DRAFT EXPLANATORY STATEMENT

Select Legislative Instrument 2017 No.

Issued by the Authority of the Minister for the Environment and Energy

Renewable Energy (Electricity) Act 2000

Renewable Energy (Electricity) Amendment (Exemptions and Other Measures) Regulations 2017

Introduction

The Renewable Energy (Electricity) Act 2000 (the Act) establishes the Renewable Energy Target (RET) scheme. The RET scheme creates a market for renewable energy to deliver around 23.5 per cent of electricity from renewable sources by 2020 and includes a legislated target for large scale renewables of 33,000 gigawatt-hours by 2020.

The RET scheme operates by allowing renewable energy power stations and owners of small-scale renewable energy systems to create a certificate for each megawatt-hour of eligible renewable electricity they produce. Liable entities (mainly electricity retailers) acquire certificates created by renewable electricity generators. Certificates are surrendered annually to the Clean Energy Regulator (The Regulator) to comply with the RET and avoid payment of a shortfall charge.

Section 161 of the Act provides, in part, that the Governor-General may make regulations prescribing matters required or permitted by the Act, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

RET exemptions

The Act provides for two types of exemptions. The first is a full exemption from liability under the scheme for entities producing and consuming their own electricity, provided certain conditions are met. The second is a full exemption for electricity used by businesses undertaking emissions-intensive trade-exposed (EITE) activities.

Division 1A of Part 4 and Division 1A of Part 5 of the Act provide the legislative framework for the provision of exemptions for EITE activities. Part 3A and Schedule 6 of the Regulations prescribe the eligible EITE activities and processes for applying for, issuing and amending exemptions, including the methodology for calculating the amounts of these exemptions.

Under Division 1A of Part 4 of the Act, an exemption is provided in the form of an exemption certificate issued by the Clean Energy Regulator (the Regulator) to a business conducting an eligible EITE activity. An EITE business can exchange this exemption certificate with its electricity retailer in return for relief from the pass-through of RET costs. In turn, the retailer reduces its liability by surrendering (to the Regulator) the exemption certificates it received from its EITE electricity customers.

Each exemption certificate represents an amount of electricity, in megawatt-hours, to which RET liability will not apply in a given year or describes the amount that is the liable entity’s exemption for the EITE activity and site referred to in the EITE application.

As part of the 2015 reforms of the RET scheme, exemptions for EITE activities were increased to cover 100 per cent of electricity consumed in an eligible EITE activity carried out at a site. The previous framework covered 60 per cent or 90 per cent of electricity consumed by an EITE activity.

Amendments to the method to calculate the quantity of exemption

The Regulations amend the Renewable Energy (Electricity) Regulations 2001 to introduce a new method of determining the amount of exemption. The new method is specific to the electricity used in undertaking one or more EITE activities at a site. This is called the ‘electricity use method’ in the Regulations.

Prior to these amendments, the calculation method was based on an extrapolation of the quantity of production over the two previous financial years multiplied by an industry-wide average electricity intensity of production. This method required a separate certificate to be issued for each EITE activity conducted at a site. This is called the ‘production calculation method’ in the Regulations.

The Regulation amendments allow exemptions for eligible EITE activities to more effectively deliver a 100 per cent exemption for an individual site in each year and avoid the risk that some entities receive an exemption that exceeds (or is less than) the RET cost associated with undertaking the EITE activity.

The Regulations enable the Regulator to issue exemption certificates that prescribe a formula as the way of calculating the quantity of exemption. The formula would refer to the metered electricity used in undertaking an EITE activity at a site, or some other means of referring to that electricity. Under this approach a single certificate can include the electricity used in all the EITE activities conducted at a site for a liable entity in relation to that electricity use.

Separate certificates are required for each liable entity in relation to a site, but an applicant can make a single application for a site to obtain certificates for multiple liable entities at the site. This is a simplification of the existing processes where an application needs to be made in relation to one liable entity, a first certificate issued, a second application made for a second liable entity, a second certificate issued and then an amendment to the first certificate.

Specifically, the Regulations prescribe matters empowered by the Act relating to the following:

applications for exemption certificates – persons who may apply, information to be included in the applications and the timing and manner of lodgement;

calculation of the amount of exemptions; the period for issuing exemption certificates; and amendment of exemption certificates – including circumstances and processes.

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The Regulations also make minor technical amendments to aspects of the RET scheme to clarify the intent, improve the operation of the scheme or correct references to external documents.

The provisions of the Act which allow the prescription of these matters are set out in Attachment   A .

Details of the Regulations are set out in Attachment B.

The Act specifies no conditions that need to be satisfied before the power to make the Regulations may be exercised.

The Regulations are a legislative instrument for the purposes of the Legislation Act 2003.

The Regulations commence on the day after they are registered on the Federal Register of Legislative Instruments.

