Submission by Alternative Technology Association And Moreland Energy Foundation On The Renewable Energy Target Scheme Exposure Draft Legislation 13 th February 2009 By Email to: RET@climatechange.gov.au For further information or enquiries contact: Damien Moyse Energy Advocate ATA Alternative Technology Association (03) 9631 5417 E-mail: Damien.Moyse@ata.org.au Brad Shone Manager Energy Strategy Moreland Energy Foundation (03) 9385 8516 E-mail: brad@mefl.com.au
ATA / MEFL Submission to Exposure Draft Legislation for the Renewable Energy Target Scheme Introduction ATA and MEFL welcome the opportunity to provide comment on the Exposure Draft Legislation for the Renewable Energy Target (RET) Scheme. We welcome the expansion of the Renewable Energy Target to 20% by 2020 and urge the Department and Government to consider the concerns expressed in this submission to ensure this target is met. ATA is a not-for-profit organisation established in 1980 to empower our community to develop and share sustainable solutions for the way we live and to promote the uptake of sustainable technologies in order to protect our environment. The organisation provides service to over 5,000 members, who are actively promoting sustainability in their own homes by using good building design and implementing water conservation and renewable energy technologies. As Australia s peak member-based organisation representing early-adopters of renewable energy systems, ATA is in a unique position to highlight the needs and concerns of small-scale renewable energy system owners and their interaction with the retail energy market. MEFL is an innovative not-for-profit organisation established by the City of Moreland in 2001 to reduce greenhouse emissions. MEFL works within and beyond the Moreland community to implement a range of energy efficiency and greenhouse gas (GHG) abatement programs, including behaviour change programs, research and demonstration projects and advice and information services. MEFL also delivers a suite of training and capacity building services for local government, the building and consultancy industries, sustainability practitioners and tradespersons, and has delivered various tailored training programs for clients including the EPA Victoria, ICLEI, Toyota and others. Based on our expertise in this field MEFL has been engaged to deliver a range of consultancy projects for all levels of government. MEFL is currently developing a number of large-scale demonstration, engagement and enterprise projects as part of the Moreland Solar City initiative, a partnership with the City of Moreland, Victorian Government and Commonwealth Government under the federal Solar Cities project. Solar Credits Scheme ATA and MEFL are highly concerned by the new Solar Credits Scheme and in particular, the Solar Multiplier. This new aspect of the RET Scheme was not highlighted as a proposal in the Design Options for the Expanded National Renewable Energy Target Scheme, which ATA responded to in July 2008. Failure to flag this as a possibility in the Options Paper has not allowed an opportunity for input into this aspect of the scheme. ATA and MEFL strongly believe that the Solar Multiplier is a design flaw in the draft RET legislation and will have a negative outcome with respect to the uptake of solar PV in Australia and the Renewable Energy Target overall. In its current form, the RET draft legislation will mean that anyone installing a small generation unit (SGU as defined by the Office of the Renewable Energy Regulator) between 1 July 2009 and 30 June 2012 will be reducing the amount of additional renewable energy produced in Australia by up to four times the 15 year energy production of their system 1. Between mid 1 Whilst it is acknowledged that this circumstance exists for systems up to 1.5 kw in size, for systems over 1.5kW between mid 2009 and mid-2012 there will be a reduction in the installed capacity of renewable energy by 6.0kW (four times the first 1.5kW), a reduction by 4.5kW for systems larger than 1.5kW installed
ATA / MEFL Submission to Exposure Draft Legislation for the Renewable Energy Target Scheme 2012 and mid 2013, this negative impact will equate to three times the production of their SGU, scaling down annually until mid 2015. Ultimately, we believe the legislation as it is proposed will actually drive down investment in small-scale renewable energy, as outlined below. SGUs in the RECs Market The contribution of small scale renewable energy to the RECs market is not insignificant. In 2008, 4.6% of the total number of RECs registered in the REC registry were generated from either solar or wind SGUs. 23 Had the Solar Multiplier been in existence in 2008, the share of RECs generated from SGUs could have accounted for more than 19% of the total REC pool, resulting in 15.5% of all RECs created (i.e. up to 1.48 million RECs out of a total of 9.5 million) not representing actual renewable generation. This is acknowledged in the Exposure Draft of the Renewable Energy (Electricity) Amendment Bill 2008 (the Bill) which states: (4) For the purposes of this Act, a certificate created in accordance with the regulations as mentioned in subsection (2) has a value of 1 MWh (even though the certificate does not actually represent 1 MWh). 