The Energy Security Safeguard
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)
  3. incentivise the production of green hydrogen (Renewable Fuel Scheme).
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 and ESS administration and compliance reforms.

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.

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. 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 TESSA (The Energy Security Safeguard Application) 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's annual statement submissions will be online.

  • Stakeholder engagement:

Our 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.

  • 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 schemes.

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.

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.

Our How the PDRS works page provides more details.

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 Office of Energy and Climate Change (OECC) is currently developing the PDRS Rule.  Please visit the Energy website for more information.

The likely activities in the first PDRS Rule have been published on our Activities page based on what we know so far from OECC.  These activities are not final and may change as a result of OECC consultation on the PDRS Rule.

How will peak scheme targets be set?

The peak demand reduction targets are set in the Electricity Supply (General) Regulation 2014. The target will start at 0.5% in 2022-23 and will increase to 10% 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.

How is peak demand reduction calculated?

The Peak Demand Reduction Scheme (PDRS) Rule will set out calculation methods for determining the number of peak reduction certificates that can be created from eligible activities. It is currently being developed by the Office of Energy and Climate Change in consultation with stakeholders. More information is available on the Energy website.

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

The Office of Energy and Climate Change (OECC) is currently developing the PDRS Rule. The PDRS Rule is anticipated to commence in the second half of 2022 but no firm date has been set by OECC (see the Energy website for details).

The key dates for the PDRS rollout are:

  1. PDRS is inserted into the Electricity Supply Act, 24 September 2021.
  2. Acceptance of expressions of interest for PDRS Accreditations, 1 April 2022.
  3. Electricity Supply (General) Regulation updated to include PDRS, date TBC.
  4. Applications for Accreditations accepted offline, late 2022.
  5. PDRS rule commences, late 2022 (dependant on conclusion of OECC consultation).
  6. Registry goes live, November 2022.
  7. First compliance period starts, November 2022.
  8. Start of Scheme Participant liability process, March 2023.
Updated timeline - April 2022
How is responsibility for PDRS split between IPART and the Office of Energy and Climate Change?

The split of PDRS responsibilities between IPART and the Office of Energy and Climate Change is the same as for the ESS.  Refer to the IPART’s role and OECC’s role pages to find out more.

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

The Energy website 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?
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.

The Scheme Participant section of our website provides more information.

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 is available to ACPs that are already accredited for specified activities under the ESS. See the How to apply for PDRS accreditation page for more information.

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 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.

More information is available on the How to apply for PDRS accreditation page.

What are the requirements for certificate creation?

Certificate creation requirements have not yet been finalised. They will be finalised when the PDRS Rule commences in the second half of 2022. The Office of Energy and Climate Change is currently developing the PDRS Rule in consultation with stakeholders.  More information is available on the Energy website.

In the meantime, information about implementing eligible activities and calculation methods is provided on our Activities and Calculation methods pages.

I am an auditor – how will I be affected?

Audits will continue to be a compliance tool used within the schemes. 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 Auditors page for more information on the panel agreement amendments and how to join the Audit Services Panel.

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
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.

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.  More information is available on our News and Events page, which will be updated regularly.

How can I provide input on the PDRS?

The Office of Energy and Climate Change is currently developing the PDRS Rule. You can find more information about the PDRS on the Energy website, including links to consultation and position papers, information about exemptions and details of how to get involved.

How can I become familiar with new systems and processes?

We will offer training and information sessions throughout 2022 to help prepare for the PDRS. More information is available on our News and Events page. We will share more details on our website as they become available.