Transitional arrangements

These Regulations provide for a transition period in which EITE applicants may continue to use the existing method based on production to determine the amount of exemption. All EITE applicants will be required to use the electricity method for determining the amount of exemption from 2020 onwards.

Consultation

During September 2017, the Department of the Environment and Energy released for public consultation a discussion paper on options to streamline the allocation of exemptions for EITE activities in the RET scheme.

The paper canvassed the approach in the Regulations to calculate exemptions based on electricity consumed in undertaking an EITE activity at a site during the exemption year. The paper also included a transitional measure to allow for exemptions to be calculated based on production for an interim period where electricity metering was not immediately available.

Exposure draft Regulations were developed and released during October 2017 for public comment.

Authority: Section 161 of the Renewable Energy (Electricity) Act 2000

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Attachment A

The Regulations are supported by the following provisions of the Renewable Energy (Electricity) Act 2000:

subsection 46A(1) of the Act which allows the regulations to prescribe who may apply for a exemption certificate;

paragraph 46A(2)(b) of the Act which allows regulations to prescribe information to be included in applications;

paragraph 46A(2)(c) of the Act which allows regulations to prescribe the time and manner of lodgement of applications;

subsection 46A(3) of the Act which allows regulations to require the verification of applications by statutory declaration;

paragraph 46B(1)(a) of the Act which allows regulations to prescribe the method for the calculation of an exemption;

paragraph 46B(1)(b) of the Act which allows regulations to prescribe the information to be included on an exemption certificate;

subsection 46B(2) of the Act which allows regulations to prescribe the period of time within which the Regulator must issue an exemption certificate;

paragraph 46C(2)(a) of the Act which allows the regulations to prescribe matters which the Regulator must consider in amending an exemption certificate;

subsection 46C(3) of the Act which allows the regulations to prescribe circumstances when the Regulator may amend a exemption certificate on its own initiative.

paragraph 160(3A)(b) of the Act which allows additional record keeping requirements to be prescribed; and

section 161 of the Act which allows the Governor-General to make regulations prescribing matters required or permitted by the Act and matters necessary or convenient to be prescribed for carrying out or giving effect to the Act.

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Attachment B

Details of the proposed Renewable Energy (Electricity) Amendment (Exemptions and Other Measures) Regulations 2017

Regulation 1 – Name of Regulations

This regulation provides that the title of the Regulations is the Renewable Energy (Electricity) Amendment (Exemptions and Other Measures) Regulations 2017.

Regulation 2 – Commencement

This regulation provides for the Regulations to commence on the day after they are registered on the Federal Register of Legislation, other than Part 2 of Schedule 2 which commences 3 months after registration.

Regulation 3 – Authority

This regulation provides that the Regulations are made under the authority of the Renewable Energy (Electricity) Act 2000.

Regulation 4 – Schedules

This regulation provides for the amendments to be set out in two Schedules. Schedule 1 relates to amendments to the provision of exemptions for emissions-intensive trade-exposed (EITE) activities to include a new method for calculating the amount of exemption that is related to the electricity used in undertaking an EITE activity at a site. Schedule 2 provides for minor technical amendments relating to various aspects of the RET scheme, including which small-scale renewable energy systems are able to create large-scale generation certificates.

SCHEDULE 1 – AMENDMENTS TO IMPLEMENT ELECTRICITY USE METHOD

Item [1] Subregulation 22A(1)

This item inserts four new defined terms in subregulation 22A(1) in relation to the electricity use method, as well as to clarify that a limited and reasonable assurance conclusion that is required for an audit report that accompanies an exemption certificate application is consistent with that defined in the National Greenhouse and Energy Reporting (Audit) Determination 2009. This is consistent with the current definitions of those terms in regulation 22UD.

Item [2] Subregulation 22A(1) (subparagraph (a)(i) of the definition of relevant product)

This item amends the definition of relevant product so that the term can be referenced in relation to applications which use the electricity use method. In particular, the omitted words “as the basis for the issue of the certificate” are redundant for the application of the definition whether the application is made under the production or electricity use method.

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Item [3] Subregulation 22E(3)

Items 3 and 4 amend the requirement that the Regulator publish a summary of the total volume of exemptions that have been issued for a year for each EITE activity and the timeframe for publishing the summary.

Item 3 clarifies that the summary of the total amount of exemptions by EITE activity will be an estimate for each EITE activity. While the Regulator will know the total amount of issued exemptions, it will only be able to estimate the proportion of that total that is issued for some EITE activities. This is because where there are multiple EITE activities undertaken at a site, an exemption amount determined under the electricity use method (described in Item 14) will cover all the electricity supplied to multiple EITE activities and the amount of electricity supplied to each EITE activity may not be identified. In those cases, the Regulator would apply some means of apportioning the exemption (such as production) to estimate the amount of the exemption that relates to each EITE activity.

