments and Transitional Provisions) Bill 2024 (Amendment bill) (collectively the bills).
3.2Industry stakeholders expressed broad support for the bills package, and many noted their involvement in the development of the Guarantee of Origin scheme (GO scheme) through consultation undertaken by the Department of Climate Change, Energy, the Environment and Water (DCCEEW).
3.3Views on various elements of the GO scheme were raised by inquiry participants, which are discussed below, including:
views on non-tradeable Product Guarantee of Origin (PGO) certificates;
‘stapling’ of PGO certificates;
calls to expand the PGO certificate stream;
exclusion of certain materials’ eligibility to be classed as renewable electricity sources;
views on the bill’s approach to below-baseline certificates;
inclusion of small-scale systems;
timestamps; and
other suggested amendments.
3.4The committee’s views and recommendation are at the end of the chapter.
General support for the bills
3.5The Australian Hydrogen Council (AHC) stated that the GO scheme was ‘much anticipated’ and that it would be a ‘necessary tool to enable the hydrogen industry, domestically and for future trade’. The AHC also described the approach to establish the GO scheme put forward in the bills as ‘an elegant solution’ and highlighted that the scheme will be required to expand to cover additional products.
3.6Although raising issues to be considered in some of the bills, environmental groups were also supportive of the proposed GO scheme. WWF-Australia stated that ‘accurate and transparent product certification is needed to build and maintain buyer and investor confidence, create demand for low emissions products, and to avoid greenwashing’. The Australian Conservation Foundation (ACF) also supported the creation of a ‘transparent and rigorous emissions accounting framework’. The views of these groups are discussed below.
3.7Iberdrola Australia said that the PGO certificate scheme ‘appears fit for purpose and will support the development and certification of green products’. The Australian Pipelines and Gas Association (APGA) highlighted the importance of hydrogen as a way to decarbonise natural gas use, and provide critical firming services for electricity grids. It argued that ‘it is critically important that the needs of a domestic hydrogen industry are fully supported by hydrogen energy policy including via the GO Scheme’.
3.8The AHC highlighted the role of the PGO certificate stream in ensuring integrity of hydrogen products:
[Consumers] are going to want to understand what it is that they are buying. All customers are going to want to make sure that those that are producing are held accountable. This is the mechanism to do that. If we do not have a means of mutually understanding, recognising, tracking, tracing and reporting on the carbon emissions of what is being traded then there is no credibility in the market.
3.9The Australian Energy Council stated that the Renewable Electricity Guarantee of Origin (REGO) certificate stream is:
…an important part of Australia’s energy transition and will create an enduring renewable certification framework to empower the voluntary market to confidently purchase clean energy, with the inclusion of energy attributes giving customers choice about the type of certificate they want to purchase.
3.10The majority of industry participants urged the swift passage of the bills, and were keen to participate in further consultation surrounding delegated legislation. The Australian Energy Council noted that it has advocated for the timely delivery of the GO scheme, and welcomed the legislation and framework.
3.11Fortescue urged the development of rules after the passage of the bills, to ensure that the scheme’s enabling legislation commences while also providing opportunities for consultation on detailed operational elements. Overall, Fortescue considered that the bill:
…strikes the right balance between enshrining elements of the GO scheme in legislation such as registration, public information and transparency, auditing and compliance and review of the scheme and leaving the detailed rules and regulations that will govern the operation of the GO scheme to be developed in subordinate legislation.
Product Guarantee of Origin certificates
3.12Aspects of the PGO certificate stream which were raised by inquiry participants, and are discussed below, include:
support for and opposition to the bill’s restriction of trade to REGO certificates;
the ‘stapling’ of PGO certificates;
calls to expand the PGO certificate stream; and
the exclusion of certain materials.
Views on non-tradable PGO certificates
Support for the bill’s approach to non-trading of PGO certificates
3.13As discussed in the previous chapter, PGO certificates would be excluded from being traded under the GO scheme.
3.14Various submitters supported the non-tradable status of PGO certificates. For example, Fortescue stated that not allowing the trade of PGO certificates would ensure ‘that certificates flow with product through to end consumers’, which would allow end consumers to have confidence that the certificate they have received relates to the product being consumed.
3.15Further, Fortescue stated that PGO certificates which remain with the product (as opposed to being traded) would ‘increase the credibility and transferability of the certificates as Australia begins to supply green products into overseas markets with strict carbon policies in place’.
