Executive summary of update

This update introduces significant changes to NSW's energy schemes, primarily by creating new compliance exemptions for energy storage and recalibrating future targets. A new exemption for "scheduled bidirectional units" (e.g., large-scale batteries) reduces compliance obligations under the Energy Savings Scheme (ESS) and Peak Demand Reduction Scheme (PDRS). The update also drastically reduces the PDRS target for 2026-2027 from 7.5% to 0.5%. Furthermore, it effectively defers the start of the Renewable Fuel Scheme by removing targets for 2024-2026 and significantly lowering the initial 2027 target. Finally, it amends the formulas for calculating ESS penalties and certificate fees, moving to a fixed base-year calculation. The primary intent is to support energy storage technologies and adjust the ambition of demand reduction and green hydrogen schemes.

Impacted parties

This update most significantly impacts scheme participants in the Energy Savings, Peak Demand Reduction, and Renewable Fuel schemes, particularly operators of energy storage assets and prospective green hydrogen producers.

Change Analysis

1. New Compliance Exemptions for Energy Storage

• What has changed**: A new definition for scheduled bidirectional unit has been added in Clause 3. New clauses 29AAA and **59D have been inserted, which state that electricity purchased for use by these units is not considered a "liable acquisition". This means such electricity purchases are now excluded from the calculation of a scheme participant's compliance obligations under the Energy Savings Scheme (ESS) and the Peak Demand Reduction Scheme (PDRS).
• Why it matters: This change creates a significant financial benefit for operators of large-scale energy storage systems, such as grid-scale batteries. By exempting the electricity they consume for charging, it lowers their compliance costs under two major state-based schemes. This improves the business case for investment in energy storage, aligning with broader energy transition goals to support grid stability and the integration of renewables.

2. Significant Recalibration of Scheme Targets

• What has changed**: The update makes two major changes to scheme targets. First, in Clause 60, the Peak Demand Reduction Scheme (PDRS) target for the 2026–2027 compliance period has been reduced from 7.5% to 0.5%. Second, in Clause 63, the Renewable Fuel Scheme targets for 2024, 2025, and 2026 have been removed entirely. The scheme's first compliance year is now 2027, with the target for that year reduced from 1,780,000 GJ to 180,000 GJ. Consequently, the reporting requirement for 2024 under **Clause 63B has been repealed.
• Why it matters: These changes represent a substantial recalibration of the state's short-to-medium term ambitions for demand reduction and green hydrogen production. The PDRS target reduction lessens the compliance burden on liable entities for that year....