Item [4] Subregulation 22E(3)

Item 4 amends the timeframe within which the summary of exemptions by EITE activity (in megawatt hour) must be published. Given that the amount of exemption under the electricity use method will be known at the end of the year, this item amends the final date for publishing the total amount of exemptions by activity to 30 March of the year following the year the exemption applies. In the transitional years, the total amount of exemptions by EITE activity would incorporate all exemptions whether they were determined using the production or electricity method.

Item [5] Paragraph 22G(c)

This item corrects a reference to a liable entity in the criteria that determines a prescribed person with a contract for the supply of electricity. The correction refers to the possibility that an EITE applicant may have more than one liable entity which supplies it electricity.

Item [6] Regulation 22L (heading)

Items 6 to 11 are a consequence of the new electricity use method for calculating exemptions. This item amends the heading of regulation 22L to specify that the regulation is only in relation to the production calculation method, given that there are separate provisions for each method relating to who is a prescribed person where a liable entity changes during an application year. This provides clarity as to how regulation 22L and 22LA applications are treated in the rest of the regulations.

Item [7] After paragraph 22L(1)(a)

This item clarifies that the provisions in regulation 22L only apply in relation to EITE applications under the production calculation method.

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Item [8] After regulation 22L

This item inserts a new regulation 22LA to define, in relation to an exemption application based on the electricity use method, a prescribed person who may apply for a subsequent exemption certificate when a liable entity changes during an application year.

Only a ‘prescribed person’ is eligible to apply for an exemption certificate. It is intended that the ‘prescribed person’ is a legal person involved in undertaking the EITE activity and not a person unrelated to the activity, or simply the retailer who supplies electricity to the site. It is also important that there are not multiple applications in relation to the same site and EITE activity so that assistance is only allocated once for a given use of electricity.

Where there is a change in a liable entity (typically the electricity retailer) in relation to an EITE activity for which an exemption certificate has been issued, it is intended that a separate exemption certificate be able to be issued for the EITE activity, site and year, in respect of the liable electricity provided by the new retailer over the remainder of the year.

It is also intended that when the new exemption certificate is issued, the original certificate for the activity, site and year is to be adjusted so that the total of the amount of the old and new exemptions equals that originally set out in the original exemption certificate.

While current regulation 22L is limited to two changes of liable entity, regulation 22LA allows for multiple changes of liable entity in a year.

Item [9] Regulation 22M (heading)

This item amends the heading of regulation 22M to specify that the regulation is only in relation to the production calculation method, given that there are separate provisions for each method relating to who is a prescribed person where there are multiple liable entities in relation to an EITE activity undertaken at a site for an application year. This takes account of the fact that under the electricity use method a single application can deal with multiple liable entities at a site.

Item [10] After paragraph 22M(a)

This item clarifies that the provisions in regulation 22M only apply in relation to EITE applications under the production calculation method.

Item [11] After regulation 22M

This item inserts a new regulation 22MA to define, in relation to an exemption application based on the electricity use method, a prescribed person who may apply for an exemption certificate when a new liable entity is added in relation to an EITE activity undertaken at a site for an application year. Note that where there are multiple liable entities at the start of the year, these would be dealt with by the initial application for the electricity use method.

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Item [12] Paragraph 22O(1)(f)

This item specifies that the production information required to be provided with an exemption application under paragraph 22O(1)(f) is only in relation to applications where the exemption amount would be worked out using the production calculation method.

Item [13] Paragraph 22O(1)(g)

This item specifies that the statement required to be provided with an exemption application under paragraph 22O(1)(g) is only in relation to applications where the exemption amount would be worked out using the production calculation method.

Item [14] At the end of subregulation 22O(1)

This item adds a new requirement to provide specific information in an exemption application where the exemption amount would be worked out using the electricity use method. The electricity use method refers to where an exemption for an EITE site is to be determined with reference to the relevant liable acquisitions of electricity used in undertaking an eligible EITE activity or activities.

This item requires that an application for an exemption to be based on electricity use include an estimate of the volume of relevant product to be produced in undertaking the EITE activity. The production data would not need to be audited but would provide the Regulator with additional information to cross-check that the electricity amount being claimed reasonably reflects production from the EITE activity.

New paragraph (i) relates to the justification for the approach to calculating the exemption amount in the method to be included in the certificate.

Item [15] At the end of subregulation 22O(2)

This item is consequential to the addition of regulation 22MA which provides that, under the electricity use method, a prescribed person may also be a prescribed person for another exemption application at the site for additional liable entities. In this situation, the applicant is required to include in its application whether they intend to apply as a prescribed person with multiple liable entities and have the electricity use method apply. This may be the case if an applicant is aware that an electricity contract is likely to expire during the year and the load is likely to be recontracted with a new liable entity.