3.16The Clean Energy Council (CEC) was similarly supportive of not allowing tradable PGO certificates, stating that the restriction would mean:
…it will not be possible for the certificates created by the production of renewable hydrogen in one location to be sold on to a fossil-fuel based hydrogen producer elsewhere – effectively resulting in emissions intensive fuels being passed off as green.
3.17The CEC elaborated on this point, explaining that the non-tradable status of PGO certificates is important in terms of trust of the product:
If someone is buying what they believe to be a green commodity—in this case, let's just say it's green hydrogen or green ammonia—then there would be an expectation that that is in fact green and it is not a fossil based product that has purchased certificates. I think it's important in these early years, particularly where there is some scepticism about that sector, that we do not make life more difficult for it by introducing concern about the veracity of claims of greenness.
3.18In a similar vein, the Clean Energy Investor Group (CEIG) supported the different approaches taken by the bill for trading REGO certificates only:
I think the tradability between REGOs and [PGOs] are different questions for different types of products. So it does make sense that the REGOs would be tradable, but, for the [PGO certificate], it's much more about traceability and showing the provenance of the inputs of that product and showing the green credentials…of the inputs of that [PGO certificate].
Opposing views on the bill’s approach to non-trading of PGO certificates
3.19Other domestic industry stakeholders, however, did not support the exclusion of certificate trade to PGOs. The Australian Gas Infrastructure Group (AGIG) called for tradability to be consistent across different energy sources and recommended that both PGO and REGO certificates be tradeable.
3.20AGIG stated that there are similarities between gas and electricity, and that neither gas molecules nor electrons can be tracked. AGIG argued that both can be pooled prior to consumption, and therefore these similarities should lead to consistent treatment under the GO scheme.
3.21AGIG elaborated on its view that gas and electricity should receive similar treatment:
…we don't believe that tradeability decreases the transparency of the level of rigour around certification. Indeed, if you look at electricity, it has worked there for a long time, and we don't see why a scheme could not be set up and administered in such a way that gave investors and users of the scheme confidence.
3.22Jemena also raised concerns that the bill would exclude trading of PGO certificates, in contrast to the tradability of REGO certificates. Jemena recommended that the role of gas network infrastructure in transporting hydrogen and other renewable gases be considered by government, and stated that the exclusion of trading PGO certificates would place limits on markets.
3.23LMS Energy, a landfill bioenergy company, also called for PGO certificates to be tradable, on the grounds that it would be ‘essential to support nascent renewable energy industries, including bioenergy’.
‘Stapling’ of PGO certificates
3.24As discussed in the previous chapter, the design of the PGO certificate stream provides for the tracking and tracing of a product from production to delivery gate, which requires a physical link to be demonstrated (described by industry as being ‘stapled’ to the product). This approach contrasts with the REGO certificate stream, where emissions are measured in a way that does not require a physical link.
3.25APGA stated that the bill ‘shows important improvements and intent in support of domestic hydrogen use’. However it raised concerns that ‘the requirement to staple the PGO certificates to hydrogen transactions delivered via existing gas infrastructure is incompatible with facilitated gas markets’.
3.26In APGA’s view, there is an incompatibility which ‘stems from the anonymising nature of facilitated gas markets such as the Domestic Wholesale Gas Market (DWGM) and various Short Term Trading Markets (STTMs)’, with large daily volumes of gas delivery capacity facilitated through these markets. APGA stated that:
Stapling requirements for hydrogen energy transacted through these markets, downstream of the PGO delivery gate, will prevent PGO certified hydrogen from being traceable through these markets.
3.27Jemena similarly raised concerns that the operation of the east coast gas market was not considered by the bill’s approach, nor how gas operates in shared infrastructure. Jemena representatives elaborated on this point arguing that ‘because of the way gas markets work, we don't know who the producer is by the time it gets to the consumer, so the chain gets broken’. Further, Jemena stated that there is ‘no handshake’ as there is a pool of gas, and then a deal is done.
3.28Consistent with AGIG’s disagreement with the bill’s Explanatory Memorandum’s (EM) rationale for treating gas and electricity differently, Jemena asserted that gas molecules are not functionally different to electrons, and gave the example of biomethane which it sells to Origin. The biomethane at its Malabar production site is injected into the gas network, meaning that, ‘functionally’, Origin has purchased the right to claim the emissions reduction of that biomethane without receiving the physical molecules.
