The Clean Energy Regulator has just announced the date of the fifth (and maybe final) ERF auction – Wednesday 5 April 2017 and Thursday 6 April 2017.
Of the original $2.55B fund, around $400M remains and this could possibly be the last auction (depending on price and volume bid). The Turnbull Government is still yet to commit to any further funding of the ERF at this point in time.
The key dates for the auction are below. Entering into the scheme is a complex and time-consuming process, so if you have a carbon saving project in-mind, time to get busy! Feel free to contact us if you have a project in mind and/or would like further information regarding the ERF.
Timeline for the fifth auction
Project registration application deadline
30 business days before the auction
21 February 2017 (midnight AEDT)
Auction qualification application deadline
20 business days before the auction
7 March 2017 (midnight AEDT)
Auction registration application deadline
Five business days before the auction
29 March 2017 (midnight AEDT)
Closing time for declaration of eligible projects
Five business days before the auction
29 March 2017 (5pm AEDT)
9am 5 April 2017 to 5pm 6 April 2017 (AEST)
Results released, authorised bidder notified and average price per tonne of abatement published
Within five business days after auction close
13 April 2017)
Currently, certain large energy users are excluded from the Victorian Energy Efficiency Target (VEET) scheme, but this is may change from as early as 1 January 2017. Public submissions regarding the proposed changes are open until 13 July 2016 – consultation documents, including the option paper for including large and users and proposed methods are available here.
The VEET scheme allows accredited businesses to offer discounts and deals on certain energy saving products and appliances (and soon project based activities). Accredited businesses monetise the energy savings by creating and selling Victorian Energy Efficiency Certificates (VEECs). Demand for the certificates is created through a legislated target, which requires energy retailers to purchase and surrender a certain number of certificates each year. The cost of purchasing certificates is typically passed on to end users by the retailer.
The exclusion of large energy users from generating energy efficiency certificates or creating a pass-through liability for energy retailers was originally provided to avoid duplication for companies covered by the Environment Protection Authority’s Environment and Resource Efficiency Plans (EREP) program, which ended in 2013. With the EREP program gone, the rationale for excluding large energy users from VEET no longer applies. Proposed changes to the VEET scheme will mean large energy users can create energy efficiency certificates, and will also be subject to increased electricity and gas prices associated with the pass through of retailer VEET liability costs.
Impact on big energy users
Key issues and potential impacts for currently excluded big energy users include:
- Costs: when the exemption ends and therefore costs associated with retailer liability are passed on to the energy user, electricity and gas bills will likely increase by around 3-4%, based on our initial analysis
- Opportunities: on the upside, access to VEET incentives may make energy efficiency improvements more economically viable. To access energy savings incentives, it is important to understand what activities, products and accredited persons are eligible to generate certificates and pass on savings.
For energy retailers, the charges will reduce the administrative burden of identifying large energy users and removing their consumption from their annual Energy Acquisition Statements.
When will the changes begin?
The Victorian Department of Economic Development, Jobs, Transport and Resources has proposed two options for extending VEET to large energy users, the first being "immediate" full implementation from 1 January 2017, and the second being a gradual implementation starting 1 January 2017, providing an initial voluntary period until 2020.
Immediate: 1 January 2017 - all large energy users can gain VEET incentives from 1 January 2017. The exclusion from creating liabilities for energy retails also ends 1 January 2017.
- Gradual: either 1 January 2020 or when the Large Energy User starts generating Victorian Energy Efficiency Certificates (VEECs) from prescribed energy saving activities, whichever is first. This options provides an initial voluntary period, where large energy users are eligible to generate certificates from 1 January 2017.
Key drivers for extending VEET to large energy users
A number of drivers underpin the proposed changes, including:
- The policy context has changed and there is no longer overlap with EREP program, which closed in 2013.
- Access to VEET incentives may make energy efficiency improvements more economically viable for large energy users.