Item [16] Regulation 22P

This item removes redundant requirements from the application for exemption certificates. These requirements relate to the repealed Clean Energy Regulations 2011.

Item [17] Before subregulation 22Q(1)

This item adds a new introduction to regulation 22Q to clarify that if an application is made for an exemption to be worked out using the electricity use method and the EITE activity is carried

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out for the first time, the applicant is required to provide information as a new entrant. This information will confirm that the EITE activity will commence in the year to which the application relates. This provides the Regulator with information to be satisfied that an applicant will be eligible for some exemption during the year for which the application is made. These are equivalent provisions to those that apply to new entrants seeking to have an exemption determined under the production calculation method.

Item [18] Subregulation 22Q(1)

This item is consequential to the inclusion of provisions to accommodate applications by new entrants that are made under the electricity use method outlined in item 15.

Item [19] At the end of regulation 22R

This item clarifies that the requirement to provide information for a significantly expanded site under regulation 22R is not relevant to applications that are made under the electricity use method. This is because if an applicant that chooses the electricity use method is intended to undergo a significant expansion of EITE production during a year, the exemption amount would still cover the increased RET costs associated with the expansion because the exemption amount would be based on the increased electricity use. The significant expansion provisions are only relevant under the production calculation method because exemptions are calculated using previous financial year production and may not cover the significant increase in RET costs associated with the expanded production.

Item [20] Regulation 22S (heading)

This item amends the heading of regulation 22S to clarify that it relates to information that is required to be included if an application is made by a prescribed person under either 22L (relating to the production calculation method) or 22LA (relating to the electricity use method). This is a consequential amendment that reflects the addition of regulation 22LA in relation to applications for exemptions to be calculated under the electricity use method where a liable entity changes during an application year.

Item [21] Subregulation 22S(1)

This is a consequential amendment that reflects the addition of regulation 22LA in relation to applications for exemptions to be calculated under the electricity use method where a liable entity changes during an application year.

Item [22] Paragraph 22S(1)(a)

This is a consequential amendment to refer to paragraph 22LA(c) as appropriate, reflecting the addition of regulation 22LA in relation to applications for exemptions to be calculated under the electricity use method where a liable entity changes during an application year

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Item [23] Paragraph 22S(1)(b)

This is a consequential amendment to refer to paragraph 22LA(d) as appropriate, reflecting the addition of regulation 22LA in relation to applications for exemptions to be calculated under the electricity use method where a liable entity changes during an application year.

Item [24] Regulation 22T (heading)

This item amends the heading of regulation 22T to clarify that it relates to information that is required to be included if an application is made by a prescribed person under either 22M (relating to the production calculation method) or 22MA (relating to the electricity use method). This is a consequential amendment that reflects the addition of regulation 22MA in relation to applications for exemptions to be calculated under the electricity use method where there are additional liable entities for an EITE activity at a site.

Item [25] Regulation 22T

This is a consequential amendment to refer to paragraph 22M or 22MA as appropriate, reflecting the addition of regulation 22MA in relation to applications for exemptions to be calculated under the electricity use method where there are additional liable entities for an EITE activity at a site.

Item [26] Paragraph 22T(b)

This is a consequential amendment to refer to paragraph 22M or 22MA as appropriate, reflecting the addition of regulation 22MA in relation to applications for exemptions to be calculated under the electricity use method where there are additional liable entities for an EITE activity at a site.

Item [27] Regulation 22U

This item removes the requirement to submit a statutory declaration with an application for an exemption certificate. The requirement for verification by the applicant’s director, chief executive officer, chief financial officer or company secretary can be incorporated into the declaration section of the application.

Item [28] Subdivision BA of Division 4 of Part 3A (heading)

This item replaces the heading of Subdivision BA with a new heading titled ‘Reports to accompany certain applications for exemption amounts to be worked out under Division 5 (production calculation method)’ to reflect that there are two calculation methods with different reporting requirements.

Item [29] Before paragraph 22UA(2)(a)

This is a consequential amendment to clarify that the requirement to provide reports in this subdivision only applies to applications for exemptions to be calculated under the production calculation method.

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Item [30] Subregulations 22UA(3), (3A), (4) and (5)

This item removes redundant requirements from the application for exemption certificates. These requirements relate to the repealed Clean Energy Regulations 2011.

Item [31] Paragraph 22UB(2)(c)

This items removes category 3 auditors registered under the National Greenhouse and Energy Reporting Regulations 2008 from the list of those who can prepare audit reports. This category of auditors was removed from the National Greenhouse and Energy Reporting Regulations 2008 in October 2015.

Item [32] Subregulations 22UB(3) and (3A) (note)

Item 32 is a consequential amendment to repeal the notes that refer to a redundant location of the definition of limited assurance conclusion and reasonable assurance conclusion. As outlined in item 1, these terms are now defined in paragraph 22A(1).