3.29APGA similarly stated that while the bill’s proposed differentiation between gas and electricity tracking ‘may be the case across the portion of the supply chain covered by the PGO, it is not the case for the portion of the supply chain downstream of the PGO delivery gate in the instance of gas infrastructure blending’.
3.30APGA recommended that stapling requirements cease at the delivery gate.
Departmental view
3.31DCCEEW responded to these concerns stating that the reason that PGO certificates are not tradable is that they are intended to operate as a record of origin and use of the product. DCCEEW officials stated the consultations between the department and domestic gas industry stakeholders had been useful, and they were aiming to balance the need for integrity with a workable system. DCCEEW was clear that ‘the intention is that the scheme does work for renewable gas injected into shared infrastructure’.
Calls to expand the PGO certificate stream
3.32A number of inquiry participants referred to the Australian Government’s intention to expand the PGO certificate stream to certify other products beyond hydrogen. Industry stakeholders considered that biomethane and low carbon liquid fuels (LCLF) should be prioritised.
Biomethane and low carbon liquid fuels
3.33The priority inclusion of biomethane to the PGO certificate stream was recommended by APGA on the grounds that it is ‘generally cheaper than green hydrogen today while still being more expensive than natural gas’. APGA also argued that biomethane could deliver the same level of gas decarbonisation for customers at a lower price than other decarbonisation alternatives.
3.34Jemena urged that biomethane be included in the PGO certificate stream from commencement in 2025, and argued that biomethane is ‘completely compatible’ with the existing gas network.
While Bioenergy Australia supported the overall GO scheme and welcomed plans to fast-track its implementation, it urged the expansion of the PGO stream to biomethane and LCLF. It noted the inclusion of LCLF in the Future Made in Australia (FMIA) National Interest Framework. According to Bioenergy Australia, these products are compatible with existing technology and have a rising demand from hard-to-abate sectors which have limited emissions-abatement alternatives:
These products offer vital decarbonisation, economic, and energy security benefits, and their inclusion in the [GO] scheme will significantly accelerate their growth and adoption within the domestic market.
3.35bp Australia stated that the bills provide a ‘good framework for these fungible energy vectors’, but that amendments were needed to accommodate blended and/or composition-dependent products including LCLFs and green metals. bp Australia drew attention to the importance of the definitions contained in the bill for the production and delivery gates. It noted that some products which may be included in the GO scheme in future may require emissions accounting beyond the delivery gate to ‘reflect differences in emissions associated with the use phase (e.g. combustion for liquid fuels)’.
3.36bp Australia argued that accommodating LCLFs in the future may require more flexibility in the consumption profile in order to reflect the specific nature of the supply chain and delivery to the end consumer.
Green metals
3.37The Australian Aluminium Council (AAC) was of the understanding that access to support through the FMIA policy for green metals would require GO certification. The AAC stated that this would essentially make the scheme mandatory, and noted that consultation on this element has not yet commenced.
3.38The AAC stated that its members already provide emissions data to the Australian Government through the National Greenhouse and Energy Reporting (NGER) scheme. It highlighted that many of its members sites are certified under the global Aluminium Stewardship Initiative. The AAC noted that while the voluntary nature of the GO scheme is positive, it does create some policy complexity. It stated however, that the aluminium industry already deals with complexity and that it had been engaging with DCCEEW to continue to work through this.
3.39The AAC drew attention to the contrast between green metals and renewable electricity and hydrogen, and noted that a PGO stream for green metals would not be able to use a ‘copy and paste’ approach. According to the AAC, any future expansion to green metals would require consideration of the interdependencies between REGOs and PGOs for aluminium and alumina. The AAC called for consultation from the earliest stages on any future expansion of the scheme to green metals.
3.40bp Australia stated that some products such as green metals and LCLFs are more likely to be integrated with the international supply chain. For example, they could use imported feedstocks. It argued that the GO scheme would need to take this into account.
3.41Fortescue stated that ‘Australia has a significant opportunity to move quickly to establish a green iron industry through processing our significant iron ore reserves onshore before shipping it to overseas steel customers’. Fortescue argued that Australia is well-positioned as a producer of ore and green hydrogen for markets in Southeast Asia, but was concerned that producers such as Africa and Brazil could outpace Australia.
