By: Energy & Street Lighting Coordinator, Travis Sydes...

Summary of Stages:

Stage 1

Register your project with an approved project method for calculating emissions.  There are a number of these, each of which is tailored to particular project types.  Registering your project does not mean you have to follow through; it simply gives you the option to get Australian Carbon Credits in future.  The project must be new, cannot be retrospective.

Stage 2

Start your project at any time.

Stage 3

Once you start your project you start reporting.  Reporting requirements vary depending on the type of project.  As an example, replacing 7,000 streetlights is considered small and over say 7 years there will be approx. 3 reporting periods.  You can say when these will be.  Once you start reporting you start getting your carbon credits.  Within this period you are also required to get your reports audited by an approved qualified NGER auditor.  An approved list of these is available.

Stage 4

With your carbon credits you can choose to either auction your credits, sell them on the secondary market or partner with a corporation seeking to purchase carbon credits.  Generally you have your carbon credits for a maximum of 7 years – it is not continuous (sequestration is 25 to 100yrs)

Auction option

Under the auction option there is a requirement to enter into an agreement with the federal government.  The term of this agreement is negotiable and you can split your credits and have different terms.

  • Minimum bid size is 2000 tonnes CO2-e per year.  (you can aggregate with other projects you or others have i.e. other councils)
  • It’s a single sealed bid – blind auction effectively with a confidential benchmark price (the government won’t consider bids above the benchmark price and they will purchase the lowest cost carbon credits)  As an example, the average price paid for the last auction was $13.95 per credit (there were 47mil credits purchased)

Secondary Market option

Under this option you can choose to sell your credits through other means and provides an opportunity outside of a government contract to generate revenue.  There are ‘banks’ available for this and it is suspected that ‘brokers’ will also start to emerge.

Corporate Partnership option

You are free to sell your credits under a corporate partnership option and the agreement is between yourselves and the corporation.

Example Project – Street lighting

Say the project is to replace 7,000 Mercury Vapour lamps with LED’s within a local government (or regional) area.  I am going to use regional approach in this example to reduce the audit costs.

7,000 Street lights = approximately 2,000 tonnes CO2-e per year.

Based on $13.95 per credit this would return $27,900 per year.

Multiplied by 7 years = $195,300

Less 3 x Audits over the 7 years at around $15,000 per audit ($45,000) = $150,300 over the 7 years in revenue for reducing emissions.

Arguably, this in itself is not enough to justify a replacement program of 7,000 streetlights but may help strengthen the cost benefit of such a project.

Under the Australian Energy Regulator (AER) draft determination for Ergon Energy, to retire existing functioning streetlights outside the LED transition program an exit fee is payable.  The proposed 2015/16 fees for Gifted and Ergon operated minor lights are $195.  This would cost $1,365,000 for 7,000 lights.

The energy savings realised moving from MV to LED for 7,000 per year =$ 425,941 per year.

In summary:

Cost to replace 7,000 MV to LED =$1,365,000

Energy savings $425,941 x 7yrs = $2,981,587

EMF revenue over 7 yrs. = $150,300

Approx. savings over 7 years = $1,766,887 however, as you can see, the revenue gained from the ERF while beneficial is not significant.

Note: assumptions are made based on 2013/14 tariffs, receiving $13.95 per credit and no additional charges.

Additional Notes of Interest

  • There are 3 federal departments involved in the Emissions Reduction Fund.  The ‘Clean Energy Regulator’ is the key contact.
  • 440 projects are currently registered – 430 are land based.  These can be seen on a public register, you can also see the credits issued.  There is also a table of auction contracts but you cannot see the prices.
  • Recommended you engage the auditor early to make sure you are collecting and running to approved method – it could be 2 years before your first audit.
  • Can aggregate i.e. regional street light project for councils.  This means 3 audits instead of numerous. 
  • You can aggregate projects to achieve 2000 CO2-e for auction.  There are guidance notes for aggregation.
  • At present the secondary or corporate partnership model does not have a minimum number.
  • There are federal funding programs that cannot be used with the emissions reduction fund.  There is a list of these i.e. 20mil trees program.  You need to choose which program you want funding from.
  • Risks: - $2.5bil program federal program for auction – funds could run out; Political uncertainty in the future however there is bipartisan support for the architecture for carbon credits and all contracts will be honoured.
  • Sequestration – Performance obligation is with the original project proponent even though it is registered on the title; the obligation does not transfer to the new owner.
  • If you do not meet your obligation you can purchase credits to top up.
  • If the benefit from the ERF is not significant why do it? A. it may tip a project over the line, b. it could be good social marketing for council, etc.

Should you have any queries, please do not hesitate to contact us for clarification or direction

More information:

For those who missed the ERF opportunities for public lighting webinar recently a link has been posted on the CER website. Other links to information on public lighting are on the link page as well.

More information about the fund and the auction process is on the Clean Energy Regulator website

For more details or to be kept in the loop of local and regional events and information sessions please get in touch with me on email/t.sydes)(