Unpacking Victoria’s Waste to Energy Cap Licence Regulations

This article was co-authored with Eliza Dean.

• Introduction
• Recap of Victoria's WtE Scheme
• Key changes made to the Cap Regulations
• Key Aspects of the Cap Licensing Regime

Introduction

On 17 December 2024, the amended Circular Economy (Waste Reduction and Recycling) (Waste to Energy Scheme) Regulations 2023 (Cap Regulations) came into effect under the Circular Economy (Waste Reduction and Recycling) Act 2021 (Vic) (CE Act).

The CE Act introduced the concept of a cap limit, being the prescribed maximum aggregate amount (in tonnes per financial year) of permitted waste that may be processed by thermal waste to energy (WtE) facilities in Victoria (Cap Limit).

The Cap Regulations build on and amend the first stage of Victoria's WtE Scheme Regulations, the Circular Economy (Waste Reduction and Recycling) (Waste to Energy Scheme) Regulations 2023 (Existing Regulations), covered in our previous legal updates available here and here.

The Cap Regulations:

• for the first time set a legislated Cap Limit of 2 million tonnes per financial year;
• outline the cap licensing requirements that apply:
  • to operators of new WtE facilities;
  • to operators of new WtE facilities who later seek to increase the cap amount in their cap licence;
  • to Existing Operators seeking to increase the amount of permitted waste which can be processed at their existing facilities;
  • if there is an unutilised or unallocated amount under the Cap Limit and the Head, Recycling Victoria decides to issue a request for expressions of interest.
• prescribe mandatory considerations that the Head, Recycling Victoria must take into account when deciding whether to:
  • invite a person to submit a cap licence application; and
  • issue a cap licence.

This legal update provides a snapshot of the Cap Regulations and sets out:

• a recap of Victoria's WtE Scheme;
• key changes to the Cap Regulations made following the consultation period on the draft version of the Cap Regulations; and
• key aspects of the Cap Regulations (including the process to obtain a cap licence or review decisions made by the Head, Recycling Victoria).

Recap of Victoria's WtE Scheme

The WtE Scheme is designed to both reduce waste sent to landfill and as part of broader policy reforms, prioritise waste avoidance and recycling to drive a sustainable and thriving circular economy.

Under the CE Act, thermal WtE operations processing 'permitted waste' must hold a licence. The WtE Scheme currently provides for two types of WtE licences:

1. Existing Operator Licences (EOLs), reserved for thermal WtE operators that were already operating or had appropriate approvals in place prior to 1 November 2021 (Existing Operators). Applications for EOLs closed on 4 December 2023, and no further EOLs can be issued as all relevant EOLs have been issued under the Existing Regulations.
2. Cap licences authorise the processing of a specified amount of permitted waste in each year under the Cap Limit, referred to as an 'allocated cap amount' (Cap Licence). Cap Licences are required for any new thermal WtE operators intending to process permitted waste in Victoria or to expand existing WtE facilities (including facilities where EOLs have been issued).
   
   Expressions of Interest (EOI) for the Cap Licence process commenced on 17 December 2024 and will close on 17 February 2025.
   
   Successful applicants, invited to apply for a Cap Licence will need to do so by 28 April 2025.

Key changes made to the Cap Regulations

Key changes included in the Cap Regulations following public consultation on the draft version of the Cap Regulations include:

• increasing the proposed Cap Limit from 1 million tonnes to 2 million tonnes per financial year.¹ The Victorian Government's recently updated economic policy reflected in the Economic Growth Statement released on 10 December 2024, indicates the Cap Limit is expected to increase to 2.5 million tonnes per annum in 2025.
• removing the proposed fee for an application to decrease the allocated cap amount for a WtE facility;
• increasing the threshold size of a WtE facility from 30,000 tonnes per annum (tpa) to 80,000 tpa which triggers a larger Cap Licence application fee while keeping the Cap Licence application fee the same for small facilities. This benefits smaller facilities who will pay half the cost ($17,065) of the fee for a large facility Cap Licence; and
• removing regulatory overlap in mandatory considerations for licensing decisions.

A key change from the draft version of the Cap Regulations, is that details of any planned, completed, or ongoing engagement with local community and traditional owners must be provided in a prospective applicant's EOI rather than in their application for a Cap Licence. This emphasises the need to appropriately consider and manage aspects of obtaining a 'social licence' to operate from the earliest stages of a WtE project's development.

In addition, in considering the Cap Licence application the Head, Recycling Victoria is required to consider details of any feedstock, energy or by-product offtake agreements the applicant has or will enter into. This means that prospective Cap Licence holders should start considering the offtake agreements they may need to enter into.

Key Aspects of the Cap Licensing Regime

Cap Licences - two stage application process

Cap licensing involves a two stage process: responding to an EOI invitation and a formal application stage (once an applicant is invited to submit an application for a Cap Licence).

See a schematic overview of the process in 'Figure 1: EOI and Cap Licence process' below.

EOI Stage

Prospective Cap Licence applicants must first be invited to submit an EOI by the Head, Recycling Victoria.² EOIs must be submitted by 17 February 2025, together with the prescribed fee.³

The Head, Recycling Victoria must then determine if the prospective applicant: a) may apply for a Cap Licence; or b) must not apply for a Cap Licence.