3.42Fortescue called for the PGO certificate stream to be extended into downstream products, as this would ‘capture the value opportunity in green iron and build upon one of Australia’s strongest economic sectors [iron ore extraction]’.
Departmental view
3.43DCCEEW acknowledged that the PGO certificate stream would initially focus on hydrogen before being expanded to other products. It stated that the GO scheme would expand to certify other products, and provide a policy framework to support other green industries in future.
3.44DCCEEW officials stated that matters relating to the scheme’s expansion into LCLFs, green metals and biomethane would be consulted on in the first half of 2025.
Exclusion of certain materials
3.45WWF-Australia drew attention to the fact that the GO scheme does not expressly exclude products like hydrogen and ammonia produced from gas, instead saying only that fossil energy sources cannot be used. WWF-Australia recommended that PGO certificates should explicitly exclude fossil raw materials, and should exclude the use of carbon capture and storage to mitigate fossil raw material at PGO facilities.
3.46In addition, the ACF did not support the classification of woodwaste as a renewable energy source, and considered that the Australian Government:
…should not be incentivising or certifying the burning of wood, irrespective of its source, as renewable, given such a process releases carbon dioxide, methane and nitrous oxide and, in Australia, produces 50% more CO2-e emissions per MWh of energy compared to black coal.
3.47WWF-Australia echoed this view, and stated that neither biomass nor woodwaste (regardless of its source) should be classified as a renewable energy source under the GO scheme.
Renewable Energy Guarantee of Origin certificates
Below-baseline generation
3.48Some inquiry participants highlighted the bill’s proposed inclusion of below-baseline generation in the REGO certificate stream. Below-baseline generation is a foundational element of the Renewable Energy Target (RET), and refers to historic levels large-scale generation that was in existence prior to the commencement of the RET in 2001, and which therefore is not able to create Large-scale Generation Certificates (LGCs). According to the Clean Energy Regulator (CER), below-baseline generation is mainly hydro generation.
3.49The Australian Industry Group (the Ai Group) noted that the inclusion of below-baseline generation is ‘the most controversial issue’ in the REGO stream, and that it is ‘a fraught issue that goes to different views of the purpose of the renewable electricity element of the GO’ scheme.
3.50While below-baseline generators would be able to create REGO certificates, the bill would allow rules to set out constraints relating to their surrender. The rules may do this by restricting surrender of below-baseline certificates to new Emission Intensive Trade Exposed (EITE) entities. In its approach paper DCCEEW stated that it:
…considers restricting use of below-baseline REGO certificates to EITE activities and [PGO] creation initially is likely to minimise market distortions and risks of competing renewable certificate schemes becoming entrenched in the market but is open to feedback from stakeholders.
Support for the approach to below-baseline generation
3.51The bill’s provisions relating to below-baseline generation were supported by the CEC, which noted that it had recommended the restriction of the surrender of below-baseline certificates to ‘new’ markets during consultation with DCCEEW. The CEC was pleased to see this approach in the bill.
3.52The CEC stated that its members had raised concerns with DCCEEW over the commencement of the REGO scheme while the RET was still in operation, potentially leading to a crash in LGC prices as a possibly large number of below-baseline certificates could enter the market. The CEC saw the bill’s approach to limit REGO surrender as a way to safeguard against major price shocks to the LGC market.
3.53The CEIG also supported placing limits on participants who may surrender below-baseline certificates before 2030 and restricting their use.
3.54Iberdrola Australia put forward the view that the proposed approach to restrict below-baseline certificates to certain roles before 2030 was a ‘reasonable balance’. It cautioned against changing this before 2030 by including any proposed restrictions on below-baseline generation in the primary legislation rather than rules. Iberdrola further stated that ‘allowing production of renewable certificates from below-baseline hydro generation without a corresponding increase in demand risks creating a surplus of certificates that do not contribute to investment’.
3.55Iberdrola Australia stated that if a change were made to the GO scheme’s approach to below-baseline generation before 2030, for example, allowing any business to use below-baseline REGOs to classify itself as 100 per cent green, it could undermine investment in renewable energy as well as increasing costs under the Capacity Investment Scheme. Changes made by the former government to the Australian Carbon Credit Units (ACCU) framework in early 2022 were raised as an example of a perverse impact on a scheme, in which developers were able to break contracts resulting in a surplus of certificates and 38 per cent reduction in ACCU prices.
