Licence Conditions for Electricity Distributors – Current Situation

Since 1996, in the State of New South Wales, the Electricity Supply Act has imposed environmental licence conditions on electricity distributors.

These licence conditions require that electricity distributors must conduct investigations on the cost effectiveness of implementing demand-side management strategies that may permit distribution network augmentation work being deferred or avoided.  A Code of Practice specifies how electricity distributors should carry out investigations of demand-side management options.

Licence Conditions for Electricity Retailers – Previous Situation

From 1996 to 2002, environmental licence conditions were also imposed on electricity retailers.  Under the terms of their licence conditions, electricity retailers had to:

• develop and negotiate with the Minister for Energy strategies to reduce greenhouse gas emissions arising from electricity sales to New South Wales customers;
• develop one, three and five year plans for energy efficiency and demand management strategies, and strategies for purchasing energy from sustainable sources; and
• prepare and publish annual reports in relation to the implementation of their strategies, and greenhouse gas emissions arising from electricity supplied by them.

In 1997, the New South Wales Government introduced a benchmark (or target) for the overall reduction in greenhouse gas emissions which was to be achieved by the New South Wales electricity sector.  This Statewide target was a reduction in the emissions of the principal greenhouse gases (carbon dioxide, methane and nitrous oxide) to 5% below the 1989/90 per capita level in New South Wales by 2000/01.  This was equivalent to 7.27 tonnes of CO2-e per capita.  Electricity retailers were required to contribute to the achievement of the Statewide target by meeting individual “retailer apportioned benchmarks” related to their market share.  Individual benchmarks were developed for the annual reductions in greenhouse gas emissions to be achieved by each electricity retailer and these individual benchmarks were incorporated into each retailer’s licence conditions.

During the period from July 1997 to June 2001, most retailers failed to meet their apportioned benchmarks for greenhouse emissions reductions.  Consequently, the environmental licence conditions for electricity retailers were widely regarded as being ineffective.

Electricity Retailers – Current Situation

Following the conclusion of the existing benchmark regime at the end of June 2001 a review of the licence conditions was carried out on behalf of the New South Wales Government.  The report of this review was released in February 2002.

Following the review, the Government introduced the NSW Greenhouse Gas Reduction Scheme (GGAS).  Under this Scheme, from 1 January 2003 electricity retailers and other parties are required by legislation to meet mandatory targets for reducing the emission of greenhouse gases resulting from the electricity they supply or consume.  To achieve the required reduction in emissions, eligible parties purchase and surrender tradeable certificates called New South Wales Greenhouse Abatement Certificates (NGACs).  NGACs can be created in several ways, one of which is by undertaking 'demand side abatement' which includes energy efficiency projects.

From 1 January 2009, the demand side abatement component was separated from GGAS to become a standalone energy efficiency certificate (or "white certificate") trading scheme known as the NSW Energy Savings Scheme (ESS).  Under ESS, Energy Savings Certificates (ESCs) may be created by accredited parties who carry out energy efficiency projects.  Eligible parties, including electricity retailes, meet their emissions reduction targets under ESS by implementing energy efficiency projects themselves or by purchasing ESCs from third parties. 

Energy Efficiency Certificates Trading Scheme