- Including large energy users in the VEET scheme would increase the pool of energy efficiency opportunities available to generate certificates
- Large energy users expressed an interest in being able to participate in the VEET scheme when the Department consulted on this issue in 2015
- Energy retailers find it administratively burdensome to identify large energy users and remove their consumption from their annual Energy Acquisition Statements. Now that EREP program has closed, the list of excluded large energy users has also become outdated.
How will large energy users access VEET incentives?
Most large energy users have a variety of energy savings options available at their sites, which will need a customised approach to determine energy savings. To address this, three new draft methods for “Project Based Activities” (PBAs) have been developed. These draft methods are open for public comment until 13 July 2016.
Because only accredited persons can generate certificates, normally facilities implementing energy saving activities will realise VEET incentives through a discount passed on by the service provider, rather than by generating and selling certificates directly. The extent of benefits passed on to the consumer can vary widely depending on the service provider, so it is worthwhile investigating which service providers offer the best financial incentives for your business. That being said, a large consumer generating many VEECs may become an accredited person themselves. We’ve seen this in the NSW scheme where heavy industry can generate Energy Saving Certificates – which is a similar concept.
We encourage you to think carefully about what the cessation of the VEET exemption might mean for your business, including the operating costs and opportunities going forward. If you have any further questions, would like some assistance with your submissions, or would like to further discuss the implications of VEET for your business– please contact us directly.
It's not too late to get tickets and as a Gold Sponsor of the 3rd Australian Emissions Reduction Summit, Ndevr Environmental is proud to offer our partners a discounted rate of 10% off a standard rate Full Registration + Dinner if you use the code: NdevrSummit2016
Last years event was a ripper and CMI have promised an event better one this year. We look forward to seeing you there - make sure you come along and say hi to the team at our Ndevr booth, and check out the sessions Phil will be chairing to hear first hand about real emissions reduction fund projects. Here's a bit more about the Summit:
Opportunities for Australia in the transition to a low carbon economy
With business looking to understand the implications of December's momentous Paris Agreement, the Summit will bring together national and international leaders from business, government, technology and finance to explore the contemporary business challenges and opportunities in the transition to a low carbon economy.
The Summit is the premier climate change and business event for 2016. The Summit will include outstanding international keynote speakers, high level conference debates, facilitated workshops, showcasing of best practice technologies, extensive networking sessions and a conference gala dinner.
The Summit will be held on the 3&4 May 2016 at the Melbourne Cricket Ground (MCG) in Melbourne. For more information, visit the following links:
The Carbon Market Institute is an independent membership-based not-for-profit organisation. As the peak body for carbon market participants, CMI has established an important role in the evolution of the carbon market in Australia. The Institute facilitates the networks, knowledge exchange and commercial interaction amongst key government policy makers and regulators, industry, financiers and investors, professional services companies and technology solution providers
The NSW Office of Environment and Heritage (OEH) is offering grant funding to implement gas efficiency projects for businesses using more than 1000GJ (about $30,000) of gas per year. Funding is offered in two stages:
Stage 1: installation of gas measurement and monitoring systems including gas and steam sub-meters and data-logging systems.
Stage 2: implementation of gas efficiency improvement projects; for example the recovery of heat from refrigeration or compressors to offset gas use.
For each eligible site, OEH will provide $1 for every $1 you spend on implementation costs at a maximum of $15,000 for Stage 1 and $25,000 for Stage 2.
Round 1 applications are open from October 2015, and close in 22 January 2016. Letters of agreement will be sent out in April 2016, and the project must be implemented within 6 months of receiving the letter.
This program is timely given that OEH has expanded the Energy Savings Scheme (ESS) to incorporate gas efficiency projects. Under the Energy Savings Scheme, eligible projects can have certificates generated by accredited certificate providers (ACPs), based on the number of tonnes of carbon dioxide equivalent abated. (Audits for ACPs and Liable Entities can be done through Ndevr Environmental as we are a member of the Audit Services Panel)
For more information on these and other programs offered by OEH, visit http://www.environment.nsw.gov.au/business/programs-finance.htm
The anxiously awaited details of the “stick” component of the Federal Governments Direct Action Plan were released yesterday for public consultation, including the Rule, Regulation, Audit Determination and associated explanatory statements.
