The Energy Security Safeguard
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What is the Energy Security Safeguard?

The Energy Security Safeguard (Safeguard) is part of the NSW Electricity Strategy, which is the NSW Government's plan for a reliable, affordable and sustainable electricity system.  It is made up of three certificate schemes that aim to:

  1. reduce energy consumption (Energy Savings Scheme)
  2. reduce peak demand for electricity consumption (Peak Demand Reduction Scheme), and
  3. incentivise the production of green hydrogen (Renewable Fuel Scheme)
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What is the legislative framework that underpins the Safeguard?

The Electricity Supply Act 1995 sets out the legal framework of the Safeguard. It also sets out the functions and responsibilities of IPART as Scheme Administrator and Scheme Regulator of the ESS and PDRS. The Electricity Supply (General) Regulation 2014 sets out requirements for accrediting and auditing ACPs, and rules around creation and transfer of certificates. It also provides compliance principles for entities that are required to participate in the scheme. The Regulation is currently being updated to include the PDRS.

Both the Act and Regulation support the ESS Rule, which provides details of the methods to create Energy Savings Certificates (ESCs).  A PDRS Rule is currently being developed to provide similar details for the PDRS.

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What is IPART doing to get ready for the Safeguard?

We are revising our existing systems and processes to expand the ESS to include new activities and introduce the PDRS when it goes live in November 2022. We have developed a full program of work to support the new Safeguard and are busy working on different components. This includes:

  • A new integrated IT system:

 

Our IT systems are undergoing major upgrades to integrate our existing systems and add the PDRS. The new integrated IT system will replace a number of existing ESS systems with a single system, making it easier for users to engage with the schemes. It will include a new certificate registry, an online application process, and for the first time the Scheme Participant process will be online.

 

  • Stakeholder engagement:

 

Our newly published Safeguard Stakeholder Engagement Strategy outlines our commitments, principles and priorities for improved engagement with all stakeholders in the Safeguard. As we implement the Safeguard we will be guided by these principles when we are engaging with you.

 

  • Key performance indicators:

 

With input from the Department of Planning and Environment we are developing key performance indicators (KPIs) to monitor scheme progress. These KPIs reflect Government expectations, Safeguard objectives and IPART’s own strategic objectives. We will report against these to ensure transparency with stakeholders on our administration of the schemes.

 

  • Documents and processes:

We will be releasing new method guides and supporting materials to help our stakeholders understand and engage with the PDRS. We are also looking at our systems and processes to make sure they support the efficient and effective administration of the Scheme.

The PDRS
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What is the Peak Demand Reduction Scheme?

The Peak Demand Reduction Scheme (PDRS) is a scheme designed to support activities that reduce the demand for electricity during the summer peak in NSW. It works by creating financial incentives for activities that provide the capacity to reduce electricity use during times of peak demand - between 2.30 and 8.30 pm (AEST) from 1 November to 31 March.

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How does the PDRS work?

Financial incentives are in the form of tradeable certificates, called peak reduction certificates (PRCs). Generally, householders and businesses who fund activities that help reduce peak demand transfer the right to create PRCs to Accredited Certificate Providers (ACPs) in return for a discount on the cost of the activity.

ACPs create and register PRCs for these peak demand reduction activities. The PRCs are then purchased each year by Scheme Participants (mainly electricity retailers) operating in NSW to meet their share of a legislated annual target.

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What activities are likely to be included in the PDRS?

We expect that there will be three types of eligible activities:

  • Peak Demand Saving – installing more efficient equipment that uses less energy during peak times, for example installing a more efficient air conditioner to reduce electricity use on hot days.
  • Peak Demand Shifting – installing new systems, or changing the way existing systems are used, so that electricity consumption is shifted to an off-peak period. Examples include hot water systems and pool pumps timed to start after 10 pm.
  • Peak Demand Response – controlling certain technologies to temporarily reduce consumption during peak times, for example using smart pool pumps and interruptible industrial processes.

Initially the scheme will prioritise Peak Demand Saving activities which save energy during peak times by using energy more efficiently. The PDRS Rule will provide more detail on these activities. The Department of Planning and Environment will be consulting on the PDRS Rule in early 2022.

We will let you know more information on eligible activities when it is available.

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How will peak scheme targets be set?

The peak demand reduction target will be set in the Electricity Supply (General) Regulation 2014. It will commence in 2022-23 at 0.5% of the forecast one-in-ten-year maximum demand and will increase to 10% of forecast maximum demand by 2029-30. The target will then remain at 10% until the end of the scheme in 2049-50. Exemptions will be considered when calculating individual targets for scheme participants.

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How is peak demand reduction calculated?

The Department of Planning and Environment is currently developing calculation methods for peak reduction certificates. They will be consulting on the PDRS Rule in early 2022.

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What are the key dates for the rollout of the PDRS?