4 A 15% shortfall in RECs making up the Renewable Energy Target is significant; effectively turning what would be a 20% renewable energy target into a 17% target. Further, there has been a significant increase in the uptake in solar PV in the last 18 months. This is demonstrated by the uptake of the federal solar rebate, the Solar Homes and Communities Plan, as follows 5 : between mid-2012 and mid-2013, by 3.0kW for systems larger than 1.5kW installed between mid-2013 and mid-2014, and by 1.5kW for systems larger than 1.5kW installed between mid-2014 and mid 2015. 2 Figures obtained via a search of the Register of Renewable Energy Certificates [Online at: https://www.recregistry.gov.au/getsearchpublicrecholdings.shtml] 3 The ORER defines a solar SGU as any system up to 100 kw in size whilst a wind SGU is defined as up to 10 kw in size. However, given the substantial investment in small scale solar PV in 2008 driven by the $8,000 means tested federal rebate, it is reasonable to assume that a significant proportion of the SGU RECs created in 2008 would have been from small scale solar PV systems. 4 Page 4, Renewable Energy (Electricity) Amendment Bill 2008, Exposure Draft, 5 DEWHA (2009) Solar Homes and Communities Plan Program Statistics [Accessed Online on 13/2/09 at http://www.environment.gov.au/settlements/renewable/pv/index.html]
ATA / MEFL Submission to Exposure Draft Legislation for the Renewable Energy Target Scheme This trend is reflected in the quantity of RECs claimed from SGUs over the last 8 years. In 2001 there was under 1000 RECs created by SGUs, increasing to 2,500 in 2002, up to 12,500 in 2005 6 and as many as 368,000 in 2008 7. This exponential growth is reflected in the following graph depicting the number of RECs created from SGUs as a percentage of the total RECs generated in that year 8 : As growth appears to be strong in this sector, it is not unreasonable to suggest that, whilst a solar multiplier in place in 2008 would have resulted in a 15% shortfall between actual MWh of renewable energy generated and the national Renewable Energy Target for that year, this number could be even greater in coming years. Indeed, if this trend were to continue, it would be possible to envisage a situation where multiplier RECs not representing actual generation comprise up to 50% of the Renewable Energy Target. Combined with the 20% of RECs that currently represent solar hot water installation (as opposed to true renewable electricity generation), ATA and MEFL have grave concerns that the Solar Multiplier has the potential to significantly distort the annual totals of renewable electricity generation achieved under the RET and to divert financial support away from large scale renewable electricity generation and undermine public confidence in the Target. Motivations of PV Owners There can be little doubt that the main motivation of most people installing small-scale renewable energy generators is to increase the quantity of renewable energy installed in Australia for the environmental benefits that it brings. A 2007 survey by the ATA of over 1300 individuals motivations for installing solar PV SGUs found that 78% cited the desire to have a positive impact on the environment 9. 6 ORER Review of the Renewable Energy Market October 2007, Table 3-1: Historic REC creation by renewable generation type 7 ORER (2009) Register of Renewable Energy Certificates [Accessed online on 10/02/09 at: https://www.recregistry.gov.au/getsearchpublicrecholdings.shtml] 8 Data for this graph is compiled from both the ORER document Review of the Renewable Energy Market and the online Register of Renewable Energy Certificates, as cited in footnote 6 and 7, with the value for 2007 being estimated. 9 ATA (2007) The Solar Experience - PV System Owners Survey [Available online at: http://www.ata.org.au/projects-and-advocacy/solar-system-owners-survey]
ATA / MEFL Submission to Exposure Draft Legislation for the Renewable Energy Target Scheme The Solar Multiplier, as outlined above, will completely negate this positive impact, and indeed will actually reduce the amount of renewable installed in Australia, as outlined above. This has the potential to build significant cynicism across the community with respect to small scale renewable energy technologies and the Government s commitment to the renewable energy industry. Other preliminary research conducted with ATA members has also demonstrated that solar PV owners understanding of the RECs system is growing. Indeed, 58% of ATA members surveyed 10 who had previously installed solar PV and did not sell their RECs specifically chose not to sell their RECs in order to retain the environmental benefit of their system so that their clean energy is additional to the former Mandatory Renewable Energy Target (MRET). [A compilation of the data gathered from this survey is contained in Attachment A to this submission.] Further, 88% of people who were considering installing solar PV systems in the next 12 months stated that they would seriously consider voluntarily surrendering their RECs for the same reason. Whilst under the proposed Solar Credits Scheme these investors may choose to sell their RECs in order to re-coup the only financial benefit that will remain available, they will be presented with an impossible