Item [33] Regulation 22UD

This item repeals the regulation which defines limited and reasonable assurance conclusions. These terms are now defined in subregulation 22A(1).

Item [34] After Subdivision BA of Division 4 of Part 3A

This item inserts a new Subdivision BB titled ‘Reports to accompany certain applications for exemption amounts to be worked out under Division 5A (electricity use method)’ to reflect that there are two calculation methods with different reporting requirements.

The item also includes new regulations which specify the requirements for reports that are to accompany an application for which the electricity use method is to apply. These new regulations are outlined below:

Regulation 22UF provides that subdivision BA exists under paragraph 46A(2)(bb) of the Act which requires an application to be accompanied by reports as outlined in the regulations and applies in relation to applications made under the electricity use method.

Regulation 22UG which prescribes when an audit report is required to accompany an application for exemption for which the electricity use method is to be applied. This Regulation requires that an audit report be provided with an application for an exemption where the electricity use method is to be used for the first time, and where the expected amount of exemption under that method (that is the amount of electricity to be used in undertaking the EITE activities) is likely to be greater than 15,000 megawatt-hours (MWh). This is consistent with the threshold for requiring an audit report to accompany applications made where the production calculation method is used.

Regulation 22UG also requires that an audit report accompany an application for

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exemption under the electricity use method every three years. Therefore, if an application is made for an exemption in 2018 where the electricity use method is to apply, an audit report would be required to be included with the application and another audit report would be required to be provided with an application for exemption for the 2021 calendar year. The details of what the audit report would cover are outlined in regulation 22UH.

Regulation 22UG also provides that the Regulator may request that an audit report accompany an application for an exemption for a site if they provide notice in writing. The request may be made if the Regulator considers that the method for working out an exemption amount under the electricity use method would no longer reflect the amount of electricity to be used in the EITE activity for a year and needs to be materially different. This may be due to changes at the site which would mean that the method previously used to determine the electricity used in the EITE activity no longer accurately reflects the amount of electricity used in the EITE activity. Requests under subregulation 22UG(3) are not limited to applications likely to exceed 15,000 MWh.

For example, if a method refers to a proportion of electricity supplied to a meter that is used in an EITE activity and there is a significant increase or decrease in the amount of electricity supplied by that meter to production activities that are not eligible EITE activities, the method would need to be corrected to ensure that the exemption reflects electricity supplied to eligible EITE activities. In that case, an audit report would be required to provide assurance that the electricity supplied to eligible EITE activities is accurately reflected in the prescribed method.

Regulation 22UH outlines who may prepare an audit report and the information that an audit report would be required to verify in relation to an application where the electricity use method is to apply.

The person undertaking the audit must be registered and qualified to prepare reports under the requirements of the National Greenhouse and Energy Reporting Act 2007 and regulations as a Category 2 auditor with no conflict of interest in relation to the application.

The requirements for an audit report and who may conduct the audit are different to those that apply in relation to audit reports that must be provided with an application under the production calculation method. This is because the electricity use method relies on technical information relating to the electricity that is used within the boundary of an eligible EITE activity.

As with the production calculation method, reasonable assurance must be given that the EITE activities related to the application are conducted. The application must also present fairly, in all material respects, the justification for the method to calculate the amount of an exemption. The report must also include reasonable assurance that the method for working out electricity used in an EITE activity that will determine the amount of exemption is reasonable and not likely to account for electricity which is not liable or not used in an EITE activity. Auditors would be expected to apply the tests for

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whether electricity is used in an EITE activity set out in regulation 22ZHB and 22ZHC, including the document entitled Emissions-Intensive Trade-Exposed Activity Boundaries published by the Department on its website.

Item [35] Regulation 22X (heading)

This item amends the heading of regulation 22X to clarify that it relates to the timing for lodging an exemption application where the exemption amount is to be determined using the production calculation method, that is, where it is available for 2018 and 2019 in some cases.

Item [36] Before subregulation 22X(1)

This is a consequential amendment to clarify that the provisions in relation to the timeframe for lodging exemption applications under this regulation only applies to applications for exemptions to be calculated under the production calculation method.

Item [37] After regulation 22X

This item adds a new regulation 22XA to outline the timeframes for lodging an exemption application where the exemption amount would be worked out using the electricity use method in Division 5A. This item provides that those applications must be lodged by 30 March of the year to which the application relates, as applies under the production calculation method. However, the regulation also allows applications to be lodged before the year to which the application relates, that is, as early as 1 August of the previous year. This is intended to allow applicants to make early applications where they are seeking to have exemption certificates issued before the start of a compliance year to assist with negotiating the benefit of the exemption certificate with liable entities.

