Legal and regulatoryaspectsof renewable energyin regional Australia
Intro to the NEM• The National Electricity Market (NEM) is the wholesale electricity market and physical networkconnecting the eastern states• Key institutions:• Australian Energy Market Operator (AEMO) operates financial market• Australian Energy Regulator (AER) is responsible for regulating the physical network• Australian Energy Market Commission (AEMC) makes rules regarding the NEM and is responsible for reform• Council of Australian Governments’ (COAG) Standing Council on Energy and Resources (SCER) is responsiblefor strategic direction• The NEM is currently undergoing a wave of reforms, brought on primarily by rapidly rising retailprices for electricity, caused by an unprecedented level of investment in network infrastructure,i.e. the poles and wires• Decentralised generation has an important role in dampening the peaks in demand thatnecessitate this investment• Greenhouse gas (GHG) emissions from the NEM constitute approximately 31% of Australia’s GHGemissions
Current reforms• a wide ranging overhaul of the incentives and mechanisms for encouragingdemand-side participation, including:• the creation of a mechanism for allowing demand-side resources to be sold in the wholesalemarket• decoupling energy throughput and infrastructure expenditure from revenue• gradual phase in of efficient and flexible retail pricing options• installation of smart meters and the creation of a framework to provide for competition inmetering• the AER’s Better Regulation program, aiming to deliver an improved regulatoryframework focused on consumers• changes to the way network businesses are regulated• increased consumer participation, largely through creation of new national body• a National Energy Savings Initiative, a market-based tool for driving economy-wide improvements in energy efficiency.
National Electricity ObjectiveThe objective of this Law is to promote efficient investment in, and efficient operation and useof, electricity services for the long term interests of consumers of electricity with respect to—(a) price, quality, safety, reliability and security of supply of electricity; and(b) the reliability, safety and security of the national electricity system.• The lack of an environmental facet to the driving objective of the NEM has been a considerablebarrier to renewable energy• Entrenches the status quo of fossil-fuelled generation.• RecommendationLocal government and planning authorities will not be able to change the NEO, and the NEMmay present some barriers to renewable energy deployment. Such bodies must be cognisant ofother authorities in favour of renewable energy deployment, and ensure that they assistrenewable energy proponents to overcome this institutionalised hurdle.
Deployment models• Large-scale, centralised generation using renewable energy resources• Mid-scale generation• Precinct energy systems• Community Renewable Energy (CRE) projects• Small-scale decentralised generation• Remote and off-grid electrification
Planning law• Planning plays a key role in supporting renewables• Onerous planning regulations can present a considerable barrier:• Regulatory and policy uncertainty• Administrative hurdles• Delays in approvals• Complex multi-tiered regulation• These barriers are present at all scales and in different ways• Streamlining the planning process at all levels is essential for renewable energy projects.RecommendationLocal government and planning authorities can take a more pragmatic and activeapproach to land use planning, by avoiding unnecessary administrative steps andimplementing a clear objective for increasing renewable energy deployments.
Large-scale, centralised generation• Large-scale renewables (LSR) could bring significant benefits to regional areas, whereenergy generated could be used locally, and/or transmitted to larger population centres• Main barrier is cost of augmentation of, and connection to, the transmission network• No national standard for grid connection• AEMC considered rule change that would provide a mechanism to allow for collaborationand cost-sharing between generators wishing to build LSR in regional areas, but it didn’teventuate• Under current rules, any party can request that AEMO undertake a study into thefeasibility of transmission augmentation in a particular area• Such a study could encourage commercial negotiation between generators to jointlyconstruct new transmission infrastructure.Recommendationa local authority seeking to encourage investment in LSR in a regional area should request thatAEMO undertake a study to investigate options for the sharing of transmission augmentation costsamongst interested generators.
