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Acquisitions and network exemption

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27 September 2017

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Under the Renewable Energy Target, relevant acquisitions refer to the purchase of electricity made by a company. Companies who are liable under the Renewable Energy Target must report all relevant acquisitions they make on an annual basis—through the submission of an energy acquisition statement or renewable energy shortfall statement. In some instances, liable entities may be exempt from reporting relevant acquisitions. If certain conditions are met, this could mean that an entire electricity network (grid) could be exempt from reporting.

There are two types of relevant acquisitions: wholesale acquisitions or notional wholesale acquisitions.

Wholesale acquisitions

Under section 32 of the Renewable Energy (Electricity) Act 2000, wholesale acquisitions include purchases of electricity:

  • from the Australian Energy Market Operator (AEMO)
  • from the Independent Market Operator (short term energy market)
  • from non-market registered generators (embedded generators, including domestic photovoltaic systems)
  • directly from generators (non-AEMO electricity networks), and
  • imported from registered market generators when the generator is not generating electricity.

Wholesale acquisitions do not apply as a relevant acquisition when the end user has acquired electricity directly from the person who generated it. In this case a notional wholesale acquisition would apply.

If a purchase of electricity has been identified as a wholesale acquisition, then no other types of acquisitions can apply.

Notional wholesale acquisitions

Under the Renewable Energy (Electricity) Act 2000 ,​ notional wholesale acquisitions are purchases of electricity made by the same legal entity where they:

  • generate and use the electricity outside of the relevant acquisition exemption rules, or
  • on-sell the electricity directly to an end customer.

Section 33 of the Act​ prescribes two situations where a notional wholesale acquisition of electricity takes place:

  • The end user of the electricity acquires the electricity from the person who generated the electricity, and the end user is not registered under the National Electricity Rules.
  • The end user of the electricity generated the electricity and neither of the following conditions apply:
    • the electricity is generated less than one kilometre from the location the electricity is used, or
    • the electricity is transmitted or distributed between the point of generation and the point of use, and the transmission or distribution line is used solely for the purpose of transmitting or distributing electricity between those two points.

In both cases, the person who generated the electricity acts as both the notional generator and the notional wholesaler. This means that the notional wholesaler acquired the electricity from the notional generator at the time that the end user acquired the electricity.

Calculating acquisitions in MWh

Under the Renewable Energy (Electricity) Regulations 2001 (the Regulations), liable entities typically calculate the amount of acquired electricity for all relevant acquisitions at the:

  • AEMO or IMO settlement point (typically the transmission network identifier), or
  • customer or generator meter (typically the network meter identifier).

Under regulation 21 of the Regulations, the amount of acquired electricity is calculated in one of several ways, if the electricity is:

  • acquired from AEMO or IMO, liable entities calculate the amount worked out on the basis of metering data used for AEMO or IMO settlement statements
  • acquired directly from the person who generated the electricity at the interface between the transmission and distribution system, liable entities calculate the amount. This is worked out by a method of calculation to be chosen by the Clean Energy Regulator after consultation with the liable entity using:
    • AEMO or IMO equivalent settlement data
    • if the person who generated the electricity and the liable entity are not in the same distribution network the customer purchase data adjusted to the node, or node equivalent, by using the applicable distribution loss factor, or
    • generation data adjusted to the node, or node equivalent, by using the applicable marginal loss factor or equivalent.
  • used outside the site of generation but in the same distribution network, liable entities calculate the amount. This is worked out by a method of calculation to be chosen by the Clean Energy Regulator after consultation with the liable entity using, depending on the applicable contractual arrangements:
    • the amount generated, as metered at the power station's grid connection point, or
    • the acquisition as metered at the customer's grid connection point, or
  • acquired at the site of the generation, liable entities calculate the amount of metered electricity at the point on which the contractual arrangement is based.
  • If (a) to (d) above does not apply, liable entities are required to use a method of calculation to be chosen by the Clean Energy Regulator after consultation with the liable entity using the amount of metered or calculated electricity:

    • provided at the interface between the transmission and distribution system, or
    • at the point at which ownership of the electricity changes, in accordance with contractual arrangements.

    Acquisition exemption rules

    Liable entities may be exempt when they are both the liable entity and legal entity, and:

    • use and generate their own electricity within one kilometre
    • transmit electricity directly from the point of generation to the point of use
    • operate within a electricity network that has a generation installed capacity less than 100 MW.

    Section 31(2) of the Renewable Energy (Electricity) Act 2000 prescribes that an acquisition is not a relevant acquisition if:

    • the electricity was delivered on a grid that has a capacity that is less than 100 MW and that is not, directly or indirectly, connected to a grid that has a capacity of 100 MW or more
    • the end user of the electricity generated the electricity and either of the following conditions are satisfied:
      • the point at which the electricity is generated is less than one kilometer from the point at which the electricity is used
      • the electricity is transmitted or distributed between the point of generation and the point of use and the line on which the electricity is transmitted or distributed is used solely for the transmission or distribution of electricity between those two points, or
    • the electricity is later acquired by AEMO or a person or body prescribed by the regulations.

    Network (grid) exemption and reporting rules

    For some networks (grids) relevant acquisitions do not apply. This includes if:

    • the electricity was delivered on a grid that has a capacity of less than 100 MW, and
    • the grid is not connected (either directly or indirectly) to a grid that has a capacity of 100 MW or more.

