Coal-fired generation assistance

The Clean Energy Regulator provides assistance in the form of free carbon units to eligible coal-fired electricity generators through the Energy Security Fund.

This assistance aims to help affected coal-fired electricity generators adjust to the carbon price and move to cleaner technologies, while maintaining energy security in Australia.

The free carbon units are issued to eligible generators who:

  • were issued with a certificate of eligibility in 2012
  • pass an annual power system reliability test during each year that assistance is available, and
  • lodge a Clean Energy Investment Plan each year that assistance is available.

Transitional assistance for coal-fired electricity generators

The government established the Energy Security Fund to provide transitional assistance to highly emissions-intensive, coal-fired electricity generators as Australia moves toward a low-carbon economy. Only coal-fired generators with an emissions intensity greater than 1.0 that supplied electricity to a main grid during the period 1 July 2008 to 30 June 2010 are eligible for assistance.

The Energy Security Fund initially offered three types of assistance:

  • the issue of 41.705 million free carbon units to eligible generators by the Clean Energy Regulator each year from 2013–14 to 2016–17
  • $1 billion of cash payments distributed to eligible generators in June 2012 by the former Department of Climate Change and Energy Efficiency, and
  • financial support to close very highly emissions-intensive power stations under the Contract for Closure program, a measure that was discontinued on 5 September 2012.

Eligible generators

The application period for a certificate of eligibility for coal-fired electricity generation assistance closed on 2 May 2012. A rigorous review process found nine applicants were eligible to receive assistance. The Clean Energy Regulator issued certificates of eligibility for these eligible generation complexes on 6 June 2012.

These certificates remain valid for the duration of assistance and successful applicants are not required to reapply. However, in order to receive their entitlement to free carbon units while assistance is available, they do need to pass an annual power system reliability test and also submit a Clean Energy Investment Plan to the Minister for Industry by 15 August each year.

How units are divided between eligible generators

A total of 41.705 million free carbon units are available each year. Free carbon units are divided between the eligible generation complexes according to the annual assistance factor shown on the certificate of eligibility issued for each complex.

The formula for determining the annual assistance factor is based on historical energy and emissions intensity for the generation complex. For details about how the annual assistance factor is calculated, see the frequently asked questions.

The annual assistance factor for each generation complex is set out in the table below.

Click on the name of the generation complex to view its certificate of eligibility.

Generation complex Annual assistance factor Annual unit entitlement
Alcoa Anglesea Power Station 588.499 621 500
Augusta Power Stations 2 349.029 2 480 700
Collinsville Power Station 344.363 363 700
Energy Brix Australia Corporation Pty Ltd (EBAC) 1 094.773 1 156 100
Hazelwood Power Station 10 500.271 11 088 800
Loy Yang A Power Station 9 482.543 10 014 100
Loy Yang B Power Station 4 616.718 4 875 500
Redbank Power Station 346.198 365 600
Yallourn W Power Station 10 168.989 10 739 000

Conditions of receiving carbon units

In addition to holding a certificate of eligibility, eligible generators must meet certain conditions each year before free carbon units are issued to them. This involves passing an annual power system reliability test and submitting an annual plan identifying the complex's proposed investment in clean energy.

The power system reliability test

The power system reliability test ensures that the reliability of Australia’s electricity network will not be compromised by an eligible generator making unexpected reductions in generation capacity.

The power system reliability test is applied to each eligible generator by the Clean Energy Regulator in consultation with the Australian Energy Market Operator. The test examines the period up to 1 April of the previous financial year. It checks the registration of the eligible generator and whether a decrease in the nameplate rating has occurred. In the event that an eligible generator reduces or ceases generation with their existing generation equipment, they remain eligible to receive their free carbon unit entitlement if they have been issued with an anticipatory certificate or if they invest in cleaner replacement capacity.

The Clean Energy Regulator performs the power system reliability test and may request further information from the eligible generator in order to complete the test. The Clean Energy Regulator will notify the eligible generator once the result has been determined.

For the specifics of the test criteria see Part 8, Division 4 of the Clean Energy Act 2011.

If an eligible generator wants to reduce their nameplate rating or cease registration as a generator, they can apply for anticipatory certification through the Australian Energy Market Operator (AEMO). AEMO will determine whether the relevant power reliability standard would be breached within a two year period and make a decision to issue the certificate on the basis of their finding.

The Clean Energy Investment Plan

Free carbon units will only be issued if the generation complex provides a Clean Energy Investment Plan. This plan must be submitted to the Department of Industry by 15 August of each year that assistance is available

The Clean Energy Investment Plan sets out any plans made by the eligible generator over the next financial year for:

  • investment in new electrical generation capacity
  • investment in the reduction of the emissions intensity of the generation complex, and
  • investment in research and development of clean energy technology.

The Clean Energy Investment Plan should also include a copy or link to any publicly available energy efficiency reports that have been prepared under section 22 of the Energy Efficiency Opportunities Act 2006.

All Clean Energy Investment Plans received will be made public on the Department of Industry website.

Contact the Department of Industry at ceip@industry.gov.au for guidance on the submission of a Clean Energy Investment Plan.

Key dates for eligible coal-fired generation complexes

From 1 April The Clean Energy Regulator applies the annual power system reliability test to eligible generators.
15 August End date to submit a Clean Energy Investment Plan to the Department of Industry.
15 August – 30 August The Clean Energy Regulator finalises arrangements for the issuance of free carbon units.
From 1 September Free carbon units are issued to compliant eligible generation complexes.

Issue of units

Free carbon units will be issued to the person liable for the emissions from the operation of the eligible generation complex.

The Clean Energy Act sets out the circumstances in which a person will be a liable entity. A person is defined as being any of the following:

  • body corporate
  • trust
  • corporation sole
  • body politic
  • local governing body, and
  • individual.

A person may be a liable entity under one or more of the provisions of the Clean Energy Act. The liable entity is responsible for the emissions created from the operation of the generation complex, either wholly or partly, during the previous financial year.

The recipient of the units must also hold an active ANREU account.

Free carbon units can be surrendered to the Clean Energy Regulator to meet a carbon price liability, sold back to the Clean Energy Regulator using the buy-back option or traded in the secondary carbon market.

Information about units issued

The Clean Energy Regulator must publish information about the issue of free carbon units. The name of the person receiving the units, the total number of carbon units issued to them and the vintage year of the carbon units will be published.

A quarterly report of the total number of carbon units issued for eligible coal-fired generation complexes will also be published.

More information

Questions about coal-fired generation assistance should be directed to industryassistanceschemes@cleanenergyregulator.gov.au.

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