3.56Tilt Renewables also called for restrictions on below-baseline certificates to be included in the primary legislation, rather than rules, in order to ensure that these restrictions are protected. Tilt Renewables stated that it does not consider that below-baseline generation should be included in the REGO scheme. It was, however, reassured that rules would be introduced which would limit the surrender of below-baseline REGOs before 2031 ‘to Emission Intensive Trade Exposed (EITE) companies or for the purpose of producing products certified under the Guarantee of Origin scheme’.
3.57While the CEIG recognised the need to show the source of renewable electricity, it urged flexibility to be built into REGO legislation. The CEIG suggested that a more practical solution than the bill’s approach would be to use ‘a neutral REGO attribute, such as ‘year built,’ or directly reference the small number of below-baseline plants’. The CEIG was supportive of the bill’s approach to surrendering below-baseline generation certificates.
Opposing views to the approach to below-baseline generation
3.58The ACF raised concerns over the inclusion of below-baseline certificates in the REGO scheme. It argued that this could have adverse impacts by allowing renewable energy generators established prior to 1997 (when below-baseline thresholds were set) to access REGO certificates and make windfall gains.
3.59Further, the ACF argued that below-baseline certificates ‘may serve to crowd-out the REGO scheme and impact the viability of new renewable generation’. The ACF called for the bill to be amended to exclude below-baseline certificates from the REGO scheme, or alternatively, to include the status of the facility on a REGO certificate to allow buyers to make informed choices when purchasing REGO certificates.
Potential impact on Tasmanian pre-1997 facilities
3.60The Tasmanian Government noted that the RET focused on incentivising new generation under that scheme, and so existing facilities were only eligible to create LGCs for renewable electricity generated in excess of their 1997 baselines.
3.61The Tasmanian Government was supportive of the bills’ provisions that all renewable electricity generators would be able to certify their renewable electricity generation. However, it expressed disappointment that the GO scheme would maintain the below-baseline concept for REGO certificates with respect to pre-1997 facilities, and allow specific restrictions on how below-baseline REGOs could be surrendered.
3.62Hydro Tasmania also supported the GO scheme, but raised similar concerns regarding the effect of the bill’s provisions on Tasmanian pre-1997 facilities. Hydro Tasmania was concerned that the approach proposed in the bill ‘could result in perverse outcomes, particularly for many Tasmanian electricity users and should be addressed prior to passage of the enabling legislation’.
3.63Hydro Tasmania outlined its strong opposition to proposed restrictions on the surrender of REGO certificates created from below-baseline generation, and recommended that the bill be amended to remove any differentiation between below-RET baseline and above-RET baseline generation sources. Hydro Tasmania called the restrictions on below-baseline generation under the GO scheme ‘unnecessary and detrimental’, and gave the following example of how this may impact Tasmania:
In a typical year, Tasmania produces approximately as much renewable electricity as there is demand (Tasmania is a net 100% renewable energy state). About 80% of Hydro Tasmania’s average annual generation is ‘below-baseline’ (approximately 8 million MWh). This represents more than half of the total below-baseline generation in Australia.
3.64Hydro Tasmania representatives elaborated on this point arguing that baselines were necessary for the RET, which was ‘fundamentally a scheme around additionality and having a target to ensure or to generate investment in new renewables to meet a target’. Hydro Tasmania stated that the REGO scheme, however, would be for the certification and attribution of renewable electricity, and baselines would not be relevant under the new scheme.
3.65The Australian Energy Council (AEC) submitted that there did not need to be a distinction between pre- and post-1997 facilities:
…one of the things that strike us in terms of the below-baseline issue is that…to the extent it's a transparency mechanism, it doesn't make any logical sense to have a dividing line for pre-1997 renewable energy versus post-1997 renewable energy. I think it really boils down to what the objective is of the legislation.
3.66Similar concerns regarding below-baseline generation in NSW were not raised by submitters.
Departmental view
3.67DCCEEW officials explained that, during its consultation program, a variety of views regarding below-baseline certificates were put forward from industry. DCCEEW’s consultation found that ‘by and large, people were relatively accommodating of a transition approach’ from the RET to the GO scheme.
