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Major National Energy Policies

Energy White Paper

The Energy White Paper 2012, Australia's Energy Transformation, details the Australian Government's policy framework and strategic priorities for the energy sector in coming years.  Key elements include:

  • Provision of secure, accessible, reliable and competitively priced electricity for Australian consumers;
  • Enhancing the development of Australia's energy resources; and
  • Accelerating Australia's clean energy transformation.

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Clean Energy Futures

On 10 July 2011 the Australian Government released its climate change plan "Securing a Clean Energy Future", which commits Australia to a five per cent reduction in greenhouse gas emissions below 2000 levels by 2020 and an 80 per cent reduction below 2000 levels by 2050.

Major elements of the plan relating to the energy sector commenced on 1 July 2012 and include the introduction of a carbon pricing mechanism, encouraging innovation in clean energy through the establishment of a Clean Energy Finance Corporation and an Australian Renewable Energy Agency, and improving energy efficiency.  The plan also included a Contracts for Closure program involving negotiating the closure of approximately 2 000 MW of highly polluting generating capacity by 2020.  However the Australian Government ceased negotiations under this program on 5 September 2012.

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Clean Energy Regulator

The Clean Energy Regulator (CER) is an independent statutory authority established in April 2012 whose responsibilities include administering the Carbon Pricing Mechanism, the National Greenhouse and Energy Reporting Scheme, the Carbon Farming Initiative and the Renewable Energy Target (RET) scheme.  The RET was previously administered by the Office of the Renewable Energy Regulator, which was amalgamated into the CER on 2 April 2012.

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Carbon Pricing Mechanism

The Carbon Pricing Mechanism commenced on 1 July 2012 and applies to Australia's largest polluters (with annual emissions greater than 25 000 tonnes of carbon dioxide equivalent). It covers approximately 60 per cent of Australia's carbon emissions and includes the electricity generation and stationary energy sectors. Transport sector emissions from households, on-road business use of light vehicles and the agriculture, forestry and fishery industries are not included.

There is a two staged process to the implementation of the carbon pricing mechanism:

  • Stage 1 is a fixed price period commencing at $23 per tonne in 2012-13 where liable entities purchase units up to their level of emissions.  Units cannot be traded or banked; and 
  • Stage 2 is a flexible price period which will commence from 1 July 2015 with the price set by the market.  Most units will be auctioned by the CER with the number of units issued limited by a pollution cap.

Liable entities must acquire and surrender carbon units equivalent to the carbon emissions they produce, or alternatively pay a shortfall charge.  Emission reduction targets can be met through progressive reductions in the pollution cap.

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Clean Energy Finance Corporation

The objective of the Clean Energy Finance Corporation (CEFC) is to overcome capital market barriers hindering the financing, commercialisation and deployment of renewable energy, low emissions (excluding carbon capture and storage) and energy efficiency technologies.

The CEFC will be commercially orientated and will act by facilitating, rather than competing with, private sector investment in clean energy projects.

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Australian Renewable Energy Agency

The objective of the Australian Renewable Energy Agency (ARENA) is to improve the competitiveness of renewable energy technologies and increase the supply of renewable energy in Australia. This will be achieved by providing financial assistance for research and development, demonstration, deployment and commercialisation of renewable energy and enabling technologies and through knowledge dissemination.

ARENA has responsibility for renewable energy support programs previously provided through the Australian Centre for Renewable Energy, the Department of Resources, Energy and Tourism (RET), and the Australian Solar Institute. For example, Hydro Tasmania's King Island Renewable Energy Integration Project (KIREIP), which received $15.28 million in funding through RET's Renewable Energy Demonstration Program, is now being administered by ARENA.

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Renewable Energy Target

The Renewable Energy Target was first legislated in 2000 by the Australian Government as a mechanism to generate an additional 9 500 GWh of renewable electricity by 2010. The scheme works by placing a legal obligation on wholesale purchasers of electricity to surrender renewable energy certificates, which are created by renewable energy generators and are tradeable through the REC market.  Each certificate represents 1 MWh of renewable electricity.

In 2009 the target was increased to 45 000 GWh of additional renewable electricity generation by 2020 (representing at least 20 per cent of total electricity generation).  In 2010 the RET was split into the Large-scale Renewable Energy target (LRET) and the Small-scale Renewable Energy Scheme (SRES). This was in response to a higher than expected uptake of solar hot water and solar PV small scale systems from 2008 to 2010 which resulted in a flooding of the REC market, depressed REC prices, and stalled investment in large scale projects.  The LRET scheme has a set target of 41 000 GWh, while the SRES scheme is uncapped with liability tracking certificate creation.  Regulation of the LRET and SRES was transferred from the Office of the Renewable Energy Regulator to the CER on 2 April 2012.

The figure below shows the number of RECs generated in Tasmania by technology type per year and the percentage contribution of Tasmanian renewable energy generation to the national annual REC targets.  Tasmania contributes a high percentage of required RECs, which is reflective of the dominance of large scale renewable energy generation in the State.  Hydro generation has been the largest contributor (particularly in the early years of the scheme) although the number of RECs generated varies depending on rainfall.  It should be noted that RECs can only be created from pre-existing renewable generators (such as virtually all of Tasmania's hydro power stations) for output above a baseline which is representative of pre-existing average generation levels.  The baseline for Hydro Tasmania's pre-existing hydro power stations was calculated based on the average output of each power station from 1995, 1996 and 1997.

RECs generated from wind increased with the commissioning of the Woolnorth wind farm, and will increase further with the planned commissioning of Musselroe wind farm in 2013.

RECs generated in Tasmania and contribution to national target

RECs generated in Tasmania and contribution to national target
Source: Clean Energy Regulator, REC Registry, December 2012

Notes:

  • Data for 2011 and 2012 is incomplete as RECs generated in a particular year do not need to be created in the REC Registry until the end of the following calendar year.
  • For 2011 and 2012, RECs are technically Large-scale Generation Certificates (LGCs) under the LRET scheme and Small-scale Generation Certificates (STCs) under the SRES scheme.
  • Percentage figure represents the Tasmanian contribution to the national annual REC target.

RECs for small scale technologies such as solar hot water and solar PV are -deemed- for up to 15 years. In addition, from 2009 solar PV systems were eligible for Solar Credits which multiplied the number of RECs solar PV systems received. A combination of these factors, in addition to rapidly falling PV prices and generous feed-in-tariffs that were available until recently in many states and territories, resulted in a dramatic increase in the number of solar PV installations and associated RECs.

This trend has continued under the SRES scheme, although the numbers of Small-scale Technology Certificates (STCs - equivalent of RECs) are predicted to decline from 2013 onwards with the winding back of feed-in-tariff incentives. Tasmania experienced a similar increase in PV installations to other States and Territories, but to a lesser extent due to less generous feed-in-tariffs and a lower solar resource.

The Climate Change Authority was established by the Australian Government on 1 July 2012 as an independent advisory body on climate change. The Authority delivered a report on a review of the RET scheme in December 2012. Significant recommendations made by the Authority include maintaining the current fixed LRET target rising to 41 000 GWh per annum for the period 2020 to 2030, and maintaining a separate SRES scheme with measures to contain SRES costs such as a lower small-scale PV system size threshold for inclusion in the SRES and a phased reduction in deeming.

The Australian Government is required to respond to the Authority's recommendations within six months.

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