Chapter 1


Chapter 1

Introduction

Conduct of the inquiry

1.1        On 13 October 2011, the Senate referred the provisions of the Australian Renewable Energy Agency Bill 2011 and the Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill 2011 (the bills) to the Environment and Communications Legislation Committee (the committee) for inquiry and report by 7 November 2011.[1]

1.2        On 14 October 2011, the committee advertised the inquiry on its website and wrote to relevant organisations inviting submissions. The committee received five submissions (see Appendix 1). One of these submissions, from the Australian Geothermal Energy Association (AGEA), was received after the committee had concluded its deliberations and therefore was not able to be considered in this report. The committee decided to receive and note the AGEA submission which can be found on the committee's website along with other submissions to this inquiry at www.aph.gov.au/senate/committee/ec_ctte/arena/submissions.htm. The committee thanks those organisations which contributed to the inquiry at short notice.

1.3        Due to the small number of submissions received, the committee decided not to hold a public hearing for this inquiry. Instead, the committee decided to pose a range of issues raised in submissions to the Department of Resources, Energy and Tourism (the department) in the form of questions on notice.[2]

Context of the bills

1.4        In September 2010, the Australian Government announced the establishment of a Multi-Party Climate Change Committee (the MPCCC). The MPCCC was tasked with investigating options for the implementation of a carbon price and building consensus on how Australia will tackle climate change.[3]

1.5        On 10 July 2011, the MPCCC released its Clean Energy Agreement, which outlined a package of key elements designed to reduce Australia's carbon pollution.[4] In addition to the introduction of a carbon pricing mechanism, one proposed measure was the consolidation of around $3.2 billion in existing government support for research and development, and demonstration and commercialisation, of renewable energy technologies into a new Commonwealth authority with an independent board (ARENA).[5] 

Overview of the bills

Australian Renewable Energy Agency Bill 2011

1.6        On 12 October 2011, the Australian Renewable Energy Agency Bill 2011 (the bill) was introduced into the House of Representatives.[6]

Summary of the bill

1.7        The bill forms part of the Australian Government's plan to move to a clean energy future,[7] with the objective of improving the competitiveness of renewable energy technologies (as defined) and increasing the supply of renewable energy in Australia.[8]

1.8        The bill aims to:

  • create an independent statutory authority called the Australian Renewable Energy Agency (ARENA) to administer Australian Government funding to improve the competitiveness of renewable energy and related technologies and to increase the supply of renewable energy;
  • create the Board and Chief Executive Officer of ARENA; and
  • set out ARENA's governance and funding arrangements.[9]

1.9        Some of the key provisions of the bill are described below.

Establishment of the Australian Renewable Energy Agency

1.10      Part 2 of the bill creates ARENA whose primary function is to provide financial assistance (as defined) for research into renewable energy technologies, or the development, demonstration, commercialisation or deployment of renewable energy technologies.[10]

1.11      A related function, which is specified in the Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill 2011 (C & T bill), is to provide financial assistance for similar purposes as agreed by the Commonwealth in funding agreements made prior to 1 July 2012 and as agreed by Australian Solar Institute Limited (ASI) in funding agreements made prior to 1 January 2013.[11]

1.12      The bill provides general rules concerning how ARENA is to perform its functions. For example, ARENA must ensure that decisions about the provision of financial assistance are merit-based.[12] If guidelines are developed for a program, those guidelines must include the merit criteria against which applications are to be assessed.[13]

1.13      The bill also sets out various requirements regarding ARENA's operation. For example:

  • ARENA can only provide financial assistance in accordance with the general funding strategy in force at the time;[14]
  • ARENA is required to consider any request from the Minister for Resources and Energy (the minister) to provide financial assistance for a particular project;[15] and
  • ARENA cannot make grants exceeding $50 million for a particular project without the minister's written approval.[16]

1.14      The minister may direct ARENA to provide advice in relation to renewable energy technologies.[17] However, such a direction is not a legislative instrument by virtue of item 5 of the table in section 7 of the Legislative Instruments Act 2003.[18]

1.15      The bill states that ARENA may perform its functions only within Constitutional limits.[19] For example, for purposes related to external affairs (paragraph 51(xx) of the Constitution), including giving effect to the 1992 United Nations Framework Convention on Climate Change.[20]

Governance arrangements

1.16      Part 3 of the bill sets out the proposed governance arrangements for ARENA, commencing with the establishment of the Board and its three functions:

  • the functions relating to the general funding strategy, guidelines and work plans;[21]
  • determining the other strategies, objectives and policies to be followed by ARENA; and
  • ensuring ARENA's compliance with the bill.[22]

1.17      The Board must develop a general funding strategy (the strategy) for each financial year, commencing 1 July 2012. The strategy must relate to the current financial year and the next two financial years, and it must be approved by the minister (whereupon the strategy becomes a legislative instrument made by the minister). However, the legislative instrument is not disallowable under section 42 of the Legislative Instruments Act 2003.[23]

