19 December 2006
Key Points:
Under the new scheme, electricity retailers must purchase a set amount of renewable energy from anywhere on the national grid.
On 9 November 2006, New South Wales Premier Morris Iemma announced a new Renewable Energy targets ("NRET") aimed at reducing greenhouse gas emissions and boosting the renewable energy sector in NSW.
Targets
Currently, renewable energy makes up 6.1 percent of the total electricity consumed in NSW. NRET sets renewable energy target levels as a percentage of electricity consumed by state residents at 10 percent by 2010 and 15 percent of 2020. These targets will be met by imposing obligations on electricity retailers to purchase renewable energy from anywhere on the national grid (meaning that it can draw electricity from Queensland, ACT, Victoria, South Australia and Tasmania).
Other Schemes
NRET is designed to be consistent with both the Commonwealth Mandatory Renewable Energy Target of 2 percent total renewable energy by 2010 ("MRET") and the Victorian Renewable Energy Target ("VRET").
There is already a voluntary buy-in scheme currently operating in New South Wales (and other states) called GreenPower. GreenPower is a national voluntary scheme whereby electricity purchasers pay a premium for electricity from renewable sources. In 2005, GreenPower purchases in NSW were approximately 200 gigawatt hours. GreenPower cannot be used by retailers to meet their obligations under the MRET and VRET schemes.
As with the MRET and VRET schemes, in order to preserve the premium consumers pay for GreenPower, electricity consumed as part of the GreenPower scheme will not be permitted to be used by retailers to meet obligations under NRET.
The NSW Government has indicated that it would be happy for the VRET administrators to also administer NRET.
Penalties
Current holders of NSW electricity retail licences will be the "liable parties" under NRET. These retailers will be assigned individual targets based on their level of supply. Enforceable penalties for non-compliance are set to be established by NRET legislation, which at this stage has not been released. The indication from the NSW Government is that penalties will be set at a level that encourages compliance by being above the generation cost of the majority of renewable generation technologies.
The NSW Government has also indicated that trade exposed or energy intensive users will be exempt from meeting the costs of the scheme, although their electricity use will be included for the purposes of measuring compliance with the target.
Certificate Trading
As certificates will be created for new accredited renewable electricity generators and for all additional generation from existing renewable sources over and above baseline generation, any generation above the baseline target for an individual generator will generate tradable certificates. For example, a renewable source that is currently generating 50 gigawatt hours per annum which increases its output to 100 gigawatts hours per annum will be able to create certificates for the additional 50 gigawatt hours per annum it produces. However, in order to prevent doubling up of certification, energy certificates created under NRET will not be able to be created again under MRET or VRET.
Costs
The costs of administering the scheme is to be met by participants through a small fee, proposed to be imposed on each certificate surrendered (under the NSW Greenhouse Gas Abatement Scheme a fee of $0.15 per certificate is imposed on the registration of each certificate at the time of creation, payable before the certificate is released for transfer or surrender).
Timing
The Government is proposing to have NRET legislation in place by 2007 with the first target level to be met in 2008. These dates are also consistent with the calendar year targets of VRET. The scheme is to be reviewed in 2013, although the NSW Government has stated that in order to provide certainty, the target will not be able to be revised down and will only be able to be revised upwards if at all.
Impact
The NRET will assist growth in the renewable sector by creating certainty of investment over the short and medium term particularly as the NSW Government has committed to only increasing targets in the future. Similar targets set in the UK have led to a boom in investment in renewables over the last few years and it is likely that a similar trend will occur here.
