Hawker Britton Occasional Papers and Media

Mandatory Renewable Energy Targets for NSW

November 2006

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NSW Premier Morris Iemma last week announced mandatory renewable energy targets for NSW.

By 2010, 10 per cent of the electricity consumed in NSW will come from renewable energy sources such as solar, hydro and wind. By 2020, this figure will be 15 per cent. Current renewable energy use in NSW is 6.1 per cent.

The mandatory NSW Renewable Energy Target (NRET) aims to reduce greenhouse gas emissions in NSW by 115 million tonnes and will stimulate investment in renewable energy generation.

Under the scheme, renewable generators will be able to create tradable renewable energy certificates. Electricity retailers will be required to surrender sufficient certificates to prove they have met the targets. Establishing a tradable energy certificate market is an important mechanism for reducing the costs of compliance associated with such a scheme.

An enforceable penalty for non-compliance will be set at a level to encourage compliance. Trade-exposed, energy-intensive users will be exempt from bearing the costs of the scheme, though their energy use will be included for the purposes of measuring compliance with the mandatory targets.

It is important to note that the target refers to the electricity consumed, not generated, in NSW. This means, as part of the National Electricity Market, NSW can draw electricity from any of the other participating jurisdictions.

The NSW Government has consistently demonstrated leadership in addressing climate change through a wide range of complementary initiatives, such as the $200 million Energy Savings Fund and the Greenhouse Gas Abatement Scheme.

Renewable energy generation is recognised by the NSW Government as a longer term strategy and the development of a robust renewable energy industry as an essential element in reducing greenhouse gas emissions in the future. The introduction of mandatory targets will provide the renewable energy industry with the necessary government support to overcome the higher costs, compared to convention generation, that have impeded the industry's expansion.

The permit price for the NSW scheme is expected to be about $45/MWh by 2010 and steadily rise to about $70/MWh by 2020, after which the price is expected to fall following the termination of the Commonwealth MRET scheme.

NSW has developed its own renewable energy targets, as have several other jurisdictions, in the absence of the Commonwealth Government extending its Mandatory Renewable Energy Target (MRET). The NSW Government will seek to align its scheme with the Victorian scheme (VRET), as a possible precursor to a potential national state-base renewable energy target. Consistency between the states will help reduce the costs of compliance for the industry.

The NRET scheme is scheduled to commence in 2007 with the first target level to be met in 2008.

The Premier also announced planning approval for a new $220 million wind farm south of Tarago in the Southern Highlands. The wind farm will produce electricity for 52,000 homes, eliminating 300,000 tonnes of greenhouse gases each year.

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