Framework Agreement on the establishment of the International Solar Alliance
This chapter examines the Framework Agreement on the establishment of the International Solar Alliance (the Framework Agreement). Australia signed the Agreement on 18 July 2017 and it was tabled in the Parliament on 4 September 2017.
The Framework Agreement establishes the International Solar Alliance (ISA). Membership of the ISA is open to those solar resource rich States which lie fully or partially between the Tropic of Cancer and the Tropic of Capricorn, which are members of the United Nations, and which have signed the Agreement and have deposited an instrument of ratification, acceptance or approval. There are 121 countries that fall within these geographic and institutional boundaries.
As at 1 November 2017, 43 countries have signed and thirteen have ratified the Framework Agreement.
The Department of the Environment and Energy assured the Committee that other substantial economies such as the United States of America (USA), China and Brazil are discussing the possibility of joining the ISA. Countries that do not meet the geographical or institutional requirements are considering partner-country status so as to be able to participate in the development of projects.
Overview and national interest summary
According to the National Interest Analysis (NIA), the ISA is a treaty level inter-governmental organisation whose membership is expected to collectively address key common challenges to the scaling up of solar energy. The ISA aims to deepen cooperation on solar research and development, financing mechanisms, and diffusion of solar technologies amongst countries in the tropics.
The Framework Agreement was drawn up by India, in consultation with France, and with India as the depository.
The NIA states that it is proposed that the ISA be governed by an Assembly, on which each member is represented, to make decisions concerning the implementation of the Agreement. The Assembly is expected to meet annually at the Ministerial level and make all decisions regarding the functioning of the ISA.
According to the NIA, the aim of the ISA is to explore models for public-private partnership and encourage private sector investment for its projects.
The thirteen countries that have completed ratification of the proposed Agreement are Bangladesh, India, Ghana, Fiji, France, Mauritius, Nauru, Niger, Mali, Seychelles, Somalia, South Sudan and Tuvalu.
The Department of the Environment and Energy told the Committee that the founding summit for the ISA is to be held in India on 8 December 2017 providing a ‘small window of opportunity’ for Australia to become a founding member. This could provide a number of benefits for Australia:
As a founding member, Australia could influence the ISA’s governance arrangements and could also have the opportunity to shape ISA’s forward direction from the outset. We would work with other members to help ensure ISA complements the work of other relevant international organisations to ensure that we don’t have crossover and overlap, and we would also advocate for transparency in governance.
Reasons to take the proposed treaty action
The NIA maintains that the ISA initiatives to date align closely with Australia’s experience, expertise and research in solar and mini-grids technologies. The ISA is expected to facilitate Australian business, investment and research opportunities through international linkages and harmonisation of technologies and procedures in the region. The Department of the Environment and Energy stressed the benefits membership of the ISA presents for Australia:
Australia is a world leader in the solar sector, with the highest average solar radiation per square metre of any continent in the world. Joining the ISA would provide us with an opportunity to promote our expertise and experience internationally and would also have the capacity to attract investment and project partners into Australia and enhance domestic industry.
The NIA suggests that participation in initiatives to develop standardised financial instruments and risk management strategies for the deployment of solar technologies at scale across the ISA region could lead to significant business opportunities for Australia. As a member of the ISA, Australia may have an opportunity to share skills and expertise in solar energy technology integration, and assist in improving global capability.
The NIA expects membership of the ISA to increase opportunities for research linkages and commercialisation of new technologies with Australia’s existing solar research institutions. The NIA states that there are numerous programs underway with the potential to complement the work of the ISA.
According to the NIA, the ISA is intended to facilitate collaboration between countries lying fully or partially between the Tropics of Cancer and Capricorn. In some of these countries, large sections of the population have little or no access to energy, including many of Australia’s neighbours in the Indo-Pacific region. Therefore it suggests that ratification of the Framework Agreement is expected to enhance Australia’s networks for the exchange, development and improvement of solar energy technologies. It may also bring further international attention and solutions to the energy issues and challenges faced by communities in this region.
The Department of the Environment and Energy provided an example of the types of projects and the flow on benefits that can arise for Australian industry from the type of projects involved:
Recently, the bush light India remote electrification project resulted from expertise that was gained in remote electrification in Australia. Demonstration projects that followed from that in India won the highest Engineering Excellence Awards in Australia. They worked in collaboration with the Indian government and non-government partners to develop enduring solutions to energy access for remote and regional villages. That is one example of where you could see a company using the ISA to gain footholds into both providing renewable energy and, for the first time in some instances, electrification in remote and regional areas in some of those countries …
The NIA expects ISA membership to provide an opportunity for Australia to deepen cooperation with key strategic partners, India and France, and to reinforce dialogue with other members of the ISA. Ratification is seen as highlighting Australia’s commitment to the Paris Agreement, including its support to help other countries achieve their Nationally Determined Contributions. The ISA is expected to contribute to achieving the Paris Agreement goals, as it strives to promote solar technologies and investment, develop innovative finance mechanisms and support capacity building.
