BILLS DIGEST NO. 74, 2011–12, 9 November 2011

Australian Renewable Energy Agency Bill 2011

Juli Tomaras
Law and Bills Digest Section

Date introduced:  12 October 2011

House:  House of Representatives

Portfolio:  Resources and Energy

Commencement:  1 July 2012

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill's home page, or through http://www.aph.gov.au/bills/. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.

Purpose

The Bill would establish within the Resources, Energy and Tourism portfolio, the Australian Renewable Energy Agency (ARENA) as an independent statutory agency.

The Bill provides for ARENA’s governance and financial arrangements, establishing the Board and the position of Chief Executive Officer. It also provides for the appointment of Members and their conditions, requiring expertise in renewables and the commercialisation of new technologies, as well as business and investment skills.

Background

Basis of policy commitment

The Clean Energy Future Plan[1] which the Federal Government announced on 10 July 2011, proposes some significant incentives for renewable energy and represents part of the Government’s efforts in endeavouring to provide a comprehensive response to the challenge of reducing greenhouse gases. The Government’s efforts to develop these new low emissions energy technologies are directed towards a few broad areas: energy efficiency, low-emissions coal and renewable energy sources. Renewable energy includes hybrid technologies.

The carbon price is expected to play significant role in creating commercial incentives to move away from traditional high-pollution energy solutions and to encourage the adoption of low-pollution alternatives. However, the Government has recognised that the ‘scale of the transformation and the imperative to change’ necessitate ‘additional measures to support innovation and investment in clean energy’.[2] Thus the other components of the Clean Energy Plan, which will combine to drive an expansion of clean energy sector, are the Renewable Energy Target (RET), the Clean Technology Innovation Program[3], the Clean Energy Finance Corporation[4] and ARENA.

The legislated RET is expected to deliver an outcome of 20 per cent of Australia’s electricity supply being sourced from renewable energy generation by 2020.[5] While the expanded RET is meant to act as an incentive to hasten the uptake of renewable energy sources, the development of the industry itself remains hamstrung by commercial and technical issues. Developing renewable energy and enabling technology to a stage where they promise to be competitive with existing energy technologies, will require financial support to assist with the development and commercialisation of emerging renewable and enabling energy technologies. As the national renewable energy technology body, ARENA’s role will be to provide this necessary injection of funding for such activities to happen in a coordinated and coherent manner. The role of ARENA’s Board in facilitating these outcomes is outlined in Part 2, Division 1, clause 18 of the Bill.

ARENA will be responsible for the funding and administration of $3.2 billion of existing government funding in research and development. This will include the demonstration and commercialisation of renewable energy technologies through competitive grants.  These projects are currently administered separately through a range of bodies. ARENA will bring together existing funding and programs delivered by the Australian Centre for Renewable Energy, the Australian Solar Institute, the Department of Resources, Energy and Tourism and the proposed Biofuels Research Institute. This consolidation is aimed at providing for a more efficient, consistent, streamlined and long-term approach to existing funding programs.

The Government has stated:

ARENA will also receive future funding from discretional dividends paid by the Clean Energy Finance Corporation and a share of future carbon pricing mechanism revenue should the Jobs and Competitiveness Program be modified following Productivity Commission reviews.[6]

Committee consideration

This Bill was referred to the Senate Environment and Communications Committee, which reported on 7 November 2011. Details of the inquiry can be found at the inquiry webpage[7]. The majority were supportive of the Bill while recognising there were uncertainties regarding funding. The Opposition members did not oppose the Bill but noted they may choose to oppose specific funding arrangements in due course. The majority also noted that only a short time frame was allowed for the inquiry.[8]

Financial implications

The Explanatory Memorandum states that the Bill will have neutral impact on the Australian Government Budget.[9]

Key provisions

Part 1—Preliminary

The object of the Act is to improve the competitiveness of renewable energy technologies and to increase the supply of renewable energy in Australia (clause 3).

Part 2—Australian Renewable Energy Agency

Clause 8 provides that ARENA’s functions are:

To provide financial assistance for:

·         the research, development, demonstration and commercialisation or deployment of renewable energy technologies and

·         the storage and sharing of information and knowledge about renewable energy technologies.

To provide advice to the Minister in relation to renewable energy technologies, including advice in relation to the following:

·         improving the competitiveness of renewable energy technologies

·         increasing the supply of renewable energy in Australia

·         improving skills development in the renewable energy technology sector, or

·         increasing the use of renewable energy technologies.

Liaising with state and territory governments and other authorities to facilitate renewable energy projects for which financial assistance is (or is proposed to be) provided. Any other functions prescribed by regulations, or conferred by this Act or any other Commonwealth law.