The method for working out an exemption based on the production calculation method continues to apply for 2018 if chosen and 2019 if applicable under the existing provisions in Division 5.

Item [38] Subregulation 22Y(1)

This item removes the requirement to lodge exemption certificate applications by fax or post and authorises the Regulator to specify the manner and form for lodging applications on its website. This change will allow the Regulator to specify electronic submissions for consistency with the National Archives’ Digital Continuity 2020 Policy.

Item [39] Division 5 of Part 3A (heading)

This item amends the heading of Division 5 to clarify that it relates to the method for working out the amount of exemption for exemption certificate applications that are to be determined using the production calculation method, that is, where it is available for 2018 and 2019 in some cases.

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Item [40] After subregulation 22Z(1)

This is a consequential amendment to clarify that the provisions in relation to the method prescribed by Division 5 do not apply to applications for exemptions to be calculated under the electricity use method which are otherwise determined under Division 5A.

Item [41] After Division 5 of Part 3A

This item inserts a new Division 5A to specify the method for calculating the amount of exemption where an application has been made for an exemption certificate to be calculated based on the electricity used in an EITE activity at a site.

The item also includes new regulations which specify the circumstances in which the new Division applies and the parameters for establishing the electricity use method. These new regulations are outlined below:

Regulation 22ZHA provides that the electricity use method to calculate exemptions in Division 5A applies for all applications for exemptions from 2020, as well as applications for 2018 and 2019 if that method has been chosen by the applicant or if the method has already been chosen in a previous application in 2018 in relation to the EITE activity or activities carried on at a site. For clarification, the regulation requires that if an applicant in relation to an EITE activity at a site has used the electricity use method in 2018, it must continue to use that method for future applications (even if the legal entity making an application in relation to the site changes).

The method in Division 5A also applies to applications that are made for 2019 where the total site electricity was greater than 2,000 gigawatt-hours in 2018. This is to ensure that large electricity users move to the electricity use method as soon as possible and avoid the risk of over- or under- allocation of exemption that could occur through the production calculation method.

Regulation 22ZHB clarifies the volume of electricity that is eligible for exemption as that which relates specifically to undertaking the EITE activity as it is defined. This is intended to cover the electricity used in emissions-intensive production activities that result in a traded product. If the EITE activity is carried on solely at one site, the method for determining the amount of exempt electricity would refer to the electricity that is used specifically in the EITE activity transformation processes as defined. Similarly, if the activity is carried on across different sites, the electricity that is eligible for exemption is that which is used specifically in the EITE activity transformation processes as defined, at those sites. Further guidance on the eligible electricity that is considered to be included in an activity, as well as electricity that is excluded from an eligible activity boundary, is provided in the approved activity definition for each eligible activity, available from the Department of the Environment and Energy.

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The boundaries of what is included in each EITE activity in the approved activities definitions will be consolidated into a new document entitled Emissions-Intensive Trade-Exposed Activity Boundaries published by the Department on its website. This is referenced in paragraph 22ZHC(4)(a) as the document existing as in force from time to time (consistent with section 160A of the Act).

Regulation 22ZHC prescribes the method for working out an exemption amount in relation to an application for an exemption for one or more EITE activities at a site. The regulation allows for an exemption amount to be determined by electricity metering data that refers to the amount of electricity that is specifically used in carrying out a production activity defined as an EITE activity during the calendar year. The method would be prescribed in an exemption certificate and the final exemption amount would be the amount of electricity to which a relevant acquisition applies that was supplied to the EITE site in accordance with the method.

Where electricity metering does not sufficiently provide the amount of electricity specific to that consumed in undertaking the EITE activity, the Regulator may determine an alternative method that refers to the electricity used in the EITE activity. This may be by reference to a proportion of metered electricity supplied to a site or by reference to some other measurement such as the emissions intensity of equipment and operating conditions (which may include production times or volumes).

The Regulator is required to determine a method that would most accurately represent the electricity that is used in undertaking the EITE activity. The Regulator would have regard to the production processes that are included as part of the eligible EITE activity, as well as specific exclusions, as referenced in each approved activity definition and set out in the Emissions-Intensive Trade-Exposed Activity Boundaries document. These definitions were established in accordance with principles that were designed to ensure consistent treatment of all eligible activities and to ensure that exemptions were targeted at the most emissions-intensive production processes that resulted in an internationally traded product.

In determining a method that is the most accurate, the Regulator is required to have regard to the practicalities of giving effect to the method at the site in question, such as how existing electricity use is metered. For example, the administrative costs of certain methods may outweigh the benefits of any increased accuracy that might be achieved.