The Safeguard Mechanism, due to come into play from 1 July 2016, was established in the Carbon Farming Amendment Act 2014, with a purpose to “safeguard the value of funds spent under the Emissions Reduction Fund by requiring large businesses to keep emissions below baseline levels”. The detail around calculating baselines and determining ‘business as usual’ has had industry on the edge of their seats, and the Safeguard Mechanism has been undergoing heavy consultation to date with 89 submissions received during the previous consultation phase.
Industry are keen to have certainty around their future requirements; and while the government is hoping to finalise the legislation next month, it should be noted that the Senate will have the right to disallow the final versions prior to their release. The certainty of the Rules, therefore, are still up in the air as criticism comes in over the lack of bite:
"It's called a safeguard mechanism but it's not an environmental safeguard. Greg Hunt is not actually constraining emissions. If it's going to work it's got to have teeth but all we've got are gums," Tony Wood, Grattan Institute.
The table below provides details of some of the Rules and our insights:
The safeguard mechanism rules to note
Applicable to facilities that have direct emissions over 100,000 t CO2-e per year, (which is expected to cover 140 large businesses)
The entity with operational control of a designated large facility will be responsible for meeting safeguard requirements, including that the facility keep net emissions at or below baseline emissions levels.
This is a significantly higher threshold than the 25,000tCO2-e facility threshold under the previous carbon price. Increased thresholds reduces the number of businesses captured and provides for fewer innovative opportunities for carbon reductions.
At the CMI forum in May 2015, a Department of Environment Senior official stated that the 200+ businesses that were once covered ‘only’ made up around 50MtCO2-e p.a. This is almost 10% of Australia’s emissions profile, so should the thresholds be tightened over time there will be more incentive for carbon reductions across the economy – as it currently stands improvement will be limited.
Transport businesses have the option of defining their facilities on a national or state basis.
This is an important concession to the transport sector who are traditionally defined by which state the fuel is purchased. A national facility definition could guard against penalising carriers based on which state the fuel is purchased from year to year.
Baselines will be set using data already reported through NGERS and will be set according to the highest historical emissions point between 2009/10 and 2013/14, even if there is only one historical point.
The following exemptions apply:
Since the closure of a number of large manufacturing industries it will be unlikely that the electricity generators will exceed their sectoral wide baseline.
The delayed nature of landfill emissions from waste deposited will mean that this exemption prevents any landfill inclusion until at least 2019/20
Special treatment can be sought to allow a more generous baseline if:
These exemptions are the basis for much of the criticism to date around the Safeguard being too weak to protect BAU emissions let along achieve any actual carbon reduction. The exemption essentially cover nearly any circumstance that see the baseline exceeded.
Of particular note, the Minerals Council of Australia's concern, quoted in the consultation paper, that 'mature mining involves deeper operations'', and 'that the emissions intensity of processing operations would fluctuate depending on ore grades' so the gross emissions and emissions intensity would likely increase - has meant that mining is exempt.
New investments and significant expansions planned for post 2020, as well as facilities with inherent emission variability, will be subject to the ‘best practice approach. Best practice will be determined by the Benchmark Emissions-Intensity Index that will be developed by the Department of the Environment over time.
This will be incredibly complex to achieve and Administer via the CER as it would essentially be a ‘moving feast’ as best practice changes over time and will have to cover many sectors
Investments prior to 2020, which will have already commenced planning will be subjected to the an audited emissions forecast provided by the facility operator, with a reconciliation of the estimate against the actual performance of the facility at the end of the forecast period
As an auditor this will be incredibly difficult and risky to provide an assurance opinion against (with reference to an actual emissions number), as you will be auditing a forecast which will be subject to many external and internal factors that will impact emissions over time.
While, ideally facilities will reduce emissions to remain under their baselines. Should baselines be exceeded businesses are required to purchase Australian Carbon Credit Units (ACCUs) to offset their emissions.
Alternatively, for those that expect to exceed the baseline facilities can adopt multi-year reporting to allow an over baseline performance in one year provided the multi-year average is still below the baseline.