choice given that in doing so, they will be decreasing the amount of renewable energy installed across the system Scaling down from 2012-2015 ATA and MEFL understand that at least part of the intent behind the scaling down of the Solar Multiplier from mid-2012 to mid-2015 is in response to anticipated industry progression and installed cost reduction, particularly in light of the likely increasing cost of traditional forms of electricity generation from a carbon price. However we remain sceptical that significant economies of scale and hence cost reductions will be achieved in such a short period of time; particularly with the potential for a degree of downturn in SGU investment in response to the removal of the Solar Homes and Communities Plan rebate coupled with the increasing awareness of the impact of claiming RECs for the installation of solar PV. This will be further exacerbated by the effect of the Solar Multiplier on actually reducing Australia s installed renewable energy capacity. Effect on investment in small-scale renewable energy When considering the motivation of individuals installing small-scale solar PV and other SGUs is primarily to obtain the environmental benefit of additional renewable energy in the electricity mix, the effect of the solar multiplier in actually reducing the net installed capacity of renewable energy in Australia will almost definitely have the perverse incentive of actually driving down investment in SGUs. As a result, ATA and MEFL urge a reconsideration of this policy in the strongest possible terms. Broader Policy Framework Such a substantial change to the policy framework for small scale renewable energy, particularly the scaling down from mid 2012 of the Solar Multiplier, and the existence of a host of state-based feed-in tariff schemes, provide a very confusing picture of the policy landscape for small scale renewable energy across the country. 10 ATA (2008) RECs Questionnaire. Unpublished, ATA Melbourne
ATA / MEFL Submission to Exposure Draft Legislation for the Renewable Energy Target Scheme This policy landscape is getting more and more complex for the increasing number of householders, small businesses and communities wishing to invest in small scale renewable electricity generation. Should Australia wish to continue to develop its small scale renewable energy industry and have it play a role in the reform of the national electricity market and in response to climate change goals, we strongly believe that a simplification of the policy framework for small scale renewable energy is required. It is on this basis that ATA and MEFL have for some time been advocating for one, nationally consistent feed-in tariff to drive small scale renewable energy across the country. [See: Attachment B Feed-In Tariff Design] Fixing the RET Going forward, ATA and MEFL strongly believe that the Solar Credits Scheme in its current form has significant potential to negatively influence the market for small scale renewable energy in Australia and to build cynicism within the community in regards to the Government s commitment to small scale renewable energy and climate change abatement. Indeed, the commentaries on both the Exposure Draft of the Bill and the Renewable Energy (Electricity) Amendment Regulations 2008 (the Regulations) both incorrectly state that one REC represents one megawatt hour (MWh) of electricity generated from eligible renewable energy sources and that the expanded scheme will deliver the Government s commitment that the equivalent of at least 20 per cent of Australia s electricity supply is generated from renewable sources by 2020. 11,12 This is then contradicted by the acknowledgement in the Bill that a certificate created in accordance with the regulations as mentioned in subsection (2) has a value of 1 MWh (even though the certificate does not actually represent 1 MWh). 13 As an interim step, the Federal Government must redress the Exposure Draft legislation by ensuring that additional annual REC targets are required of electricity retailers and large electricity consumers to avoid the loss of additional renewable electricity generation to what will essentially be phantom RECs. Whilst this will address the problem of a renewable energy shortfall under the RET, it does not however address the fundamental problem of the proposed RET preventing small scale renewable energy investors from achieving additionality in the renewable energy market. This can only be achieved by the maintenance of a Solar Homes & Communities Plan-style rebate (exclusive from the eligibility for RECs) as a transitionary measure to a longer term policy mechanism to drive small scale renewable energy. Ultimately, to ensure continued incentive for individuals to install renewable energy and community support for Government policies on renewable energy, it is essential that the government provide a long-term incentive for small scale renewable energy which doesn t dilute the national target and ensures that individual action in this area actually leads to an increase in renewable energy installed in Australia. 11 Page 1, Renewable Energy (Electricity) Amendment Bill 2008, Exposure Draft Commentary. 12 Page 1, Renewable Energy (Electricity) Amendment Regulations 2008, Exposure Draft Commentary. 13 Page 4, Renewable Energy (Electricity) Amendment Bill 2008, Exposure Draft,