Examples of how a method may be specified to refer to electricity at a site that is used in an EITE activity are below:

o The total amount of megawatt-hours of electricity for which a relevant acquisition applies that is supplied to a facility through ‘meter A’;

o The amount of electricity in megawatt-hours for which a relevant acquisition applies that is supplied to a facility through ‘meter B’ multiplied by an EITE activity factor. This factor describes the proportion of eligible EITE and non-EITE electricity consumption through an electricity meter;

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o The amount of electricity in megawatt-hours for which a relevant acquisition applies that is supplied to a facility through ‘meter C’ less the amount of electricity in megawatt-hours for which a relevant acquisition applies that is supplied to a part of the facility not undertaking EITE activities through ‘sub-meter D’.

Regulation 22ZHD includes an obligation on the Regulator to inform the applicant and liable entity of the final amount of exemption that has resulted from the application of the formula in the certificate. This would generally be done after the year has ended.

Item [42] Paragraph 22ZJ(g)

This is a consequential amendment to clarify that the provisions that prescribe the information that is to be included in an exemption certificate that relate to the volume of production used to determine an exemption amount only apply in respect of an application for which the production calculation method is used.

Item [43] Paragraph 22ZJ(h)

This is a consequential amendment to clarify that the provisions that prescribe the information that is to be included in an exemption certificate that relate to the volume of production used to determine an exemption amount only apply in respect of an application for which the production calculation method is used.

Item [44] After paragraphs 22ZL(1)(a) and (2)(a)

This is a consequential amendment to clarify that the provisions that relate to the prescribed period for issuing an exemption certificate in subregulation 22ZL(1) and (2) relate only to an exemption certificate for which the production calculation method has been used.

Item [45] At the end of regulation 22ZL

This item adds a new provision to regulation 22ZL to specify the timeframes for issuing an exemption certificate where the exemption amount is to be worked out using the electricity use method. The provision specifies that the Regulator must issue the exemption certificate within 60 days from the date the application was received, unless further information was sought and in that case, 60 days from the day the further information was received. These timeframes are consistent with those that apply under the production calculation method.

Item [46] Paragraph 22ZN(2)(b)

This is a consequential amendment to clarify the matters the Regulator must have regard to in amending an exemption certificate under regulation 22ZN where the exemption amount has been determined under the production calculation method.

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Item [47] After paragraph 22ZN(2)(b)

This item inserts a new provision to prescribe the matters that the Regulator must have regard to in amending an exemption certificate where the electricity use method has been used to determine the exemption amount. Any amendment should give be consistent with the requirements in Division 5A, particularly regarding the use of liable electricity in an EITE activity at a site.

Item [48] Regulation 22ZP (heading)

This item replaces the heading of regulation 22ZP to clarify that it relates only to where regulation 22L applies. That is, in relation to who is a prescribed person where a change of liable entity applies if the exemption is worked out using the production calculation method.

Item [49] After regulation 22ZP

This item inserts a new set of provisions, in parallel to regulation 22ZP for the production calculation method, relating to the circumstances in which the Regulator may amend and re-issue an exemption certificate where there has been a change of liable entity and the exemption amount has been determined under the electricity use method. For example, the first certificate may have been for 90% of the electricity supplied through the meter with a specific National Metering Identifier during the year. If the liable entity ceased to be a liable entity at the end of 30 June, the certificate would be amended to reflect that the metered amount would only be from 1 January to 30 June.

Item [50] Regulation 22ZQ (heading)

This item replaces the heading of regulation 22ZP to clarify that it relates only to where regulation 22M applies, that is, in relation to who is a prescribed person where there is a second liable entity if the exemption is worked out using the production calculation method.

Item [51] After regulation 22ZQ

This item inserts a new set of provisions, in parallel to regulation 22ZQ for the production calculation method, relating to the circumstances in which the Regulator may amend and re-issue an exemption certificate where there are additional liable entities and the exemption certificate has been issued under the electricity use method. For example, the certificate may be in relation to the electricity supplied through two meters during the year. It may need amendment if there is a new liable entity supplying through one of the meters from 1 July, such that the amount for the first certificate issued would now be all of the electricity supplied through the first meter during the year, but only the electricity supply through the second meter until 30 June.

Item [52] Subregulation 22ZR(2)

This is a consequential amendment to clarify that subregulation 22ZR(2), which prescribes how an exemption amount must be reduced where the activity ceases on site, only applies where the exemption amount has been determined by the production calculation method.

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Item [53] At the end of regulation 22ZR

This item inserts a new provision to prescribe that an amendment to an exemption that has been determined using the electricity use method must take account of the cessation of an activity. A formula specified in an exemption certificate to determine an exemption amount based on electricity use as supplied through a meter, for instance, will need to be amended if the method does not automatically take account of the activity having ceased. For example, if a formula is prescribed as 50% of electricity supplied to meter A and the activity ceases but other non-eligible activities are supplied by that meter, the electricity would not be eligible for exemption. In that case, the method would need to be adjusted to reflect that the eligible exempt amount has been reduced to 0% of the electricity supplied to the meter from a certain date.

