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Maturing our approach to compliance

Our approach to regulation starts from the premise that responsibility for complying with scheme obligations rests with the individual or organisation to whom the relevant legislation, policy or contract applies. We take a harm prevention approach in the first instance to encourage compliance and pursue non-compliance.

We adopt an intelligence-led, risk-based approach that considers the behaviour and motivation of scheme participants to help determine the appropriate response to non-compliance.

Engagement, education and support are essential to assist scheme participants meet their obligations and avoid inadvertent non-compliance. We provide participants with guidance, resources and support to inform them of their obligations. In addition, our well-established monitoring, audit and assessment processes protect against fraud and non-compliance across all our schemes. This includes assessing submitted reports, analysing data to identify trends, anomalies and behaviours, and conducting audits, site visits and inspections. We also analyse large datasets and use smart algorithms to detect anomalies in behaviour.

Where necessary, we initiate investigations, pursue administrative sanctions or civil action, and refer relevant cases for criminal prosecution in more serious cases of deliberate non-compliance. We publish details of enforcement action on our website.

Audit framework

The National Greenhouse and Energy Reporting Audit Framework helps ensure the integrity of data reported to us under all the schemes we administer and assists us to prioritise compliance, education and intelligence actions. Audits provide assurance for National Greenhouse and Energy Reporting data, the issuance of Australian carbon credit units under the Emissions Reduction Fund and issuance of exemption certificates under the Renewable Energy Target for emissions-intensive trade-exposed facilities.

In 2019–20, we continued to improve our audit framework with an increased focus on risk and non‑compliance. We adapted quickly to the COVID-19 pandemic, providing guidance and support to auditors and regulated entities, through alternative assurance mechanisms, where feasible. As a result, our audit program was not materially impacted.

A total of 301 audits were completed under the audit framework in 2019–20. This included 23 audits initiated at our cost under our risk-based approach. Audit outcomes were:

  • 94 per cent of audits returned a clean opinion, indicating the participant was compliant with scheme requirements audited
  • 5 per cent of audits returned a qualified opinion, indicating the participant was largely compliant
  • 1 per cent of audits returned an adverse finding, where at least one material issue of significant non‑compliance was identified.

In addition, 89 greenhouse and energy auditors were registered under the scheme, and five inspections were undertaken to monitor auditor performance and compliance.

Our compliance outcomes

To support scheme compliance, we take a comprehensive approach to help participants understand how to comply, educate those who want to do the right thing, and deter, detect and respond to non-compliance and misconduct to ensure ongoing scheme integrity.

Each year, we publish compliance and enforcement priorities to increase transparency and accountability of our activities. In December 2019, we published the first compliance update on our activities to address these priorities and promote scheme compliance.

Our 2019–20 scheme compliance priorities and outcomes are summarised in Table 7 below.

Table 7: Compliance and enforcement priorities and outcomes, 2019–20

Scheme

Focus areas

Activities and outcomes

Emissions Reduction Fund

Binding contractual obligations

Ensuring that contractors deliver carbon abatement means the Emissions Reduction Fund continues to contribute to Australia meeting its 2020 and 2030 emissions reduction targets.

Effective monitoring and enforcement arrangements are vital to ensure the integrity of the Emissions Reduction Fund.

In 2019–20, we introduced several reforms to enhance compliance. These include the production of simple method guides to improve the access and quality of information about scheme eligibility, participation and project requirements. We also introduced an enhanced triage system for assessing ACCU crediting applications, which is improving both the timeliness and the effectiveness of agency assessments.

In 2019–20, 13.4 million tonnes of abatement was delivered under contract, with 91 per cent of scheduled deliveries made early or on time.

Adherence to the guidelines for the Human-Induced Regeneration of a Permanent Even-Aged Native Forest and Native Forest from Managed Regrowth methods

Ensuring adherence to the guidelines supports accurate ACCU claims.

We continue to use spatial analysis tools to assess applications for ACCUs for vegetation projects.

This includes use of high-resolution geospatial imagery to check the capacity of projects to deliver carbon abatement.

Adherence to these guidelines continues to support the ongoing integrity of these methods.