When assessing EOIs for either new Cap Licences, the increase of an Existing Operators' permitted waste amount, or an increase in a WtE facility's allocated cap amount, the Head, Recycling Victoria must consider the prescribed matters which are now outlined in Regulation 10A of the Cap Regulations including:⁴

• the source, composition, material type and weight of the 'permitted' and 'exempt' waste proposed to be processed at the WtE facility;
• the proposed technology to be used by the WtE facility and its ability to both process the facility's waste and accept different feedstock to that proposed by the applicant;
• any advice or information from the EPA provided to the Head, Recycling Victoria about the potential environmental or compliance risks posed by the WtE facility;
• details of any other relevant approved or pending applications for permissions under the Environment Protection Act 2017 or the Planning and Environment Act 1987; and
• the applicant's planned, completed or ongoing engagement with both the local community and Traditional Owners.

Formal application stage

Only 'approved applicants' that are successful at the EOI stage can be invited to apply for a Cap Licence. Those who receive invitations from the Head, Recycling Victoria to apply for a Cap Licence will then have until 28 April 2025 to submit their application together with the prescribed fee.⁵

The Head, Recycling Victoria will then review applications and decide whether to issue a Cap Licence to the relevant facility, with an expected notification date to all applicants on the outcome of their Cap Licence application of no later than 30 June 2025.

Since the draft version of the Cap Regulations was published, changes have been made to the factors the Head, Recycling Victoria must consider in deciding whether to issue a Cap Licence, including:⁶

• whether the facility will contribute (and the extent to which it will contribute) to an efficient waste infrastructure system considering sources of suitable feedstock and offtake destinations for energy and other output products;
• the commercial viability of the facility, considering any commercial milestones achieved and yet to be achieved;
• details of any relevant feedstock agreements the applicant has obtained or is seeking;
• details of any energy or by-product offtake agreements applicant has obtained or is seeking;
• information relevant to the applicant's environmental, planning, safety and other permits or licences associated with the facility's development or operation as provided to the Head, Recycling Victoria;
• economic benefits associated with the facility, including employment opportunities created by the construction and operation of the facility; and
• energy outputs and offtakes of the facility and how these contribute to efficient energy fuels or products.

Cap Licence conditions

While standard conditions will be applied to all Cap Licences (i.e., the facility must be fully operational by the date specified on its Cap Licence), the Head, Recycling Victoria also has discretion to apply facility-specific conditions on a case by case basis.

Facility-specific conditions address specific issues associated with either a class of facilities or a particular proposed facility (such as specific milestone and commissioning dates). Where non-compliance with a licence condition occurs or is likely to occur, the licence holder must notify the Head, Recycling Victoria as soon as practicable.

Where sufficient notification is provided, the Head, Recycling Victoria will then assess if it is appropriate to vary the condition, i.e., to amend the date for commissioning of the facility, or whether other actions are more appropriate (such as suspension or revocation of the Cap Licence).

Decreasing an allocated cap amount

Cap Licence holders should ideally process an amount of permitted waste as close as possible to their allocated cap amount in each financial year and suspended Cap Licences are taken into account in determining whether the Cap Limit has been met.

If a licence holder consistently processes an amount that is significantly less than their allocated cap amount:

1. the facility's licence holder can apply to Recycling Victoria to decrease their allocated cap amount for the WtE facility, noting that due to the changes included in the Cap Regulations, a licence holder does not need to pay a prescribed fee to do so;⁷ or
2. the Head, Recycling Victoria may request the licence holder to explain why they are processing less waste, issue an information gathering notice requiring the facility to produce information relevant to the decrease of processed waste, or amend the Cap Licence under the CE Act to decrease the allocated cap amount.

If a Cap Licence holder consistently fails to utilise their cap allocation, or to appropriately build, commission, maintain or operate their facility, Recycling Victoria may suspend (for not more than 12 months) or revoke the Cap Licence.

What happens if there is a residual WtE Cap amount remaining within the prescribed Cap Limit?

Where the Head, Recycling Victoria decreases the allocated cap amount in a Cap Licence or revokes a Cap Licence, they may choose to reopen EOIs to reallocate the remaining cap amount.

Reopening EOIs is at the discretion of the Head, Recycling Victoria because Recycling Victoria may issue Cap Licences up to the Cap Limit, but is not under any obligation to issue licences to fully subscribe the Cap Limit.

Review of a Cap Licence decision

Decisions arising from the EOI Stage can only be contested through an application to the Supreme Court for judicial review.

A review of a decision by the Head, Recycling Victoria by the Victorian Civil and Administrative Tribunal (VCAT) can be instituted if:

• the Head, Recycling Victoria refuses to issue a Cap Licence at the formal application stage; or
• the holder of a Cap Licence wishes to have a condition in the Cap Licence amended or removed.

Notably VCAT does not have the power (in respect of cap licensing decisions) to vary or set aside the decision under review and substitute the decision. If an applicant seeks a review, VCAT can only affirm the cap licensing decision or return the decision to the Head, Recycling Victoria for reconsideration in accordance with VCAT's directions or recommendations.