Item [54] At the end of regulation 22ZS

This item inserts a new provision to prescribe circumstances under which an exemption certificate issued under the electricity use method may be inaccurate. If the certificate was not amended, it could result in an incorrect amount of exemption being issued. Some examples of inaccuracies include a change of processes on site that mean that electricity supplied through a particular meter as prescribed in the exemption certificate has changed and no longer relates to the eligible EITE activity, or a change in the proportion of non-EITE activities undertaken on site that means that a proportion of metered electricity supplied to an EITE activity is no longer correct.

Item [55] Regulation 22ZT

This is a consequential amendment to allow for a subsection to be added in regulation 22ZT, as outlined in item 56.

Item [56] At the end of regulation 22ZT

This item clarifies that the record keeping requirements do not apply where an exemption amount has been determined under the electricity use method. This is because the information on electricity use would already need to be kept as a record under subsection 160(3A) of the Act which requires the keeping of any documents relevant to ascertaining a matter to which the certificate relates.

Item [57] Subclause 601(1) of Schedule 6 note

This item adds to the note in subclause 601(1) of Schedule 6 to clarify that the matters relating to the emissions intensity and baselines for an activity relate only to where an exemption amount is determined under the production calculation method.

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SCHEDULE 2 – MINOR AND TECHNICAL AMENDMENTS

Part 1 – Amendments commencing day after registration

Item [1] Subregulation 3(1) (definition of standby plant)

This item removes the definition of a standby plant as, with the amendment of regulation 22 in item 5, this term is no longer referenced in the regulations.

Item [2] Subparagraph 3A(3)(c)(ii)

For solar water heaters with a capacity of more than 700 litres (L), the storage tank of the device should meet the requirements of a document called “Heat Loss Test Procedure for Solar Water Heaters with a Hot Water Storage Tank Greater than 630 L”. This item changes the document title from ‘greater than 630 L’ to ‘greater than 700 L’ to provide consistent size references within the regulations. The Regulator will amend the title of the document on its website to match the regulations.

Item [3] Subregulation 19(1)

This item removes the time restriction on full system installation in relation to determining the time at which a solar water heater is taken to have been installed. The 60 day limit for full system installation adversely affects installations in new dwellings and buildings.

Item [4] Before paragraph 20B(a)

Owners of solar (photovoltaic) systems with a capacity of 10 kW to 100 kW (inclusive) and that generate from 25 MWh to 250 MWh (inclusive) may opt out of the Small-scale Renewable Energy Scheme and elect to participate in the Large-scale Renewable Energy Target (LRET) scheme and create large-scale generation certificates. This item will remove this option for systems installed after 31 December 2017. Participation in the LRET can be administratively problematic for small entities and individuals and can result in subsequent non-compliance due to the ongoing and stringent LRET reporting requirements.

Item [5] Regulation 22

This regulation outlines the requirements for determining whether an electricity grid meets or exceeds the 100 megawatt capacity threshold for liability, in accordance with subsection 31 (3) of the Act. This item clarifies that the capacity of the grid is to be calculated using the nameplate capacity of the individual generators connected (directly or indirectly) to the grid. The word “generator” is not intended to be read as “power station”. It is intended to refer to individual generating units. If the liable entity satisfies the Regulator that nameplate rating is not an appropriate measure of capacity for the grid then the Regulator may calculate the capacity of the grid using nominal capacity.

Individual generators may be excluded from the calculation of grid capacity if they are privately owned domestic generators or are generators which have been connected to the grid for a least

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3 calendar years before the assessment year and in each of those years have produced less than 50 GWh or had a load factor of less than 5%. A new generator will not be eligible to claim the later exemption until it has been connected to the grid for at least 3 years.

These changes have been made to address issues raised by the Administrative Appeals Tribunal in decision 2017 AATA 48 (dated 20 January 2017).

Part 2—Amendments commencing 3 months after registration

Item [6] Paragraph 20(1)(b)

This item sets out the method for calculating the number of small-scale technology certificates that may be created by solar (photovoltaic) systems. The zone ratings and zones for solar (photovoltaic) systems to be used in the calculation will now be prescribed by legislative instrument. Previously this information was set out in schedule 5 of the regulations.

Item [7] After subregulation 20(3)

This item confers on the Regulator the function of prescribing the zone ratings and zones for solar (photovoltaic) systems through a legislative instrument. This item will allow the Regulator to periodically adjust zone ratings and update the zones to reflect new postcodes and changes to the geographic distribution of existing postcodes.

Item [8] Schedule 5

This item removes schedule 5, which currently prescribed the zone ratings and zones for solar (photovoltaic) systems. This information will now be prescribed by legislative instrument.

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