Commonwealth Numbered Regulations - Explanatory Statements

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RENEWABLE ENERGY (ELECTRICITY) AMENDMENT REGULATIONS 2011 (NO. 1) (SLI NO 11 OF 2011)

EXPLANATORY STATEMENT

Select Legislative Instrument 2011 No. 11

Issued by the Authority of the Minister for Climate Change and Energy Efficiency

Renewable Energy (Electricity) Act 2000

Renewable Energy (Electricity) Amendment Regulations 2011 (No. 1)

Section 161 of the Renewable Energy (Electricity) Act 2000 (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.

The Act establishes a Renewable Energy Target (RET) scheme to encourage additional electricity generation from eligible energy sources. The RET scheme is designed to ensure that 20% of Australia's electricity supply is generated from renewable sources by 2020.

Under the Act, wholesale purchasers of electricity ('liable parties') are required to meet a share of the RET in proportion to their share of the national wholesale electricity market. The Act provides for the creation of Renewable Energy Certificates (RECs) by generators of renewable energy. One REC generally represents one megawatt-hour (MWh) of electricity from eligible energy sources.

The Regulations amend the Renewable Energy (Electricity) Regulations 2001 (the Principal Regulations) to support the provisions of the Act that deal with the provision of partial exemptions from liability in respect of the electricity acquired for use in carrying on activities that are defined as emissions-intensive trade-exposed (EITE) for the purposes of the Act. Examples of these activities include the production of silicon, aluminium smelting and printing and writing paper manufacturing.

The Regulations prescribe two additional EITE activities in the Principal Regulations to support these activities.  

Details of the Regulations are set out in the Attachment.

Consultation

The Department of Climate Change and Energy Efficiency started a formal process for defining and determining the eligibility of EITE activities in February 2009. This has involved stakeholder workshops to assist in the creation of appropriate definitions and boundaries for activities. Activities were then formally defined by the relevant Minister for the purposes of data collection and published on the Department's website. Audited data has been submitted to the Government on the basis of the approved definitions and the activities in these regulations have been determined as eligible by the Minister for Climate Change and Energy Efficiency. Relevant industries who have submitted data to the Government have provided comment on the final wording of the definitions to be included in the Regulations to ensure that the structure of the definitions reflects the conduct of the activities at their individual sites.

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

Attachment

Details of the Renewable Energy (Electricity) Amendment Regulations 2011 (No. 1)

Regulation 1 - Name of Regulations

This regulation provides that the Regulations are the Renewable Energy (Electricity) Amendment Regulations 2011 (No. 1).

Regulation 2 - Commencement

This regulation provides that the Regulations commence on the day after they are registered on the Federal Register of Legislative Instruments.

Regulation 3 - Amendment of Renewable Energy (Electricity) Regulations 2001

This regulation provides that Schedule 1 amends the Renewable Energy (Electricity) Regulations 2001 (the Principal Regulations).

SCHEDULE 1 AMENDMENTS

Item [1] - Subregulation 22A (3)

Item [1] substitutes subregulation 22A (3) with a revised reference location for information regarding the highly emissions intensive status of an activity, which can be found under Division 2 of the relevant Part in Schedule 6 for each activity.

Item [2] - Subregulation 22A (5)

Item [2] substitutes subregulation 22A (5) with a revised reference location for information regarding the moderately emissions intensive status of an activity, which can be found under Division 2 of the relevant Part in Schedule 6 for each activity.

Item [3] - Subregulation 22ZA (2), at the foot

Item [3] inserts a new note at the foot of subregulation 22ZA (2). This note provides a location reference for information regarding the moderately or highly emissions intensive status of each activity, listed under Division 2 of the relevant Part in Schedule 6 for each activity.

Item [4] - Schedule 6, after Part 30

Item [4] inserts new Parts 31 (Production of carbamide (urea)) and 32 (Production of sodium carbonate (soda ash) and sodium bicarbonate).

Part 31 Production of carbamide (urea)

Division 1 Production of carbamide (urea)

Clause 689 - Production of carbamide (urea)

This clause provides that the production of carbamide (urea (CO(NH₂)₂)) is the chemical transformation of carbon dioxide (CO₂) and anhydrous ammonia (NH₃) to produce carbamide solution (urea (CO(NH₂)_2(aq))) that:

(a)        has a concentration of carbamide (urea (CO(NH₂)₂)) equal to or greater than 80%; and

(b)        is subsequently used to produce either or both of:

(i)         carbamide solutions (urea (CO(NH₂)_2(aq))); and

(ii)        saleable granulated, prilled or other solid forms of carbamide (urea (CO(NH₂)_2(s))).