3.68Since issuing consultation papers in 2021, DCCEEW engaged with industry on this topic:
The sense that we got was that, when you look at the extremes, there was absolutely no use of below-baseline REGOs versus unrestricted use of below-baseline REGOs. It seemed, when we looked at the full range of positions, the potential impacts were on contracts that have already been signed for certificates—the desirability of avoiding a shock to the certificate market, the reality that, after 2030, if we don't do anything there are no certificates at all.
3.69According to the department, the approach taken by the bill was taken because it was ‘probably an approach that would satisfy both the need of industry, that wants access to low-cost renewable certification, while not adversely impacting a number of industries that have signed up under the existing RET framework on an assumption of a certain LGC price through to 2030’.
Inclusion of small-scale systems
3.70Inquiry participants put forward a variety of views on the proposed inclusion of small-scale generation in the REGO certificate stream. Iberdrola Australia, for instance, considered that ‘it is critical that the carbon value of small-scale systems is recognized, given the contribution of small-scale residential and commercial systems to decarbonisation’.
3.71AGL Energy noted the history of incentivising small-scale renewable electricity, such as rooftop solar PV systems, through feed-in tariffs and later the Small-scale Renewable Energy Scheme (SRES). AGL Energy explained that the upfront installation SRES rebates, which were passed on to consumers through their deemed small-scale technology certificates (STCs), led to a widespread deployment of rooftop solar PV systems in Australia.
3.72AGL Energy recommended that REGO certificates from small-scale generation should be able to be managed by other parties, as with the current SRES, in order to reduce the administrative burden on customers. AGL Energy elaborated:
The proposed approach to allow owners of smaller systems to assign their rights and responsibilities of REGO certificate creation to an intermediary or aggregator appears to be a sensible step to aid small-scale participation; however, care should be taken to ensure that the more complex architecture of REGO does not create an administrative burden on customers or CER providers.
3.73Further, AGL Energy urged consideration of how consumer energy resources such as household batteries and rooftop solar could integrate with the REGO certificate stream.
3.74The CEC supported the ‘principle that all recognised forms of renewable energy generation should be eligible to create renewable electricity certificates’, but flagged challenges and complexities associated with how the inclusion of small-scale systems would work in practice. The CEC stated that there may be benefits in maintaining differentiation between small and large-scale generation.
3.75The CEC raised the possibility that the change from the SRES to REGOs could see different market behaviours:
…we expect to see solar retailers and aggregators acting as intermediaries to purchase certificates from owners of small-to-medium sized systems. If this practice becomes commonplace across the sector, it could create a large new source of certificates, which could have the impact of suppressing prices. That said, given the relatively depressed price outlook for REGOs post 2030 anyway, the effects of large volumes of certificates entering the market from small-scale systems, may well be less consequential than in a market in which a mandatory renewable energy target is still in place.
3.76Iberdrola Australia suggested that there may be an issue ‘if consumers sell the REGOs from their systems equivalent to all generation (both consumed and exported), their consumption is no longer zero emissions’. Further, consumers ‘would be effectively buying energy at the residual emissions factor of the grid’. Also, Iberdrola Australia submitted that there may be a double counting of emissions reductions, and gave the following example:
As an extreme illustrative example: consider a hypothetical grid where half of consumption was served by rooftop solar (no net grid purchases), and the other half physically by coal generation but financially through buying and surrendering rooftop REGOs. All participants might consider themselves 100% green, and all grid purchases would be backed by certificates. In strict accounting terms, however, household consumers in this hypothetical grid would effectively be importing emissions from coal.
3.77Ultimately, Iberdrola Australia recommended that further analysis and consultation be undertaken before the incorporation of small-scale systems into the REGO certificate stream.
Departmental view
3.78In September 2023, DCCEEW’s policy approach paper stated that ‘most owners of small-scale systems would have already created STCs for deemed generation until 2030’ through the SRES. It was expected that future small-scale system owners would continue to use the SRES in preference to the REGO scheme.
3.79DCCEEW officials stated that there would be restrictions on the inclusion of small-scale systems, in that REGO certificates would not be issued if any of the small-scale components in an aggregated system receive support through the SRES. The reason for this was that the SRES deeming period should be finished before small-scale generators can start to apply for REGOs.
Timestamps
3.80The inclusion of timestamps on REGO certificates was highlighted by WWF-Australia as being the ideal practice in terms of accounting methods.
