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Acquisitions and network exemption

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14 September 2018

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Under the Renewable Energy Target, there are two types of relevant acquisitions: wholesale acquisitions and notional wholesale acquisitions. Entities who are liable under the Renewable Energy Target must report all relevant acquisitions they make on an annual basis. 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.

Wholesale acquisitions

The vast majority of relevant acquisitions are wholesale acquisitions, which generally relates to electricity acquired by retailers from the grid or directly from generators to then sell to their customers.

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

  • from the Australian Energy Market Operator (AEMO) or AEMO WA, or
  • directly from generators, including non-market registered generators, embedded generators and photovoltaic systems.

If a purchase of electricity has been identified as a wholesale acquisition, then no other acquisition in relation to that electricity will be a relevant acquisition (regardless of when the other acquisition occurs). That is, there can be no 'double counting' of acquisitions in relation to the same electricity​.

Notional wholesale acquisitions

A minority of acquisitions are identified as notional wholesale acquisitions. These generally occur in situations such as a mine site, where a generator sells electricity directly to the mine for their operations.

Under section 33 of the Act, there are 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 related acquisition exemption rules apply.

In both cases, the person who generated the electricity acts as both the notional generator and the notional wholesaler, so the generator is the liable entity for the purposes of reporting these acquisitions​.

Calculating acquisitions in MWh

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

  • AEMO or AEMO WA settlement point (typically the transmission network identifier or Muja reference node), or
  • customer or generator meter (typically the network meter identifier).

In most cases, liable entities calculate the amount worked out on the basis of metering data used for AEMO or AEMO WA settlement statements, where the electricity is acquired from AEMO or AEMO WA.

In other circumstances, the amount of acquired electricity is calculated in one of several ways, if the electricity is:

​a. acq​uired from AEMO or AEMO WA, liable entities calculate the amount worked out on the basis of metering data used for AEMO or AEMO WA settlement statements.

b. 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 agency after consultation with the liable entity using:

    • AEMO or AEMO WA 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.

​c. 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 agency 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.
      ​​

​​d. 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 do not apply, liable entities are required to use a method of calculation to be chosen by the agency 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

Acquisitions of electricity may be exempt for liability purposes (that is, it is not a 'relevant acquisition') if the:

  • electricity is later acquired by AEMO or a person or body prescribed by the regulations, or
  • end user of the electricity is the entity who also generated the electricity, and either the:
    • distance between electricity generation and use is less than 1 km, or
    • electricity transmission line is used solely for the transmission of electricity between the point of generation and point of use.

In addition, entities that conduct emissions-intensive trade-exposed activities may be eligible to apply for exemption in relation to their relevant acquisitions. Activities eligible for exemption include, but are not limited to, production of glass containers and bulk flat glass, integrated production of lead and zinc, manufacture of newsprint and carton board and petroleum refining. In these circumstances, exemption certificates are used by liable entities to calculate their reduced acquisitions​.

Network (grid) exemption and reporting rules

Some electricity networks (grids) are exempt from liability. Under section 31(2)(a) and section 31(3) the Act, this includes if the:

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

Under the Regulations, 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 provide the agency a statement within 28 days of the following changes:

  • 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 include lease arrangements, were not envisaged when the Renewable Energy Target was established. The new business models require careful assessment to determine how liabi​lity is to be determined under the Renewable Energy Target. This guidance outlines the agency'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 PV 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 Act. 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 agency'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 agency in order to justify why it has not reported those acquisitions.

The agency 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 ​Ac​​t ​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 agency takes the following interim position regarding liability for battery storage systems.

  • If a battery storage system is connected to a transmission network managed by 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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