The chemical transformation generally follows in accordance with the following chemical equations:

The activity, as conducted during the period used to assess the eligibility of the activity, involved the reaction of carbon dioxide with anhydrous ammonia to create a carbamide (urea) solution, some of which was on-sold in varying concentrations. The majority of the carbamide (urea) solution was further evaporated and a solid granulated product produced.

It is intended that alternative processes of synthetic carbamide (urea) manufacture which use anhydrous ammonia as a feedstock are considered to satisfy the activity description.

The activity description is not satisfied through the undertaking of the production of carbamide (urea) from a feedstock other than anhydrous ammonia.

The inputs of the activity have been defined to include anhydrous ammonia and carbon dioxide.

The output of the activity may be in solid or solution form. Carbamide (urea) in solution is produced at various concentrations based on the final end product use. Carbamide (urea) in its solid form is sold in a variety of shapes the most common of which are granules and prills.

The activity does not include the upstream production of anhydrous ammonia or the downstream blending or converting of the urea into any products other than a carbamide (urea) solution or solid carbamide (urea) product.  As such, the relevant site for the application is that where the carbamide (urea) solution, solid product, or both is actually produced and does not extend to separate sites which may conduct upstream production of anhydrous ammonia or the downstream production of products other than solid carbamide (urea) or carbamide (urea) solutions but not the activity as described. Generally, it is expected that where these upstream and downstream processes are carried out at separate sites those sites would not be regarded as carrying out the emissions-intensive trade-exposed activity for the purposes of subregulation 22A(9) . However, it is understood that some upstream or downstream processing or ancillary processes may be conducted at the same site as an EITE activity and these processes do not impact the eligibility for partial exemptions of the EITE activity itself.

Division 2 Classification of activity

Clause 690 - Classification of activity

This clause provides that the production of carbamide (urea) is classified as a moderately emissions-intensive activity.

Division 3 Electricity baseline for calculating partial exemption

Clause 691 - Electricity baseline for product

This clause provides that the electricity baseline for calculating the amount of a liable entity's partial exemption in respect of the production of carbamide (urea) is 0.285 MWh per tonne of 100% equivalent carbamide (urea (CO(NH₂)₂)) on a dry weight basis.

The concentration of carbamide (urea) is measured using AOAC 978.02 Nitrogen (Total) in Fertilizers; (or equivalent) and/or ISO 22241 Diesel engines - NO_x reduction agent AUS 32 - Part 1: Quality requirements.

To be eligible as a relevant product, the 100% equivalent carbamide (urea (CO(NH₂)₂)) must be:

(a)        contained within either of the following products:

            (i)         carbamide solutions (urea (CO(NH₂)_2(aq))); or

            (ii)        saleable, granulated, prilled or other solid forms of carbamide (urea                         (CO(NH₂)_2(s))); and

(b)        produced by carrying on the emissions-intensive trade-exposed activity; and

(c)        of saleable quality.

The carbamide (urea) must have been produced by carrying on the activity as defined by clause 689 to be eligible as a relevant product. For instance, where imported carbamide (urea) is blended with the product produced from the activity, only the domestically produced carbamide (urea) would be included in the tonnes of the relevant product.

The carbamide (urea) must be of saleable quality. This is defined by regulation 22C. In particular, the tonnes of carbamide (urea) which are recycled, lost or discarded are not to be included in the tonnes of dry weight relevant product.

Part 32 Production of sodium carbonate (soda ash) and sodium bicarbonate

Division 1 Production of sodium carbonate (soda ash) and sodium bicarbonate

Clause 692 - Production of sodium carbonate (soda ash) and sodium bicarbonate

This clause provides that the production of sodium carbonate (soda ash) and sodium bicarbonate is the chemical and physical transformation of calcium carbonate (CaCO₃), sodium chloride (salt (NaCl)), ammonia (NH₃) and carbon bearing materials (such as coke) into 1 or more of the following:

(a)                           light sodium carbonate (light soda ash (Na₂CO₃)) which has a concentration of  sodium carbonate (soda ash (Na₂CO₃)) equal to or greater than 98.0%;

(b)                          dense sodium carbonate (dense soda ash (Na₂CO₃)) which has a concentration of sodium carbonate (soda ash (Na₂CO₃)) equal to or greater than 97.5%;

(c)                           refined sodium bicarbonate (NaHCO₃) which has a concentration of sodium bicarbonate (NaHCO₃) equal to or greater than 95.0% .

