Following lengthy negotiations, the Federal Government and Labor opposition have finally reached an agreement on a revised Renewable Energy Target of 33,000 gigawatt hours by 2020. This revises the target down from the 41,000 gigawatt hours target legislated in 2009.
The Renewable Energy Target (RET) is a Commonwealth scheme designed to increase the proportion of electricity generated in Australia from renewable sources. Under the scheme, there is a legal obligation on entities that purchase wholesale electricity (mainly electricity retailers) to surrender a certain number of renewable energy certificates to the Clean Energy Regulator each year. Each certificate represents one megawatt-hour (MWh) of additional renewable energy for compliance purposes. Certificates are generated by accredited renewable energy power stations (eg, wind farms) and eligible small-scale renewable technology systems (eg, solar PV). The funds from the sale of certificates supports investment in renewable energy generation.
In 2009 the scheme was significantly expanded to support the goal of 20 per cent of Australia’s 2020 electricity generation coming from large-scale renewable energy generators. The following year, the 20 per cent target was converted into a gigawatt hours target of 41,000GWh based on forecast annual electricity demand in 2020 of 205,000GWh. However, due to falling demand for electricity, the figure had become no longer representative of the percentage target. As a result, there was bipartisan support to reduce the 41,000 gigawatt hours figure to reflect the new projected electricity consumption in 2020.
As part of the proposed arrangements, electricity users in emissions-intensive trade-exposed (EITE) industries have gained significant benefits. These are users that are unable to pass on costs associated with the RET due to international competition for their output. As expected, those industries currently classified as ‘highly emission intensive’ and entitled to a 90% exemption, for example aluminium smelting, will now have 100% exemption. Additionally, there will be exemptions to cover all EITE industries, including those formerly entitled to 60% exemption, (those defined as moderately emissions-intensive). These industries include glass manufacturing, newsprint/pulp and paper manufacturing, steel, cement, liquefied natural gas, polyethylene, zinc and alumina refining.
To assist the passage of legislation, the Government agreed to drop the two yearly review of progress towards the 2020 target, which the Opposition had argued created uncertainty in the industry. Instead, the Government and Opposition have agreed that the Clean Energy Regulator will provide annual statements to Parliament, which will include details of the progress towards the target and any impact on electricity prices.
One problem the Government may have in getting the amendments through Parliament is the proposal to reinstate native forest wood waste from sawmill residue, manufacturing operations or harvesting, (as long as they meet a number of integrity requirements as an eligible renewable energy source). RET Regulations had included native forest wood waste prior to amendments in 2011. It is expected that Labor will attempt to break the legislative amendments into parts so that it can vote against the change.