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Chair's review

​​​​David Parker AM, Chair, Clean Energy Regulator

The past year, 2017-18, has seen several important transitions in the markets we support and consequently in the role of the Clean Energy Regulator, with innovation driving change on many levels.

The Clean Energy Regulator is not only a regulator – we are involved in the administration of government programs. For example, these programs include entering into contracts under the Emissions Reduction Fund to purchase carbon abatement and these activities often have co-benefits for the environment or regional and indigenous communities. Similarly, we support market transactions by running high volume, public facing and secure IT based regimes that record and track ownership of market instruments. We also collect a substantial volume of data from the private sector that is used to inform policy and regulatory decisions at both the Commonwealth and State levels and underpins publication of emissions and energy statistics.

Investment boom in renewable energy market

The electricity system is rapidly transforming with greater renewables penetration and emerging storage options, which raises both challenges and opportunities. The record level of renewable energy investment this year means Australia is on track to achieve and surpass the 2020 Large-scale Renewable Energy Target – there is no longer a debate on whether the target is achievable. We accredited almost three times as many large-scale renewable energy power stations in 2017–18 than the year before. We expect the large-scale generation certificate spot price will continue to moderate as new projects come online. Small-scale renewables are also surging with more than three million small-scale rooftop solar systems now installed in homes and businesses around the country.

This investment boom has begun to drive down average electricity prices in the wholesale market but it is also posing challenges for the operation of the electricity system. The Clean Energy Regulator has been involved in policy discussions about the integration of renewables into the electricity system and has taken a number of steps to help smooth and manage that transition including: changing the regulatory posture on the application of Renewable Energy Target liability to storage in a way that improves the economics of storage; delivered geographic information on installations to the Australian Energy Market Operator that can assist in forecasting demand and supply; collecting additional information about battery storage systems included in the installation of small-scale generation units. Improving the use of data analytics to validate and make best use of reported greenhouse and energy data (see National Greenhouse and Energy Reporting scheme​); and tracking and publishing information about the build of renewable energy power stations to inform government and market participants.

Carbon abatement market maturing

We have also observed changes in the carbon abatement market. Our emphasis has changed from running large Emissions Reduction Fund auctions to build a sizable portfolio of Emissions Reductions Fund projects, to running a series of smaller auctions to maintain and improve the quality of the portfolio. This shift has been made in the context that 2020 emissions targets will be met and is intended to promote the development of the private markets. In particular, smaller auctions promote supply of Australian carbon credit units—beyond that absorbed by the auction—that can help meet an emerging private demand for Australian carbon credit units. As the contract market matures, the focus is more on delivery of contract obligations. Pleasingly, close to 100 per cent of scheduled abatement, some 32.8 million tonnes, has been delivered to date.

Collaboration and innovation

These transitions require us to be just as innovative as those in the sector. Increasingly, there are opportunities to use big data and artificial intelligence to underpin sound regulatory decisions and reduce costs for clients. For example, we use data matching with the Australian Energy Market Operator to confirm installation of solar panels and cross-check information provided by renewable energy power stations in order to provide assurance on the renewable energy certificates we validate. We use data analytics to identify anomalies and assure reported greenhouse and energy data. We collaborated with the solar industry on a new app based regulatory scheme that validates solar panel installations to reduce the potential for fraud and help households get what they paid for.

We have also been innovating in cooperation and development of geospatial capability with other government agencies and this significantly adds to our capability to assure land based carbon abatement projects.

Collaboration and co-design are central to many of these successful initiatives. Another example is our close work with stakeholders this year to develop guidance on native title matters for Emissions Reduction Fund projects. Around one-third of total contracted abatement under this scheme is on determined or claimed native title land. This requires a clear understanding of the rights of native title groups and how the different legislation for carbon farming and native title at both Commonwealth and State levels interact. It is very positive to see industry paying attention to social licence and we anticipate the new guidance will also help promote a culture of early engagement more broadly across the carbon farming industry.

We work in partnership with industry and collaborate with those on both the supply and demand side of the market. We understand the importance of engaging, educating and supporting our clients to meet their obligations under the schemes we administer. But, we also take compliance seriously and do and will take action on non-compliance matters.

We take our own accountability and transparency seriously too. We have been paying attention to lessons from the financial sector Royal Commission and recognise the vital importance of trust and clear accountability. As such, we will continue to examine our own governance, accountabilities and role clarity.

As an agency that is involved in regulatory and government programs we need to be very practical, commercially orientated, innovative and agile. Behavioural intelligence is a key cultural element of being a good regulator. We also have to provide technologically advanced solutions that ensure smooth administration of varied schemes while also enabling dynamic commercial markets to operate in an ever changing sector. This is all only possible due to the hard work of the agency’s dedicated staff and valuable direction provided by my colleagues on the Regulator Board.

Importance of underpinning infrastructure

We will continue to redesign and refine our business processes to adapt to changes, making us a better, smarter and focussed agency able to add value in our client interactions. This includes modernising market support systems to allow the emergence of deep and liquid markets into the future. We have done an extensive amount of planning to overhaul our business systems, in line with the government’s digital transformation agenda, to better meet the needs of our clients and our agency into the future.

Looking ahead

Reflecting on the past 12 months, the energy debate has shifted from how much renewable energy is coming through to how to manage the transition of the electricity system. Our existing regulatory frameworks will need to adapt to this fundamental shift. As these changes continue, we are well-placed with the necessary expertise and systems ready to support initiatives for Australia’s energy future and the Government’s objectives for emissions abatement.

David Parker AM
Chair, Clean Energy Regulator

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