The activity as conducted during the period used to assess the eligibility of the activity involved the Solvay method.

The output of the activity is saleable light sodium carbonate  (light soda ash (Na₂CO₃)) which has a concentration of light sodium carbonate greater than or equal to 98.0% with respect to mass, dense sodium carbonate (dense soda ash (Na₂CO₃)) which has a concentration of dense sodium carbonate greater than or equal to 97.5%  with respect to mass; and/or refined sodium bicarbonate (NaHCO₃) which has a concentration of refined sodium bicarbonate greater than or equal to 95.0% with respect to mass.

The activity does not include the upstream mining and processing of limestone to produce sodium carbonate or sodium bicarbonate. As such, the relevant site for the application is that where the soda ash is actually produced and does not extend to separate sites which may conduct upstream or downstream processing but not the activity as described. Generally, it is expected that where these processes are carried out at separate sites those sites would not be regarded as carrying out the emissions-intensive trade-exposed activity for the purposes of subregulation 22A(9). However, it is understood that some upstream or downstream processing or ancillary processes may be conducted at the same site as an EITE activity and these processes do not impact the eligibility for partial exemptions of the EITE activity itself.

Division 2 Classification of activity

Clause 693 - Classification of activity

This clause provides that the production of sodium carbonate (soda ash) and sodium bicarbonate is classified as a highly emissions-intensive activity.

Division 3 Electricity baseline for calculating partial exemption

Clause 694 - Electricity baseline for product

This clause provides that the electricity baseline for calculating the amount of a liable entity's partial exemption in respect of the production of sodium carbonate (soda ash) and sodium bicarbonate is 0.130 MWh per tonne of saleable light sodium carbonate (light soda ash (Na₂CO₃)) which has a concentration of light sodium carbonate greater than or equal to 98.0%  with respect to mass, dense sodium carbonate (dense soda ash (Na₂CO₃)) which has a concentration of dense sodium carbonate greater than or equal to 97.5% with respect to mass and/or refined sodium bicarbonate (NaHCO₃) which has a concentration of refined sodium bicarbonate greater than or equal to 95.0% with respect to mass.

The tonnage of the relevant soda ash should be measured accordingly to ordinary measurement rules applicable in the industry.

To be eligible as a relevant product, either or both of the sodium carbonate (soda ash) and sodium bicarbonate must be:

(a)          light sodium carbonate (light soda ash (Na₂CO₃)) that:

(i)        has a concentration of sodium carbonate (soda ash (Na₂CO₃)) equal to or greater than   98.0%; and

(ii)       is produced by carrying on the emissions-intensive trade-exposed activity; and

(iii)      is of saleable quality;

(b)               dense sodium carbonate (dense soda ash (Na₂CO₃)) that:

(i)        has a concentration of sodium carbonate (soda ash (Na₂CO₃)) equal to or greater than 97.5%; and

(ii)       is produced by carrying on the emissions-intensive trade-exposed activity; and

(iii)       is of saleable quality;

(c)               refined sodium bicarbonate (NaHCO₃) that:

(i)        has a concentration of sodium bicarbonate (NaHCO₃) equal to or greater than 95.0%; and

(ii)       is produced by carrying on the emissions-intensive trade-exposed activity; and

(iii)      is of saleable quality.

The soda ash must be produced by carrying on the activity as defined by clause 692 to be eligible as a relevant product. An application may involve one, two or all three of the products in paragraphs (a) to (c) of clause 694. Where more than one of the products are involved, the annual tonnes of relevant product is the sum of the tonnes of all of the products which comply with paragraphs (a), (b) or (c) as appropriate. However, a particular tonne of product is not to be counted as a relevant product under more than one paragraph of clause 694.

The products in paragraphs (a) to (c) of clause 694 must be of saleable quality. This is defined by regulation 22C. In particular, the tonnes of product which are recycled, lost or discarded are not to be included in the tonnes of relevant product.

Item [5] - Further amendments - omissions

Item [5] omits the notes under Division 2 of the relevant Part of Schedule 6 for each activity. These notes have been superseded by the new note inserted by item [3].

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