ATA / MEFL Submission to Exposure Draft Legislation for the Renewable Energy Target Scheme We believe that the adoption of a national gross feed-in tariff for small scale renewable offers an internationally recognised, effective incentive to achieve this aim, and urge the Government to work actively with the states and territories to achieve this outcome. Failure to address the above concerns with the Bill in relation to SGUs will undermine the Government s Renewable Energy Target, lead to deep scepticism within a community actively engaged and increasingly willing to undertake individual action to address climate change. We believe the reputational risks from a failure to address the concerns of this policy are great. Further Contact Feel free to contact either Damien Moyse (ATA) or Brad Shone (MEFL) should you have any questions regarding the content of this submission. Damien is available directly on (03) 9631 5417 or via email at: damien@ata.org.au, and Brad Shone on (03) 9385 8516 or via email at brad@mefl.com.au. Yours sincerely, Damien Moyse Energy Advocate Brad Shone Manager Energy Strategy
ATA / MEFL Submission to Exposure Draft Legislation for the Renewable Energy Target Scheme Attachment A ATA Members GreenPower Survey
ATA Member GreenPower Survey promoting technology for living sustainably for over 25 years
GreenPower Motivation Survey Q1 ATA Members RECs Survey
GreenPower Motivation Survey Q2a ~Those who answered Yes to Question 1 (Currently purchasing GreenPower) ATA Members RECs Survey
GreenPower Motivation Survey Q3a ~Those who answered Yes to Question 1 (Currently purchasing GreenPower) ATA Members RECs Survey
GreenPower Motivation Survey Q4a ~Those who answered Yes to Question 1 (Currently purchasing GreenPower) ATA Members RECs Survey
GreenPower Motivation Survey Q2b ~Those who answered No to Question 1 (NOT currently purchasing GreenPower) ATA Members RECs Survey
GreenPower Motivation Survey Q3b ~Those who answered No to Question 1 (NOT currently purchasing GreenPower) ATA Members RECs Survey
GreenPower Motivation Survey Q4b ~Those who answered No to Question 1 (NOT currently purchasing GreenPower) ATA Members RECs Survey
GreenPower Motivation Survey Q5b ~Those who answered No to Question 1 (NOT currently purchasing GreenPower) ATA Members RECs Survey
ATA / MEFL Submission to Exposure Draft Legislation for the Renewable Energy Target Scheme Attachment B Feed-In Tariff Design Feed-in tariffs are the most widely recognised and successful international examples of incentives to address the financial barriers faced by renewable energy. At present, feed-in regulations for renewable energy exist in over 40 countries, states or provinces internationally. In probably the most noted international example, feed-in tariffs in Germany have been responsible for driving substantial growth in the German solar PV industry. ATA and MEFL have participated strongly in numerous policy investigations and debates relating to feed-in tariffs across the country. Indeed recently, ATA was a key contributor to the Federal Senate s Inquiry into the Renewable Energy (Electricity) Amendment (Feed-in-Tariff) Bill 2008. In response to this Inquiry, ATA argued strongly that for a feed-in tariff to be effective, it is essential that the tariff offered is designed in a way as to adequately reward small scale renewable energy proponents. ATA believes that in order to provide an incentive for people to install grid-connected SGUs, there are four key elements of a feed-in mechanism which need to be considered: the level of the tariff; the means of metering; the duration of the scheme; and the funding model for the scheme. ATA strongly believe that an effective national scheme would involve a feed-in tariff mandated at a minimum of 60 cents per kwh; paid on the entire output of a PV system (via gross production metering); and would be offered for at least 15 years. Only a feed-in tariff set at or above these levels would adequately reward the adoption of small scale renewable energy for its range of environmental, social and economic benefits and encourage the uptake at sufficient levels. ATA also strongly support the protection of low income consumers in any funding model associated with a national feed-in tariff scheme. Low income households spend proportionally more of their income on their electricity needs and will be subject to proportionally greater costs associated with future electricity price increases. As a feed-in tariff is funded by a costspread across all electricity consumers, ATA therefore supports the exclusion of low income households from contributing to any national feed-in tariff scheme. ATA believe that a funding model on this basis can still achieve a substantial increase in small scale renewable energy deployment at low cost to contributing consumers. Indeed, modelling done for the South Australian feed-in tariff scheme demonstrated that 150 MW of small scale solar PV could be installed over 15 years at a cost ranging from $0.28 to $56 per contributing household per year. ATA would be happy to work through this modelling with Department of Climate Change officers and urges that this type of detailed analysis be conducted at a national scale.