3.81The CEIG stated that timestamps on REGO certificates are ‘a useful attribute’ which would allow future consumers to have an opportunity to purchase certificates based on the time of the electricity’s generation. The CEIG noted, however, that timestamps should not be too granular by having the time intervals too short, for example, one minute.
3.82Timestamping of REGO certificates was raised as an issue by Iberdrola Australia. It stated that timestamping could potentially introduce ‘significant complexity’, and that it is unclear how significant the costs of implementing timestamping may be under the GO scheme. A second concern regarding timestamping was its potential impact on the fungibility of REGOs, by ‘inhibiting their trading and thereby substantially increasing compliance costs of businesses trying to demonstrate zero Scope 2 emissions’. Iberdrola Australia recommended that mandatory timestamping be delayed until after the retirement of the RET in 2030.
3.83AGL Energy was concerned that timestamping could lead to ‘price stratification and undermine tradability’. It noted that ‘while there are reasonable use cases for time stamping, these appear limited in the context of the overall market for renewable electricity, and the complexity and cost involved could be significant’.
3.84AGL Energy was of the view that mandatory timestamping does not need to be introduced immediately.
Other suggested amendments
3.85Inquiry participants made other suggestions to amend the bills, relating to:
the issuing of methodology determinations for the PGO certificate stream by legislative instrument;
cost recovery; and
engagement with First Nations peoples.
Methodology determination by legislative instrument
3.86As discussed in the previous chapter, the bill proposes that the minister must make a methodology determination by legislative instrument, which would determine one or more production pathways for a product included in the PGO certificate stream. Definitions related to the methodology determination are provided in the bill.
3.87Requirements, including providing formulas for metering, measuring, and calculating inputs, outputs, and losses relevant to producing a batch of product, would be included in a methodology determination.
3.88The ACF stated that the development of the methodology determination should conform with best practice principles, which would require participants in the scheme to measure and report all material sources of emissions which are associated with a production pathway. The ACF considered that the methodology determination would be the backbone of the PGO certificate stream, and should ensure ‘the robust and transparent reporting of a product’s embedded emissions’.
3.89Referring to the use of delegated legislation to contain detailed elements of the overall GO scheme, DCCEEW stated that the bill is intended to provide the overarching GO scheme architecture while allowing delegated legislation to provide further detail. DCCEEW’s position was that this was an appropriate pathway for the scheme:
Given the innovative and technical nature of the scheme, the Government will need flexibility provided through subordinate legislation to adapt the scheme to reflect addition of new products and production pathways, technological advancement, respond to market dynamics, rectify or clarify misinterpretations, align with international obligations, and to ensure integrity is maintained.
3.90DCCEEW officials outlined the process for delegated legislation, if the bills are passed, with the hydrogen methodology determination a priority:
We collectively intend to consult on draft rules and regulations early in 2025, subject to the passage of the bill. In terms of the product GO side of things, as we've heard today, we have been more advanced on thinking about hydrogen. That's likely to be our first draft methodology determination that we'll be looking forward to consulting publicly on, once again, likely early in 2025.
3.91Further consultation is set to take place on the methodology determinations relating to future products, such as LCLFs, green metals and biomethane. These discussions would take place some time in 2025.
Cost recovery on maturity or commencement
3.92The bills propose that cost recovery will begin on commencement of the scheme. DCCEEW explained that the scheme will be fully cost-recovered, with fees and levies included from commencement and phased in for nascent industries.
3.93Some inquiry participants were of the view that cost recovery should be delayed until the hydrogen industry has matured and become competitive with existing energy sources. The CEC noted that this had been the approach proposed in DCCEEW’s consultations. Fortescue similarly stated that it had supported the previous position of cost-recovery to be delayed until industry maturity on the grounds that the GO scheme is a voluntary framework and the products would need time for their economic value to be assessed and incorporated into the global market.
3.94DCCEEW stated that full cost recovery from commencement would ensure that the CER is appropriately resourced to administer the GO scheme.
3.95The Charges bill EM also stated that ‘charges may be phased in for scheme participants, such as in nascent industries’.
First Nations engagement
3.96The First Nations Clean Energy Network noted that First Nations participation is included in a range of legislative and policy settings, including the Future Made in Australia Bill 2024, National Reconstruction Fund Corporation Act 2023, Capacity Investment Scheme, and Hydrogen Headstart Guidelines.