In addition to those and any other powers conferred by the Act, ARENA has, subject to the Act, the power to do all things necessary or convenient to be done in connection with the performance of its functions, for example, entering into contracts, acquiring, holding and disposing of real and personal property (clause 15).

ARENA does not have privileges and immunities of the Crown, other than those set out in the legislation or the Commonwealth Constitution (clause 16).

Probity in performing its functions

In performing its functions, ARENA must act in a proper, efficient and effective manner, ensuring that its decisions about the provision of financial assistance are based on merit. If appropriate, ARENA must act collaboratively with other persons, organisations and governments, and promote the sharing of information and knowledge about renewable energy technologies (clause 9).

Clause 10 provides that ARENA must not enter into an agreement for the provision of financial assistance unless the financial assistance provided is in accordance with the general funding strategy in force under clause 19.

The Minister may request that ARENA consider providing funding for a particular project (clause 11). And, Ministerial approval is required where grants exceed $50 million (clause 12). Details of requests made by the Minister under clause 11 must be published in the annual report (clause 70).

Clause 13 provides that the Minister may direct ARENA to provide advice to the Minister in relation to:

·         improving the competitiveness of renewable energy technologies

·         increasing the supply of renewable energy in Australia

·         improving skills development in the renewable energy technology sector, or

·         increasing the use of renewable energy technologies.

ARENA must comply with the direction, and particulars of the direction must be included in the annual report (clause 70).

Constitutional limits

Clause 14 circumscribes constitutional limits around the performance of ARENA’s functions. Thus in general terms, ARENA would be likely to exercise its power to provide financial assistance to, or for the benefit of, a foreign, trading or financial corporation, or in order to give effect to Australia’s obligations under the Climate Change Convention, or another international agreement to which Australia is a party.[10] Other constitutional bases are listed under clause 14. These include a wide array of Commonwealth powers including collection of statistics, trade and commerce and the granting of financial assistance to a state. 

Part 3—Board of ARENA

Division 1—Establishment and functions of ARENA

Clause 18 provides that the functions of the Board relate to:

·         making general funding strategies, guidelines and work plans

·         deciding other strategies, objectives and policies to be followed by ARENA (ensuring it complies with the Act), and

·         to do all things necessary or convenient in connection with the performance of its functions.

Division 2—General funding strategy, guidelines and work plans

Clause 19 provides that for each financial year, the Board must develop a funding strategy which must relate to that financial year and for the next two financial years. A general funding strategy must not require financial assistance to be provided to a particular person or for a particular project.

Once the general funding strategy has been developed, it must be given to the Minister for approval. The approved funding strategy is a legislative instrument made by the Minister on the day on which the strategy is approved. However, section 42 (disallowance) of the Legislative Instruments Act 2003 (LI Act) does not apply to a general funding strategy (clause 20). The Explanatory Memorandum states that ‘this is consistent with the position of Ministerial directions to a Commonwealth Authorities and Companies Act 1997 (CAC Act) body, which are not legislative instruments by virtue of item 5 of the table in section 7 of the LI Act’.[11]

The Board must, during a financial year, regularly review the general funding strategy that is in force for the year and consider any variations that should be made (clause 22).

Clause 23 provides that the general funding strategy is to be published on ARENA’s website. However, a timeliness requirement has not been explicitly provided. The requisite time frames for publication are not spelt out, other than by the implicit reference to strategies that are in force from ‘time-to-time’.

Guidelines for the provision of financial assistance

Clause 24 provides that the Board may develop guidelines (which must be in writing) in relation to the provision of financial assistance under the Act, but these are not legislative instruments and may be varied or revoked by the Board.

However, the Board must develop guidelines for a grant or program if under the program, the total of all grants for a particular project could exceed $15 million (clause 25). These guidelines and any variation (unless it is minor in nature) must be given to the Minister for approval (clause 25).

Clause 26 provides that the guidelines that are in force from time-to-time must be published on ARENA’s website.

Work plans

Clause 27 requires that work plans be developed for 2012—13 and subsequent years. The work plan for that year should set out the general funding strategy and how it is to be implemented. Before finalising the work plan or a variation of the plan, the Board must prepare a draft of the plan or variation and give it to the Minister, having regard to any comments or requests made by the Minister in relation to that draft. ARENA, the Board and CEO must take into account that work plan when performing functions and exercising powers (clause 28).

Division 3—Board Members

Clause 29 provides that the Board shall be composed of up to six appointed Members (including a Chair) and the Secretary.

Clause 30 provides that Members of the Board (other than the Secretary) are to be appointed by the Minister in writing and on a part-time basis, and for a period that does not exceed 2 years (clause 32). In deciding these appointments, the criteria that must inform the Minister’s decision are that the Minister is satisfied that a person has knowledge of, or experience in, at least one of the following fields:

·         renewable energy technology

·         commercialisation

·         business investment, or

·         corporate governance.