We expect the PDRS Rule will commence soon after 1 July 2022 but no firm date for this has been set. Scheme liability for the PDRS will commence on 1 November 2022. Certificates can be registered from 1 November 2022.

Accreditation under the Scheme can only commence after the PDRS Rule is gazetted.

The expected timeline of activity is set out in the PDRS Roadmap below.

Timetable explained below
  1. PDRS inserted in ESS Act 24 September 2022
  2. ES (General) Regulation updated to include PDRS TBA
  3. Accept expressions of interest for PDRS Accreditations 1 April 2022
  4. Applications for Accreditations accepted offline 1 July 2022
  5. PDRS rule commences 1 July 2022
  6. PDRS Registry goes live November 2022
  7. First compliance period starts November 2022
  8. Start of Scheme Participant liability process March 2023
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How is responsibility for PDRS split between IPART and the Department?

The split of PDRS responsibilities between IPART and the Department is the same as for the ESS.  Refer to the Roles in the Scheme page to find out more.

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Where can I go to access further information on the PDRS?

The Department of Planning and Environment’s Peak Demand Reduction Scheme page contains information on the PDRS, including links to consultation and position papers, information about exemptions and details of how to get involved.

How can I be involved in the PDRS?
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I am a Scheme Participant – how will I be affected?

Scheme Participants – entities that are legally required to participate in the PDRS, such as electricity retailers - will be required to calculate their individual liable demand. This will be based on the four summer days with the highest maximum demand within the compliance period. The Scheme Regulator will nominate these days based on AEMO information. Scheme Participants will be required to submit information to the Scheme Regulator in two stages.

Stage 1 requires Scheme Participants to calculate their Individual Liable Demand during the hours of 2:30 and 8:30pm (AEST) on the four nominated days. The Scheme Regulator will calculate and publish the Scheme Liable Demand based on the Individual Liable Demand of all Scheme Participants.

In stage 2, the Scheme Participant will calculate their individual certificate target based on the Scheme Liable Demand and provide an annual statement to the Scheme Regulator. The statement will set out how they will meet their obligations, e.g. by surrendering certificates, carrying forward a shortfall or paying a shortfall penalty.

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I am an Accredited Certificate Provider under the ESS – how do I get accredited for the PDRS?

To make it easier for ACPs to become accredited under the PDRS, a streamlined application process will be available to ACPs that are already accredited for specified activities under the ESS. More information on the application process and the specified activities will be provided as it becomes available.

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I am not currently an ACP but am interested in applying for accreditation – what is the process?

To become accredited under the PDRS you need to be approved by IPART, as the Scheme Administrator. You will be required to submit an application which will be assessed by the Scheme Administrator against certain eligibility criteria. Only accredited certificate providers are able to create Peak Demand Reduction Certificates. More information on the application process will be provided as it becomes available.

You may also consider becoming accredited under the ESS for the equivalent activities.  Once accredited under the ESS you may apply to become accredited under the PDRS using the streamlined application process described above.

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What are the requirements for certificate creation?

Certificate creation requirements have not yet been finalised. They will be finalised when the PDRS Rule is published. The Department will be consulting on the draft rule early in 2022.

We will let you know when information on certificate creation requirements becomes available.

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I am an auditor – how will I be affected?

Audits will continue to be a compliance tool used within the Safeguard. Auditors that are currently members of the Audit Services Panel for the ESS will be able to complete audits under the PDRS subject to upcoming amendments to the audit services panel agreement. See the PDRS home page for more information on the panel agreement updates and on how to become an Audit Services Panel member.

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I am a Measurement & Verification Professional – how will I be affected?

M&VPs are unlikely to be impacted by the introduction of the PDRS, as the initial calculation methods will be deemed and won't require measurement and verification.

Stakeholder engagement
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How will IPART keep stakeholders informed about the introduction of PDRS?

We are committed to keeping you informed about what we are doing to get ready for the PDRS. We will do this by providing regular updates through our website and publishing useful information as it becomes available.

We want to make sure that you have the information you need so that you can properly prepare for the PDRS. We will seek your feedback on what we are doing so that we can continue to tailor our approach when engaging with you.

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How will IPART engage with stakeholders throughout the process?

Stakeholder engagement is an important part of our work. We will undertake targeted approaches to engagement with different stakeholder groups in relation to the changes we are making. Our aim is to keep you informed throughout the process.  We will provide more information on our engagement activities as soon as we can.

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How can I provide input on the PDRS?

The Department of Planning and Environment will be consulting on the PDRS Rule in early 2022. There will be opportunities to provide your input on the Rule and calculation methods for the PDRS through that process. You can register through the Department’s Peak Demand Reduction Scheme page to receive updates from the Department about the PDRS and opportunities to give feedback.

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How can I become familiar with new systems and processes?

We will be developing training and information sessions throughout 2022 to help prepare for the PDRS. We will share details of these on our website as they are developed.