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05 Feb 2009

Renewable Energy (Electricity) Amendment Bill 2008

by Dan Howard, Martin Aylward

The MRET scheme will increase to ensure that 20 percent of Australia's electricity is sourced from Renewable Energy by 2020

The Commonwealth Government's commitment to expand renewable energy to 20 percent of Australia's electricity supply is in the process of being implemented through the release of the Renewable Energy (Electricity) Amendment Bill 2008 exposure draft. The increase in the national target will coincide with the phase-out of a number of state-based schemes also designed to increase renewable energy capacity.

The Bill will amend the Mandatory Renewable Energy Target of 2001 (MRET) by significantly increasing the renewable energy target (RET), starting from the year 2010. The scheme aims to increase the new renewable energy supply from a target of 9,500 GWh to 45,000 GWh in 2020. The expanded scheme will now expire in 2030 rather than the previous date of 2020. The RET scheme sets annual interim targets that ramp up to 45,000 GWh in 2020, the initial ramp up is slower between 2009 and 2014 and then accelerates to 2020. From 2024 to 2030 the scheme targets reduce to 23,000 GWh when the scheme terminates.

Renewable energy target1

For Queensland electricity consumers there are now three potential schemes designed that on the electricity price: the Carbon Pollution Reduction Scheme (CPRS), Renewable Energy Target and the Queensland 18 percent Gas Scheme. The CPRS White Paper has stated that the Queensland Gas Scheme should be phased out with the introduction of Emissions Trading, however this has not yet been put into place through legislation.

Carbon Pollution Reduction Scheme

The increased targets are designed to be complementary to the CPRS goal of reducing carbon pollution. The administration of the scheme will come under the same regulator as the CPRS and the NGER requirements.

Trade Exposed Industries

The recent CPRS White Paper outlined a process for assistance to emissions intensive trade exposed industries (EITE). While the original MRET scheme provided for no assistance to such industries, there is a proposal to provide assistance to industries that will be materially impacted by the RET scheme. The level and form of assistance is the subject of a discussion paper currently under review. Assistance will only be provided for the impact of the increased targets and will not cover the original scheme targets.

Assistance will not automatically be provided to those industries that qualify for assistance under the CPRS. Only industries that are classed as "Renewable Energy Target Affected, Trade Exposed (RATE)" will qualify. RATE industries are likely to be high-intensity electricity consumers such as the aluminium and steel industries.

Timing

The draft bill and emissions intensive discussion paper are open for public comment until February 13. Passage of the bill is expected to take place by mid-2009 with a start date of the amended scheme on 1 January 2010. The first obligation to surrender Renewable Energy Certificates will not occur until early 2011.

Conclusion

The electricity sector is experiencing rapid change in a number of regulatory areas. It is important for participants to be up to date with the impacts of these changes. In particular any contracts that have covered obligations under the original MRET or Queensland Gas Scheme should be reviewed.

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Disclaimer

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.