Guest Post by Tim Kelly. Tim is works as a Principal Climate Change Advisor in the Water Industry.
The Exposure draft of the Renewable Energy (Electricity) Amendment Bill (Bill) is proposed to fulfill the Rudd Government’s 20% renewable electricity commitment by 2020. The Bill increases Australia’s Mandatory renewable energy target above its pre 1997 baseline from 9500 GWh (gigwatt hours) in 2010 to 45,000 GWh by 2020. In very rough terms this would increase Australia’s use of renewables from around 10% to 20%.
So what would the Bill actually deliver?
• The Bill will deliver an increase in renewable energy required by law from 9500 GWh by 2010 under the old Act to 45, 000 GWh required by law in 2020 before being phased out by 2030.
• There is no guarantee in the Bill that 20% renewable energy would be achieved.
• Some voluntary renewable energy efforts remain somewhat tangled with mandatory requirements.
• The proposed multiplier for Renewable Energy Certificates (REC) created by small generation units could result in six counts of renewable energy for every deemed MWh of renewable energy created.
• A full and comprehensive definition of RECs describing each essential aspect that a REC does and does not include is not included in the Bill, despite ongoing ambiguity that encourages RECs to be treated as different things by different parties resulting in systemic double counting.
The Department of Climate Change has invited comments on the draft Bill by February 13, 2008.
Details and analysis of what the REA bill will and won’t deliver follow…
Details: Exposure Draft of the Renewable Energy (Electricity) Amendment Bill 2008 — What will it deliver?
A significant increase in Australia’s renewable energy
There is no doubt that the increase from 9500 GWh annually to 45,000 GWh is significant in comparison with the current MRET target that reaches its ceiling in 2010. This will provide stimulus for the renewable energy sector that has largely missed out in access to a competitive position under the CPRS because the price on carbon emissions remains in somewhat controlled via the grand fathering of permits and a price cap. In fact the Bill could be considered as essential for the future of the renewables sector as the cost of carbon emissions pollution will remain below the additional cost needed for renewables to compete in the short to medium term.
The Bill does not lock in 20% use of renewables
The Bill makes no mention of achieving 20% renewables which as per the Federal Government’s election commitment. Instead the Government is relying on an increase of MRET from 9500 GWh to 45,000 GWh to fulfill the commitment.
It is not possible for the Australian Government to predict total electricity demand in 2020 yet it is possible that the 45,000 GWh of MRET + 15000 GWh of old renewables may fall short of 20%. To be certain, the 20% requirement would need to be included in the Bill.
Voluntary renewables remain somewhat tangled with mandatory requirements.
Where the 15,000 GWh pre 1997 renewable baseline + 45,000 GWh MRET is equal to or greater than 20% then voluntary renewable energy purchases will be additional (OK). However, should 60,000 GWh be less than 20% it appears that voluntary renewable purchases could be used to meet the 20% target, displacing other renewable energy already required by law.
The Bill will maintain the impact of GreenPower as being additional to the 45000 GWh MRET (should it be reformed to survive NGERS and the CPRS constraints), however, tens of thousands of householders that install solar hot water heaters and small scale generation units are still not aware that when they sign across their Renewable Energy Certificates (RECs), that this merely results in displacing other renewable energy that is already required by law and is often counted towards MRET. These small scale generation units are still well and truly tangled.
The Bill does not include any reforms to require open-ness and transparency in all related programs to untangle all voluntary efforts from the mandatory requirement.
Multiplier for Renewable Energy Certificates created by small generation units
The Bill proposes a multiplier to achieve 5 Renewable Energy Certificates from every deemed MWh of renewable energy created from a small scale generation unit, albeit to be phased out after several years. As previously explained, most transactions result in a double count of the renewable energy being one count by the householder belief and another by the party that surrenders the REC. Should the Department of Climate Change apply a multiplication factor of five to a single deemed MWh creating five RECs, this would result in six counts of renewable energy from one deemed MWh of generation.
What would happen if we applied such an approach to our financial systems?
Renewables pathway to 2030
The draft bill proposes that renewable energy would increase initially at a slow rate, then at a faster rate to 2020 before being phased out from 2025 to 2030. The pathways are not shown in a visual manner in the Bill or in the accompanying Commentary Paper, but are shown in the following chart of mandatory requirements since 2001, and projected to 2030.
Still no clarity in the meaning of Renewable Energy Certificates (RECs)
With the creation of the NGERS legislation and the NGERS Determination (2008) the system in effect assigns all aspects of renewable energy (use of, reduced emissions, green-ness and renewable-ness) to the grid and no other method of calculating scope 2 emissions is permitted for any kind of electricity purchase other than using the state grid factor (ie, no difference between black, green, or gas electricity or any other potential color or type of electricity product).
With this being the case, GreenPower and the voluntary purchase and surrender of RECs does not mean reduced emissions for customers.
The Bill provides an opportunity for clarity through establishing the full and comprehensive definition of the Renewable Electricity Certificate describing each essential aspect that a REC does and does not include. The current ambiguity that encourages RECs to be treated as different things by different parties is therefore likely to continue.
Reference to reducing greenhouse gas emissions in Section 3
Whilst being somewhat trivial to note, the purpose of the Legislation is being updated from “to reduce emissions of greenhouse gasses” to “to reduce emissions of greenhouses gases in the electricity sector” A change is necessary because the implementation of the Carbon Pollution Reduction Scheme means that under most circumstances emissions can only be reduced by the Federal Government reducing the number of permits that it will issue. Increased renewable energy frees up permits to be used elsewhere so this will result in zero net reduction in Australia’s emissions. This is the nature of cap and trade.
Even from within the fuel burning electricity sector, if the growth in electricity production is significantly greater than 35,500 GWh (being the difference between the old and new MRET requirements), then there may be no absolute reduction for the sector and the proposed new objective may not be achieved.