The NIA states that the provisions of the Framework Agreement are set out in aspirational language and do not mandate members taking certain action.
Article IV: The Assembly, the supreme decision-making body of the ISA, will consist of representation from each member, and will meet annually unless it decides otherwise. Each member will have the right to participate in all of the decisions taken by the Assembly, including on the budget and work programme, and applications for membership.
Article V: The ISA will establish a Secretariat comprised of a Director General, who is the Chief Executive Officer, and other staff as may be required.
Article VI: The ISA has no membership or joining fee. Funding will come from voluntary contributions from Members, Partner countries, the United Nations (UN) and its agencies and other countries. Voluntary contributions will also be sought from the private sector and revenue generated from specific activities.
Article X(3) provides that privileges and immunities ‘may’ be accorded to the ISA Secretariat, subject to the National Laws of each Member and ‘in accordance with a separate Agreement, if necessary’.
Entry into force
The NIA states that the Framework Agreement will not establish new substantive legal obligations and Australia will therefore not enact implementing legislation.
Australia will be required to nominate a National Focal Point for the ISA which will act as Australia’s correspondent with the ISA members. It is proposed that the National Focal Point will also interact with relevant stakeholders to identify areas of common interest, design Programme proposals and make recommendations to the Secretariat regarding the implementation of the objectives of the ISA.
The Department of the Environment and Energy will be the National Focal Point for Australia.
As stated in Article VI no financial contribution is required. However, the NIA suggests that Government could consider supporting ISA projects as they arise through Australia’s aid program or multilateral partnerships, in consultation with aid partner governments and multilateral partners and in line with their priorities.
The Committee queried the balance between aid funding and industry development. The Department of Foreign Affairs and Trade (DFAT) and the Department of the Environment and Energy admit that initial funding is expected to come from the overseas development assistance (ODA) budget but insist that long term opportunities exist for Australian industry:
I don’t think this will have any impact on our domestic energy business in the short to medium term. In the longer term, there may be advantages for Australia with respect to any potential projects that come out of the ISA facilitation that are then reapplied into Australia. I don’t see that happening in the shorter term. I think, in the short to medium term, we primarily view through this the prism of (1) we currently have an ODA budget that supports ISA compliant projects and (2) we have experience in public-private partnerships and innovative financing of projects for solar. We think that those models are applicable and can be applicable to other countries and that expertise will be valuable. It’s also a way for us to be at the forefront of trying to facilitate our Australian industry and businesses–both small to medium and large businesses–in terms of their active engagement in solar energy penetration in other countries.
Over time it is expected that ISA initiatives will reduce dependence on aid funding:
… this has the potential to reduce ODA reliance in these countries, with respect to solar technology deployment and upscaling, primarily because this is a way to facilitate both research and industry engagement in public-private partnerships that are not then completely reliant on ODA funding from various countries.
The Department of the Environment and Energy explained that the role of the ISA is as a broker or facilitator not a direct funder of projects:
… the public-private partnership model potentially looks at partners from the ISA going to the World Bank, where the World Bank will cover the risk component in terms of the investment profile. What this opens up is a whole range of innovative financing models that allow the ISA to help broker projects …
The Committee asked if the Department of the Environment and Energy had directly consulted with industry to ascertain potential benefits of Australia joining the ISA. The Department has consulted with industry and research stakeholders in the solar and power sectors and informally with a range of other stakeholders. The overall response was positive:
These stakeholders could see the benefit of joining the ISA, particularly through the aggregation of demand and increasing the ease of doing business in the region. Much of the time and cost of individual project development is spent in consultations with local residents, governments and non-government organisations to understand the local environment and regulatory processes before the technical aspects of the system are even addressed.
The harmonisation of equipment standards, testing and installation procedures, along with access to affordable finance and collaboration on research and innovation would all be factors that would facilitate Australian industry doing business in ISA Member countries.
The Committee notes the aspirational nature of the Framework Agreement and acknowledges that it opens the way for Australia to promote its expertise and experience in the field of solar technology.
The Committee supports ratification of the Framework Agreement and recommends that binding treaty action be taken.
The Committee supports the Framework Agreement on the establishment of the International Solar Alliance and recommends that binding treaty action be taken.