Renewable Energy Zones

What’s in the Bill?

Long-term Planning

A REZ long-term strategic plan (the long-term plan) would be completed within 12 months of the legislation being passed. The long-term plan would examine demand scenarios for the state, identify potential REZs and the required infrastructure and costs for those zones, and make recommendations relating to the optimal sequencing for development of each REZ.

Identifying the optimal pathway for REZ development will ensure the state achieves its renewable energy goals while minimising new transmission.

REZ Coordinator

Under a REZ framework set out in the draft legislation, the REZ Coordinator has a key role in REZ strategic planning. They will provide advice to the Minister on the need for, and potential location of, REZs in the state. The REZ Coordinator will be performed by the Director of Energy Planning, a statutory role under the Energy Co-ordination and Planning Act 1995.

Declaration of a REZ

The Minister can declare an area of Tasmania to be a REZ by making a declaration order. The declaration can only be made on the recommendation of the REZ Coordinator and is disallowable by Parliament.

In declaring a REZ, the Minister would be satisfied, based on the advice of the REZ Coordinator, that the declaration is consistent with the long-term plan and the REZ objectives, and that any social and economic impacts of a REZ on the region have been considered.

Access Scheme

The Minister would also make an access scheme order for each REZ. The access scheme sets out the rules, terms and conditions for projects seeking to connect to the REZ Infrastructure (the transmission network within a REZ).

The access scheme can restrict the number of projects that can connect to the REZ Infrastructure. Under a REZ model, a physical cap on connections would be introduced to help provide revenue certainty for generation and storage projects and to ensure network infrastructure is efficiently utilised.

Cost Recovery

Importantly, a REZ framework provides flexibility in how costs are recovered. Under the national electricity laws, the costs for building and operating transmission network are generally recovered from customers. Under the draft Bill, generators, load and storage that connect to the REZ Infrastructure would pay for the infrastructure, with costs being recovered from customers as a last resort and in very limited circumstances (details are set out below).

The framework also allows for additional costs to be recovered from generators such as administration costs of the REZ Coordinator, regulation costs and community benefit sharing payments.

Community Benefit Sharing

Community Benefit Sharing (CBS) is a key element of the REZ model to ensure that communities hosting renewable energy developments directly benefit. This could be through a particular community fund that supports regional projects with local communities or councils, or even direct financial benefits to residents.

Under the draft legislation, projects connecting to the REZ infrastructure will be required to contribute into a regional community benefits fund. Adopting a coordinated approach can ensure a greater impact on important local issues and address key community aspirations.

Proponent Commitment

Under a REZ model, a competitive expression of interest process will be run for projects seeking to connect to the REZ Infrastructure. It is proposed that successful applicants will be required to make a form of financial commitment, such as a bonding arrangement to reserve their spot. Importantly, the level of commitment required to trigger the construction of REZ Infrastructure, may not be 100 per cent of the cost of the line, but will instead be set by the Minister under the REZ order.

If REZ Infrastructure is undersubscribed (but above the trigger commitment threshold) the shortfall will need to be recovered from a third party which could include customers. However, if costs are being sought from customers there are a number of safeguards to ensure it is only done as a last resort and that consumers also benefit from that REZ Infrastructure proceeding. This includes a requirement for a separate order to be made by the Minister setting out the reasons for doing so and oversight by a REZ Regulator.

REZ Regulation

The economic framework included in the draft Bill will protect REZ participants from the potential power imbalance that comes with a monopoly service provider. A REZ Regulator will be appointed to provide oversight for the costs of the REZ infrastructure being built and to approve how these costs are allocated amongst REZ participants.

While the REZ model envisages REZ participants paying for the REZ Infrastructure rather than electricity customers (although this is an option), there is still a need for a rigorous framework around cost recovery, and the REZ planning, construction and operating entities (if they are separate) will need to make a submission to the REZ Regulator for the revenue they require and how that would be allocated to REZ participants.

REZ Roles and Functions

The roles and functions required for planning, delivery, maintenance and operation of a REZ model are set out in the legislation.

While the REZ planner, constructor and operator role may be undertaken by one organisation, the draft Bill provides for the roles to be separate to provide an opportunity for competition, particularly in the constructor role.