National Greenhouse and Energy Reporting

Participants with repeated non-compliance with reporting obligations, particularly where
the data underpins Safeguard Mechanism baselines

Ensuring the consistency and accuracy of emissions and energy data informs policy making, the public and helps meet Australia’s international obligations.

Our aim is to bring non-compliant National Greenhouse and Energy Reporting corporations back into voluntary scheme compliance, while taking stronger action to discourage non-compliance.

In 2019–20, we tightened our resubmission policy and strengthened our regulatory responses in relation to reporters who repeatedly submit inaccurate, incomplete or late data, particularly where the data underpins Safeguard Mechanism obligations.

All entities met their Safeguard Mechanism obligations for 2018–19 by ensuring facilities did not have emissions that exceeded their baselines on or after 1 March 2020. Sixteen Safeguard Mechanism facilities were required to surrender a total of 58,731 ACCUs to manage their emissions below their baselines. A further 131,650 ACCUs were surrendered under deemed surrender provisions, before the statutory deadline.

Renewable Energy Target

Agent’s small-scale renewable technology certificates claims that are not backed by solar panel validation


Using solar panel validation apps is an efficient way for participants to ensure compliance providing higher levels of assurance on small-scale technology certificate claims.

We introduced fast-track processing of small-scale technology certificate claims that use solar panel validation. This helps protect the integrity of the Small-scale Renewable Energy Scheme, giving industry and consumers an easy and real-time tool to check that solar panels are approved by the Clean Energy Council, and therefore eligible for small-scale technology certificates, meet Australian standards and are backed by manufacturer warranty.

Solar panel validation has resulted in:

  • reduced small-scale technology certificate processing times, from 4–6 weeks for non-solar panel validation claims to just 24 hours for claims with solar panel validation
  • reduced scheme participant small-scale technology certificate failure rates
  • a marked reduction in the error rate for small-scale technology certificate claims compared with non- solar panel validation claims, and
  • benefits to scheme participants including cost-savings and a streamlined process.

We also introduced a new practice of accepting manual serial number verification when claims were not supported by solar panel validation.

As at 30 June 2020, 50 per cent of small-scale technology certificate claims were made by solar panel validation, up from 5 per cent in 2018–19.

Small-scale technology
certificate claims from agents that have not completed SRES Smart

Completing SRES Smart allows agents to check
that they have the capabilities to be successful in the Small-scale Renewable Energy Scheme.

As at 30 June 2020, a total of 298 agents had completed SRES Smart. We targeted education activities to engage with agents who did not complete SRES Smart requirements.

Incomplete power station accreditation applications


Ensuring complete applications are lodged reduces regulatory burden on participants and application processing timeframes.

We introduced new functionality in the REC Registry to make it easier for industry to understand the requirements necessary to make a determination on the application.

As a result of the changes and additional functionality, average processing times for power station accreditation applications reduced by more than 60 per cent, from 120 to 45 days.

We also suspended the accreditation of four inactive power stations during 2019–20 as they were no longer producing electricity from an eligible fuel source and failed to submit an electricity generation return.

Auditors

Conducting auditor inspections identifies auditors who have deficiencies.

In 2019–20, we conducted five inspections of registered Category 2 auditors. As at 30 June 2020, one had been finalised with no compliance action required. The remaining four were still being reviewed.

Record-keeping

Auditing helps ensure accuracy and adequacy of record-keeping

Our audit program did not identify any concerns with scheme participants’ record-keeping.

Maturing our approach to compliance

Proactive campaign to target non-compliance and fraud—misuse of installer details in the Small-scale Renewable Energy Scheme

In 2019–20, a significant focus for us was targeting non-compliance and fraud associated with the misuse of Clean Energy Council accredited installer details in the Small-scale Renewable Energy Scheme. The misuse of installer details poses a significant risk to the safety of the community and integrity of the scheme, with broad implications for government and industry stakeholders.