·         Comment

It may be useful to require that to the extent possible, Members of the Board have between them experience covering all the above mentioned areas, otherwise there may be critical gaps in knowledge or experience.

Clause 36 deals with the disclosure of the interests of a Member. A Member must give written notice to the Minister of all interests, pecuniary or otherwise, that the Member has, or acquires, which conflict, or could conflict, with the proper performance of the Member’s functions.

Comment

There is no clause which provides that a Member who has an interest, pecuniary or otherwise, in a matter being considered or about to be considered by the Board must disclose the nature of the interest to a meeting of the Board. Disclosure to the Minister may be important but it could be equally important that the Board itself be informed.

Clause 38 deals with the termination of appointment of a Board Member. The Minister may terminate an appointment of a Member for misbehaviour or physical or mental incapacity. Consistently with common practices for a statutory authority, the Minister may also terminate an appointment in circumstances where:

·         the Member becomes bankrupt; or applies to take the benefit of any law for the relief of bankrupt or insolvent debtors; or makes an assignment of their remuneration for the benefit of his or her creditors, or compounds with his debtors

·         the Member is absent (except for leave of absence) from three consecutive meetings of the Board, or

·         the Member fails, without reasonable excuse, to disclose interests in compliance with section 36, or fails to comply with section 27F or 27J of the CAC Act. These sections of the CAC Act deal with disclosure of, and voting on matters involving, material personal interests.

Division 4—Meetings of the Board

Clause 40 provides that meetings must be held as is necessary for the Board to efficiently perform its functions. At least six meetings must be held each calendar year and the Chair must convene a meeting if requested in writing by three or more Members or the Minister.

Division 5—Committees

The Board may establish committees to advise or assist in the performance of ARENA’s functions or the Board’s functions. The Board may be constituted wholly by Board Members or wholly by persons who are not Board Members or partly by Board Members and other persons. The Committee’s terms of reference are to be established by the Board (clause 48).

Part 4—Chief Executive Officer, staff and consultants

Clause 52 provides that the CEO is to be appointed by the Minister on the recommendation of the Board. The CEO must not engage in paid employment outside the duties of his or her office without the Minister’s approval (clause 54).

The CEO must give written notice to the Minister of all material personal interests that they have or acquire and that conflict or may conflict with the proper performance of their duties (clause 57).

Clause 59 provides that the Minister may terminate the appointment of the CEO in certain circumstances.

Clause 62 provides that staff may be engaged under the Public Service Act 1999, to assist the Board. Consultants and other persons may also be engaged to assist the Board (clause 63).

Part 5—Finance

This part deals with the provision of funding for ARENA’s operations, ensuring that it holds an appropriate amount of money to meet its obligations under agreements to pay financial assistance.

Subclause 64(1) sets out the amounts which would be available for payment by the Commonwealth to ARENA in each financial year from 2012-13 to 2019-20.[12]

Part 6—Miscellaneous

Clause 70 lists extra matters to be included in the annual report. These include:

·         for each person who has been given or promised financial assistance, the particulars of that person and the financial assistance and the RET to which the assistance relates

·         an assessment of the extent to which agreements for the provision of financial assistance entered into during the year have progressed, or are expected to progress, the principle objectives and priorities stated in the general funding strategy in force for that year, and

·         requests and directions given to ARENA by the Minister.

There is a general regulation making power given to the Governor-General in clause 74.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2404.

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ISSN 1328-8091

[1].               Australian Government, ‘Securing a clean energy future: the Australian Government’s climate change plan’, Clean Energy Future website, pp. 133‑134, viewed 11 July 2011, http://www.cleanenergyfuture.gov.au/wp-content/uploads/2011/07/Consolidated-Final.pdf

[2].               Ibid., p. xvi.

[3].               The $200 million Clean Technology Innovation Program is part of the Clean Technology Program and is expected to provide further support for businesses to support research and development in renewable energy and other low‑pollution measures, Clean Energy Future Plan, op. cit, p. 64.

[4].               The Clean Energy Finance Corporation will invest in the commercialisation and deployment of renewable energy, energy efficiency and clean technologies.

[5].               Australian Government, Securing a clean energy future: the Australian Government’s climate change plan, op. cit., p. 64.

[6].               Ibid., p. 66.

[7].               Senate Standing Committee on Environment and Communications, Inquiry into the Australian Renewable Energy Agency Bill 2011, 13 October 2011, viewed 9 November 2011, http://www.aph.gov.au/Senate/committee/ec_ctte/arena/index.htm

[8].               Ibid.

[9].               Explanatory Memorandum, Australian Renewable Energy Agency Bill 2011, p. 1.

[10].               Ibid., pp. 5—6.

[11].               Ibid., p. 7.

[12].               Ibid., p. 16.