CHANGES TO THE MANDATORY RENEWABLE ENERGY (MRET) SCHEME
The government released draft legislation in December 2008 that proposes a number of changes to the MRET scheme, most significantly changing the renewable energy target from its current level of 2% by 2010 to 20% by 2020.
20% renewable energy by 2020
In line with the Rudd Government’s election commitment the new Renewable Energy Target (RET) will be increased to 20% by 2020 (a total 45 000 GWh of electricity in 2020). It is proposed that the targets will then stabilise at this level and decline afterwards based on the assumption that the carbon price signal takes over the role of facilitating new renewable energy.
RENEWABLE ENERGY TARGETS 2009 – 2020
Consolidation of the various state targets into a single national scheme
The RET scheme is being designed in cooperation with the States and Territories through the Council of Australian Governments (COAG) and brings the existing MRET and existing state-based targets into a single national scheme. The Victorian Government has however stated that it will only transition on the basis that the expanded RET will ensure that the level of support provided is at least equal to that provided to Victoria under its own renewable target scheme.
The requirements for complying with new RET remains unchanged from the MRET, with the legal liability to purchase renewable energy electricity applying to large wholesale purchasers of electricity, typically retailers.
Renewable energy sources
The eligible sources of renewable energy generation remain unchanged from MRET.
Incentives for small-scale rooftop solar, wind and micro hydro
New incentives have been created in the form of REC (Renewable Energy Certificate) multipliers for rooftop solar, wind and micro hydro. The intention is to improve the economics of these energy sources by increasing the renewable energy revenue stream in the first few years.
For every MWh of energy produced, these sources will qualify for multiple RECs. These incentives are not restricted to households although much of the Government’s information about these incentives is targeted at households.
Impact on the renewable energy industry
It became apparent to the renewable energy industry last year that there were sufficient renewable energy projects in development to meet the 2010 targets. As a result, a number of projects have been on hold and only a small number of new wind farms have been initiated, largely to meet voluntary renewable energy commitments such as desalination plants.
The discussion during 2008 of the expanded REC targets created a substantial amount of activity with the expectation of increased market demand once the new targets are endorsed and implemented. In 2009 we expect to see a substantial increase in wind farm projects and substantial work on other renewable energy sources as a result of the new targets.
REC prices are also likely to remain high in the near future.
Impact on business and industry
The new targets will come at a cost - there will be an increase in electricity prices for business users, as renewable energy sources cost more than conventional generation.
The price increases will come on top of the expected significant price increase due to the introduction of carbon pricing under the Carbon Pollution Reduction Scheme (CPRS).
Buyers of green power in particular will find that REC prices and therefore Green Power prices are likely to remain high in the near future. The exposure legislation has been generally well received by business and environmental organisations such as the Clean Energy Council.
Opportunities for business and industry
For clients who are interested in pursuing renewable energy projects, Energetics can assist with information and advice on how the changes to the legislation will enhance or affect your renewable energy project.
The draft legislation is open for consultation - provide comments by 13 February 2009.