Non-compliance can result in fiscal penalties ($18,000/day up to $1.8M)
It is highly unlikely there will be any cases of non-compliance particularly given the number of exemptions and special cases.
Additionally, Minister Hunt has stated that:
"It has always been our commitment and we continue to budget zero revenue. It is our clear expectation that no businesses will pay penalties" Greg Hunt (AFR 2015)
A review is scheduled for 2017-18 with the door left open for international carbon abatement permits.
(Rumoured by some as an opening to form an Emissions Trading Scheme)
This (international unit purchase) is spoken about in hushed tones within Government, as the Prime Minister has on numerous occasions stated his disdain for international credits. Business however have long recognised that international credits are typically cheaper (and more plentiful) than domestic credits. That being said, we feel it is important to support the domestic abatement market for a number of factors, and if international credits are allowed, they should be limited to a point where cost-effective domestic projects are still supported. All this being said however, because the Safeguard is so ‘weak’ as it stands, it is very unlikely to generate demand for a significant volumes of ACCUs, and will not support a domestic offset market. It is likely the ERF will be the sole vehicle to drive domestic offsets projects.
The Scheme will be administered by the Clean Energy Regulator.
The Safeguard Mechanism will likely be complex and expensive to Administer. The CER will need to be adequately resourced to meet their ever expanding regulatory functions.
It is important to balance your response between understanding the potential impact of the Safeguard Mechanism as it currently stands on your business, and recognising that the actual design could be subject to some significant amendments over the coming months due to likely opposition, including the possibility that it may not pass through the Senate and be enacted by the 2016/17 financial year.
Some of the practical steps you should take now are:
- Review historic NGER reports at the site (facility) level to determine whether you are likely to trigger coverage thresholds – and if so, identify at which sites.
- Establish your baseline for these site (highest historical point between
- Identify facilities at risk of being captured if the thresholds are lowered.
- Identify exemptions which may be applicable to your facilities:
- Talk to capital expenditure committees/sales/procurement/executives on any planned acquisitions, growth forecasts or expansion that is earmarked for the future that may be impacted by the Safeguard Mechanism
- If seeking exemptions identify what other information/data you might require
- i.e. production data/emissions intensity figures
- do you have the systems and equipment in place to capture this data?
- do you have the human capital to effectively manage and monitor the impacts ?
- Quantify the impacts of any emission reduction activities currently planned. Determine if it is better to act Will we potentially be penalised if we act now or wait until a Safeguard is in place?
- If you are undertaking ERF projects – consider how any ACCUs generated will impact your performance against your baseline, and consider whether it is better to ‘hold’ some ACCUs or commit them all to an ERF contract?
Additional detail is available on the Department of Environment website:
A lot of material to get your head around - feel free to give us a call if you need a hand.
Thanks to Juliana Bedggood and Matt Drum for assisting in the compilation of this overview.
The Facilities method is applicable to organisations currently reporting under the National Greenhouse & Energy Reporting Scheme (NGERS), and provides a high-level, activity-neutral framework to calculate abatement from facilities. It is functionally consistent with the intent of the Industrial Electricity and Fuel Efficiency (IEFE) method.
However, this method unlike other approved ERF methods has a new requirement to ensure that proposed abatement projects are additional to what would have occurred without the fund. Under the Facilities method, a person with operational control of the facility is required to submit a ‘Statement of activity intent’ to the Regulator stating that the abatement activities proposed would not be (or would not have been) implemented at the facility during the period in the absence of a declaration of the project as being eligible for offsets. For abatement projects expected to generate more than 100,000 tonnes annually this statement must be signed by the CFO. A false statement is a criminal offence.
The baseline period relevant to the Facilities method comprises the four consecutive NGER reporting years preceding the start of a project (ie the start of the crediting period). Within this period, the facility cannot have undergone a major change. The baseline emissions intensity is calculated by determining the lowest emissions intensity (total annual emissions divided by the total of the production variable) within the four year baseline period. The baseline emissions intensity is then valid for the entire 7-year crediting period and can only be recalculated if the facilities experiences a change which will have a material effect on the level of project abatement achieved in an NGER reporting year.