    For more information refer section 31(2)(a) and section 31(3) Renewable Energy (Electricity) Act 2000 .

    Under the Renewable Energy (Electricity) Regulations 2001 , regulation 22 defines the capacity of a grid as the sum of all installed electricity generation capacity, excluding:

    • standby plants, and
    • privately owned domestic generators.

    A person who owns, operates or controls a grid must also provide the Clean Energy Regulator a statement within 28 days of the following changes:

    • the capacity of the grid increases from less than 100 MW to 100 MW or more, or
    • the grid becomes connected (either directly or indirectly) to a grid that has a capacity of 100 MW or more.

    Behind the meter photovoltaic systems and Renewable Energy Target liability

    Evolving renewables market

    New business models for photovoltaic (PV) systems ownership are growing. These models, which including lease arrangements, were not envisaged when the Renewable Energy Target was established. The new business models require careful assessment to determine how liability is to be determined under the Renewable Energy Target. This guidance outlines the Clean Energy Regulator’s approach to the issue, both in terms of how liability is to be reported in the short term and how longer term options may be pursued.

    Traditional model​

    In traditional model small-scale photovoltaic systems, an owner of solar panels generates electricity, some of which is used directly by the owner and the remainder is exported to the grid. Their electricity retailer then has liability under the Renewable Energy Target for the portion exported to the grid, as they make a ‘wholesale acquisition’ of electricity under the Renewable Energy (Electricity) Act 2000. The owner of the solar panels does not have a Renewable Energy Target liability for their self-consumption behind the meter.

    New business models

    New business models generally involve a home or business owner leasing solar panels from a company under a contract. The terms of those contracts may have an impact on the point of liability and who has a Renewable Energy Target liability. In some circumstances, contractual arrangements could result in both behind the meter consumption and the amount fed into the grid being liable. However, there does not appear to be consistency across the market in relation to how these matters (including potential RET liability) are explained to home and business owners. Similarly, there does not appear to be a uniform approach to the contractual terms. Therefore, there is not a ‘one-size-fits-all’ outcome.

    Interim approach

    As these contracts are a matter between the parties, the Clean Energy Regulator’s position is that it is the responsibility of the entities who offer these contracts to home and business owners, and the retailers who acquire relevant electricity, to carefully consider the point of liability, properly inform home and business owners, and report acquisitions appropriately.

    Default position

    The default position is that electricity retailers should continue to report all liable electricity acquired consistent with the traditional model outlined above in their energy acquisition statements; including any excess exported into the grid from behind the meter solar PV systems of their household and business customers.

    Should the retailer be aware of contractual arrangements that it believes does not make it liable for the export to the grid, and not wish to report and acquit those acquisitions, then it must provide full details of each specific case to the Clean Energy Regulator in order to justify why it has not reported those acquisitions.

    The Clean Energy Regulator will review this guidance and the underlying position if it becomes aware of information that substantially affects the operation of the scheme or December 2018, whichever occurs first.

    Longer term approach

    New business models are continuing to grow, including peer-to-peer trading and the use of blockchain for settlement.

    The agency is continuing discussions with the Department of the Environment and Energy regarding potential legislative amendments to clarify liability under the Renewable Energy Target for new and emerging business models.​

    Renewable Energy Target liability for battery storage systems​

    ​Interim guidance

    The installation of battery storage systems is increasing across Australia and market participants need to be aware of their Renewable Energy Target responsibilities, including whether or not they may become liable entities. This guidance clarifies liability under the Renewable Energy Target for battery storage systems that import electricity from the transmission or distribution networks, or directly from the generator, and later export electricity back to the grid. 

    There are two principles in the Renewable Energy (Electricity) Act 2000 that are relevant when considering Renewable Energy Target liability for battery storage systems:

    • Liability applies to electricity acquired from a network operator or directly acquired from a generator.
    • Liability for electricity should not be double counted. 

    The Clean Energy Regulator takes the following interim position regarding liability for battery storage systems:

    • If a battery storage system is connected to a transmission network managed by the Australian Energy Market Operator (AEMO) or the Independent Market Operator (IMO), Renewable Energy Target liability applies only to auxiliaries and other electricity used in the operation of the storage system. Liability does not apply to the amount of electricity that is later acquired by AEMO or IMO. In general, this means that the owner of the battery storage system is liable for the amount of electricity imported from the network, less the amount of electricity exported back to the network.
    • Where a battery is installed on a remote network, where the network capacity is 100 MW or more, the battery owner is liable for the entire amount of electricity acquired to charge the battery, because the electricity ​will not later be acquired by AEMO or IMO.
    • If a battery storage system with a capacity of 5 MW or more is connected to a distribution network, the owner of the battery storage system is liable for any electricity that is not later acquired by AEMO or IMO.
    • If a battery storage system with a capacity of less than 5 MW is connected to a distribution network, the owner of the battery storage system is not liable under the Renewable Energy Target for any electricity imported from the network. In these cases, the electricity has already been acquired by an electricity retailer and the electricity retailer is liable for those acquisitions.

    Battery storage system owners must ensure that appropriate metering exists and records are maintained. This guidance can also be used for most other energy storage technologies including pumped hydro energy storage. For further information, please contact us​. ​

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