3.97The Network had two key suggestions for incorporating First Nations outcomes in the design of the GO scheme:
in the fit and proper person test in the bill – the Network recommended that applicants should be required to provide information about their demonstrable ability to engage and partner with First Nations communities; and
certifying products against First Nations outcomes, and specifically, products consistent with the Articles of the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP), which enshrines the right to Free, Prior and Informed Consent (FPIC). The Network set out that verifying whether FPIC has been achieved should be an essential part of the GO scheme and be included on the GO Register.
3.98The Network considered that:
…it would be entirely appropriate for the GO scheme, and essential, to also ensure it incorporates First Nations outcomes in the attributes it tracks associated with low-emission products and the certification mechanism it establishes for renewable electricity.
Committee view
3.99The proposed Guarantee of Origin scheme (GO scheme) is a key component of the $22.7billion Future Made in Australia (FMIA) policy, which aims to attract and enable investment in renewable energy and leverage the economic and industrial benefits of the global move to net zero.
3.100The GO scheme will be critical to both the encouragement of investment and building an enduring competitive advantage for renewable electricity and low-emissions products. These were identified as priority sectors under the Future Made in Australia’s National Interest Framework.
3.101Participation in the proposed voluntary GO scheme will benefit industry participants by reducing trading barriers, as it aims to align with global standards and facilitate international trade. Product Guarantee of Origin (PGO) certificate stream participants will also be eligible for Australian Government incentive schemes including the Hydrogen Headstart program, and proposed Hydrogen Production Tax Incentive.
3.102PGO certificates are intended to operate a record of origin and use of a product—initially hydrogen although the scheme is set to expand to other products. Various submitters raised concerns that, unlike Renewable Electricity Guarantee of Origin (REGO) certificates, the bill proposes PGO certificates to be excluded from trading. The committee acknowledges these concerns, which primarily relate to similarities in traceability of renewable energy generated electrons and low emissions fuels. The committee also recognises the justifications for excluding PGO certificate tradability—that the proposed arrangements will increase the credibility of PGO certificates, build trust in emerging low emissions product markets, and minimise the risk of undermining consumer confidence. The committee considers that the bill’s provisions excluding PGO certificates from being traded is the correct approach.
3.103The REGO certificate stream will allow domestic and international markets to be confident in making claims of renewable electricity use, whether in the manufacture of low emissions products, or in day-to-day business operations. The REGO stream will operate alongside the Renewable Energy Target (RET) until it sunsets in December 2030, allowing a seamless transition between certification systems.
3.104The committee heard that the issue of below-baseline certificates is complex, with differing views on whether they should be included or excluded from the proposed GO scheme. The committee notes that the bill provides for rules to be created which could restrict the surrender of these certificates to new Emission Intensive Trade Exposed (EITE) entities. The Department of Climate Change, Energy, the Environment and Water (DCCEEW) told the committee that the approach proposed in the bill aims to satisfy the needs of industry while not adversely affecting the existing RET contract market. From the committee’s perspective this approach strikes a reasonable balance.
3.105The committee thanks industry stakeholders for their engagement in the DCCEEW’s comprehensive program of consultation over the last few years. Numerous industry stakeholders praised DCCEEW’s consultation program, with the Australian Aluminium Council stating that it could not be faulted.
3.106The committee notes that the strong majority of industry stakeholders who participated in the inquiry were keen to see the swift passage of the bills, and to participate in further consultation for delegated legislation. The committee is of the view that the bills’ use of delegated legislation will balance the need for flexibility in the prospective GO scheme’s design and operation, and ensuring the integrity of the scheme.
3.107The committee heard that DCCEEW has highlighted a further program for consultation on the prospective GO scheme. This will include discussions with industry stakeholders on the methodology determination for hydrogen and the proposed expansion of the scheme to include low carbon liquid fuels (LCLFs), green metals and biomethane. The committee supports further consultation with industry and the public on delegated legislation to support the proposed GO scheme, in order to continue working through the policy complexity of this area.
3.108Overall, the committee is of the view that the proposed GO scheme will assist in attracting the investment needed to make Australia a renewable energy superpower. The strong collaborative effort of DCCEEW and industry stakeholders, which is set to continue, has allowed the bills to provide flexibility to expand the scheme, while providing certainty to industry and investors.
3.109The committee recommends that the bills be passed.
Senator Karen Grogan
Chair