Drawing on data analytics and enhanced data matching capabilities, our intelligence-led strategy was designed to stop the harm, improve participant behaviour and deter future non-compliance across the scheme. In addition to agency-led enforcement action, we continued to work with Commonwealth and state and territory regulators and other authorities to respond to identified non-compliance. This resulted in the following enforcement outcomes:

  • 51 installers referred to the Clean Energy Council for accreditation review
  • 51 installers referred to relevant state or territory electrical safety and/or consumer protection regulators
  • one Clean Energy Regulator Inspector had their appointment revoked
  • two installers entered into enforceable undertakings, and
  • two agents had their registration permanently suspended.

This compliance initiative is ongoing as at 30 June 2020.

Compliance and enforcement action

We undertake investigations in accordance with our Compliance policy for education, monitoring and enforcement activities and the Australian Government Investigation Standards, and leverage off our compliance, detection and intelligence activities.

Where substantive non-compliance or fraud is detected, experienced and qualified investigators, regulatory officers and lawyers work together to collect evidence and determine the most appropriate course of action.

In 2019–20, we received 24 allegations of serious non-compliance with our schemes, leading to five new investigations being opened. All these cases related to potential fraud in the Small-scale Renewable Energy Scheme and involved the recording of false information in the REC Registry or submitting false information or documents to us. In addition to these cases resulting from allegations received, we also opened a further 13 investigations as a result of our enhanced data matching and analytics.

During this same period, we closed 24 investigations. Closed investigations include finalised court matters and matters that have been resolved by non-court action, including accepting enforceable undertakings or suspending the registration of non-compliant participants and removing them from our schemes.

Through our enhanced case management, we reduced the average age of cases from 346 days to 209 days during 2019–20. As at 30 June 2020, a total of 16 investigations remained under investigation.

Table 8: Compliance outcomes, 2019–20

Compliance actions

Total

Allegations assessed

24

Investigations opened

18

Investigations closed

24

Disclosures for compliance cases

204

Notice to produce issued to obtain relevant information from third parties

51

Permanent suspensions of registered persons

6

Inspector appointments revoked

2

Monitoring warrants executed

0

Search warrants executed

0

Court action

During 2019–20, we had two successful criminal prosecution outcomes. One defendant was sentenced to a term of imprisonment of four years and six months for fraud offences, which resulted in him obtaining a dishonest gain of $399,000 over a period of 12 months. The defendant in the second matter received a $5000 fine after he dishonestly claimed he had conducted solar installations for which he was not present, resulting in the improper creation of small-scale technology certificates.

Enforceable undertakings

In 2019–20, we accepted enforceable undertakings from seven scheme participants (Table 9). Six enforceable undertakings were given under the Renewable Energy (Electricity) Act 2000, while one (Country Carbon Pty Limited) was given under the Carbon Credits (Carbon Farming Initiative) Act 2011.

Four enforceable undertakings were completed during the reporting year, as Emerging Energy Solutions Group Pty Ltd, EDL LFG (SA) Pty Ltd, Green and Gold Solar Australia Pty Ltd, and P & N NSW Pty Ltd complied with the terms of their undertakings.

Table 9: Enforceable undertakings accepted, 2019–20

Entity

Date accepted

Allegation summary

Mr Sandeep Chikhale and SSC Electrical Services Pty Ltd

26 June 2020

Submission of false information that Mr Chikhale either supervised or completed the installation of solar PV systems. This false information was relied on to create small-scale technology certificates.

Mr Ryan Mulhern

29 May 2020

Submission of false information that Mr Mulhern either supervised or completed the installation of solar PV systems. This false information was relied on to create small-scale technology certificates.

Country Carbon Pty Limited

28 May 2020

Failure to comply with obligations under the Carbon Credits (Carbon Farming Initiative) Act 2011.

Trina Solar (Australia) Pty Ltd

7 May 2020

Incorrect information uploaded by Trina Solar into the solar panel validation service as to the eligibility of certain solar panels for small-scale technology certificates.

GB Environmental Trading Pty Ltd

24 October 2019

Improper creation of 1128 small-scale technology certificates after unknowingly receiving false information from a third party.

More Green Energy Pty Ltd

18 October 2019

Improper creation of 5090 small-scale technology certificates. Green Energy Pty Ltd compliance procedures did not identify that the solar panels were non-compliant.

Nasir Taimoor Kahloo

22 July 2019

Improper creation of 6577 small-scale technology certificates arising from the provision of false information.