Medium-scale distributed generators(<30MW)Registration• Registration process designed for large generators and is complex and time consuming• No statutory timeframe for connection, and registration involves significant registration and participant fees• Automatic right to connect exists for certain larger generators (>5 MW), and micro-generators (<10kW) also have an automatic right ofconnection• Other small to medium generators will only be guaranteed an automatic right to connection if a network business chooses to provide forthis• These issues are currently the subject of a rule change proposal, discussed later in relation to precinct generation.Connection aggregation• AEMC recently approved rule change to provide for Small Generation Aggregators (SGA) in the NEM• Companies can register as SGAs under the new rule, allowing them to supply electricity to the network by aggregating small generationunits (<30MW)• SGAs can shield small generators from transaction costs and provide a wider range of possibilities in terms of return on investment• Has the potential to engage distributed generation at times of peak demand, which in turn could lower network costs• RDAs, with their local knowledge, are well positioned to provide some generic guidelines on this.RecommendationLocal authorities can work together with SGAs and their communities to establish whether there is scope for anarea to benefit from aggregated connection
Precinct energy systems• Generation units located in city buildings that generate sufficient electricity to meet that building’s energy needs/export excess to thenetwork• Has primarily been gas-fired co- and tri-generation plants, but there is also scope for the development of systems using renewables• E.g. Sydney CBD project could save up to $1.5 billion that has been set aside for new coal power plants and upgrades to the network• Regulatory barriers are common to decentralised generation generally and a rule change process is currently underway which also hasramifications for community renewables and small-scale generation• National Electricity Rules deter generators from connecting to the electricity grid with its complex, poorly defined, and costly regulatoryprocesses for connection and export.• Rule change proposal, which proposes the following:• Automatic right of connection and standard access terms applicable to generators that meet ‘Automatic Access Standards’• Improved connection process for embedded generators not eligible for automatic access• Right to export electricity generated to the grid• Changes would bring the regulatory framework for generation of between 10kW-30MW into line with the streamlined connectionarrangements for microgeneration (<10kW)• If implemented, would greatly improve the regulatory framework and provide a more level playing field for decentralised generation.RecommendationRDA committees and local authorities should participate in the AEMC’s rule change process, ‘Connection of EmbeddedGenerators’, in order to ensure that the regional perspective is heard.Local authorities with significant population centres could consider the suitability of a precinct generation scheme.
Community Renewable Energy (CRE)projects• Members of the local community invest in a small-scale generation project• Increasingly popular as a model for renewable energy generation• Thousands of CRE cooperative organisations and projects around the world, with 70 in the early stages of development inAustralia.• There is currently only one project in operation in Australia: Hepburn wind in Victoria• Numerous technical, regulatory, cultural and legal barriers:• Uncertain timelines for connection enquiry and application• Lack of clarity regarding the information required to achieve connection• Onerous technical requirements imposed on CRE generators as a condition of connection.• Costs and terms of connection.• Precinct generation rule change theoretically encompasses CRE projects• In other jurisdictions, CRE projects have received much stronger support. For example, the Scottish Governments Community andRenewable Energy Scheme, designed to support CRE projects with funding and project management assistance, has assisted in thecommissioning of over 300 CRE projects.RecommendationAs above, the ‘Connection of Embedded Generators’ rule change should be supported. Regional authoritiesor state governments could institute a scheme to assist local communities to navigate the regulatoryprocess for CRE projects.
Options for retailing energy from distributedgeneration• Lack of clarity of the options for small-scale generators to retail theenergy they generate• Range of possible options, including:• establishing a retailer under the existing Rules• selling electricity under a feed-in tariff• subcontracting logistics (billing etc.) to a big retailer• establishing a Power Purchase Agreement with a retailer• setting up a virtual net metering (VNM)• establishing a new tier of small retailers• None of these approaches seems ideal at present, with significantissues with each option.
Small-scale decentralised generationConnection• Small-scale decentralised generation, i.e. rooftop solar, does not face the same barriers as larger generation because of theestablishment of a separate and simpler connection negotiation framework for retail customers in the RulesFeed-in tariffs (FiTs)• Embedded generator is paid a premium for energy exported to the network• Have been successful and cost-effective worldwide, but have been plagued by inconsistent policymaking: there is no federal FiT• Currently little political drive to improve FiT policymaking• Contrasts markedly to Germany, and other countries, where the FiT started high, but was ramped down in a predictable mannerover time as uptake increasedRemote/off-grid• Fringe-of-grid locations are not considered a priority for network business due to the small customer base• There is often resistance to supporting embedded generation in these areas• Renewable energy can be used as a substitute to further investment in these networks, or as a supplement existing supply• E.g. the Northern Territory Government aims to replace diesel generators in remote off-grid areas with renewablesRecommendationLocal government can partner with networks and industry to support for theintegration of renewables in rural electrification.