Projects established under the Facilities method can include:
- Replacing or modifying boilers,
- Improving control systems and processes,
- Waste heat capture and re-use,
- Upgrading turbines ,
- Improving the efficiency of motors, fans and pumps with high efficiency conversions,
- Installing variable speed drives,
- Improving compressed air processes,
- Reducing industrial process emissions,
- Behavioural changes,
- Installing low emissions-intensity electricity generation equipment, and
- Fuel switching.
Ineligible abatement activities include: activities that generate abatement by changing the level of a production variable; activities that result in an increase in excluded NGER fugitive emissions; and activities that decrease onsite emissions while increasing emissions outside the project boundary.
The determination does not apply to facilities which: do not produce an output (ie large shopping centres, storage warehouses), are transport facilities, are part of another offsets project; use biomass; are part of a facility aggregate.
Note: The determination does allow facilities to reduce emissions from transport within the facility if the facility is not a transport facility.
For further information, the methodology is available from the comlaw website: https://www.comlaw.gov.au/Details/F2015L01346 or feel free to contact us.
The Clean Energy Regulator has announced the second Emissions Reduction Fund auction for carbon abatement contracts will be held on the 4th and 5th November 2015.
For those waiting for this announcement to move on registering their projects - time to get moving!
A number of projects have been registered during July under the new methods released since the first auction. The Clean Energy Regulator has said that new projects will only be eligible to participate in the auction if the completed project registration is received before Friday 18 September 2015.
Good luck to all registering proponents !
(Registration can take longer than you think so get started asap to avoid disappointment)
So, here are a few NGERs related updates to note:
- The 2014-15 Emissions and Energy Reporting System (EERS) is due for release on 31 July 2015 - with submissions as usual due by 31 October.
- The Clean Energy Regulator is planning to facilitate training sessions in the use of EERS (timing to be advised).
- OSCAR, the predecessor of EERS, will be decommissioned by the end of June 2015. So make sure you have logged on before then to download any historic reports that you haven't already saved to an internal system. (Following this requests for data can be submitted to the Clean Energy Regulator who will be able to provide the current NGERs contact person or executive officer with the requested historic reports).
Feel free to contact us if you have any NGERs queries (03) 9865 1400.
Ndevr Environmental welcomes Katherine Simmons to the team!
We have recently added another highly experienced technical specialist to our team – Katherine Simmons. Bringing over 15 years’ engineering and management experience across the petrochemical and manufacturing industries, Katherine joins us from her previous role as Sustainability Manager at one of Australia’s largest petrochemical manufacturers. In her former position Katherine was responsible for all things environment, carbon, energy and sustainability related.
We are really excited to have Katherine on-board to further extend our deep knowledge-base in the carbon, energy and sustainability space.
For more details on Katherine's skills and experience, or to contact her directly check out our about us page.
The Government's Emissions Reduction Fund provides a revenue stream to successful projects after emissions reductions have been verified. However, many projects will require significant upfront capital to get started. In light of this the NAB, with support from the Clean Energy Finance Corporation, are offering an Energy Efficient Bonus to Equipment Finance Loans.
Any emissions reduction project that is registered for Australian Carbon Credit Units (ACCUs) and involves a technology are eligible for the 0.7% pa discount; $0 deposit; tailored repayments equipment loan.
Additionally, there are a range of technologies and equipment that are eligible regardless of participation in the ERF, including:
- industrial and commercial refrigeration that result in at least 10% reduction in energy consumption
- Heating Ventilation and air conditioning (HVAC) replacement with at least 10% reduction in energy consumption
- Rooftop solar PV compliant with Australian Standards
- Building monitoring systems, where the technology provider or qualified consultant forecasts savings
- Lighting upgrades that qualify under the Victorian Energy Efficiency Target (VEET) or the NSW Energy Efficiency Scheme (ESS)
Feel free to contact us (03 9865 1400) or NAB (13 10 12) for more details.
(Note: Ndevr is not associated with NAB or any other bank)