1.18      The Board may develop written guidelines for the provision of financial assistance under the Act (the guidelines) and must do so in the case of a grant program where the total of all grants for a particular project might exceed $15 million. In this situation, the minister must approve the guidelines, including non-minor variations and revocations.[24]

1.19      The Board must also develop a work plan for each financial year, commencing 1 July 2012. Each work plan must specify how the strategy is proposed to be implemented in that year, and also the main activities proposed to be undertaken by ARENA and the Board for that year, and how they are proposed to be undertaken. The minister's approval is not required for a work plan.[25]

1.20      The Board will consist of the secretary of the department, and up to six members appointed by the minister (the appointed members). An appointed member must have experience or knowledge in at least one of four specialised fields: renewable energy technology; commercialisation; business investment; or corporate governance.[26]

1.21      The term of appointment for each member is capped at two years, with a maximum continuous period of appointment of six years. The Chair and other board members (other than the secretary) will be appointed by the minister on a part-time basis and have their remuneration determined by the Remuneration Tribunal. The minister also holds the power to terminate an appointment on various grounds (for example, misbehaviour, physical or mental incapacity, bankruptcy, absence from three consecutive meetings, failure to disclose interests).[27]

1.22      The bill sets out additional provisions relating to meetings of the Board, including: convening meetings; the secretary's nomination of an alternative to attend meetings; who presides at meetings; quorum requirements; voting at meetings; conduct of meetings; minutes of meetings; and decisions without meetings.[28] The bill also provides for the establishment of committees to advise or assist in the performance of either ARENA or the Board's functions.[29]

Establishment of the office of the Chief Executive Officer

1.23      The bill sets out provisions relating to the appointment of a Chief Executive Officer of ARENA (CEO), and ARENA's staff and consultants.[30]

1.24      The CEO will be responsible for the daily administration of ARENA. The CEO must act in accordance with policies determined by the Board and comply with written directions given by the Board in relation to the performance of the CEO's responsibilities.[31]

1.25      The minister will appoint the CEO on the recommendation of the Board, with the term of appointment not to exceed three years. However, the CEO is eligible for re-appointment pursuant to section 33AA of the Acts Interpretation Act 1901. Special provision is made for the appointment of the first CEO to enable that officer to take up office on the day when ARENA is first established (1 July 2012).[32]

1.26      The minister may terminate the appointment of the CEO for misbehaviour, or physical or mental incapacity, subject to consultation with the Board, and for various other reasons set out in the bill (for example, bankruptcy, absence for 14 consecutive days, failure to disclose material personal interests, engagement in external employment).[33]

1.27      The bill also sets out provisions relating to the employment of a chief financial officer, operational and administrative support from the department, and the engagement of technical and specialist advisory services.[34]

Financial arrangements

1.28      The bill proposes payments to ARENA of up to specified amounts for the financial years 2012–13 to 2019–20.[35] The yearly maximum payments are shown below in Table 1.1.

1.29      If an amount is not paid to ARENA in a particular financial year, it is to be rolled over to become available to ARENA in the following financial year.[36]

1.30      In addition, it is proposed that an amount of money may be determined by the Finance Minister after 1 July 2012, to be debited from the Clean Energy Initiative Special Account and to be made available to ARENA in the 2012–13 financial year.[37] According to the Explanatory Memorandum, the determination of the Finance Minister would be a legislative instrument.[38]

1.31      Similarly, the bill provides for an amount of money currently held by ASI, which will become Commonwealth money as a result of the C & T bill, to be made available to ARENA in the 2012–13 financial year.[39]

Table 1.1—Amounts available for payment to ARENA

Yearly maximum payments to ARENA

Item

Financial year

Amount for financial year

1

2012–13

$292,565,000.00

2

2013–14

$344,904,000.00

3

2014–15

$436,640,000.00

4

2015–16

$321,810,000.00

5

2016–17

$299,550,000.00

6

2017–18

$221,000,000.00

7

2018–19

$237,000,000.00

8

2019–20

$368,340,000.00

Source: Subclause 64(1) of the Australian Renewable Energy Agency Bill 2011

1.32      During a financial year, ARENA may request payments from the Commonwealth to meet liabilities which are either due for payment or will, or are expected to, become due for payment during that financial year. Each request must specify the amount required from the available funds, with the requested amounts not to exceed the total amount available in the relevant financial year.[40]

1.33      Amounts paid to ARENA are to be paid out of the Consolidated Revenue Fund,[41] and the bill strictly curtails how ARENA is to spend those monies, for example, for the purpose of providing financial assistance in accordance with the bill.[42]

1.34      The bill sets out miscellaneous provisions, including: extra matters to be included in the annual report; delegation of a power or function by ARENA or the Board; sub-delegation of a power or function by the CEO; and the making of regulations by the Governor-General.[43]

Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill 2011

1.35      On 12 October 2011, the Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill 2011 (the C & T bill) was also introduced into the House of Representatives.[44]

Summary of the C & T bill

1.36      The stated purpose of the C & T bill is to deal with the transitional and consequential matters arising from the bill. At present, the funding and administration of renewable energy and related technology innovation projects is undertaken by the department and ASI.

1.37      Accordingly, the C & T bill sets out provisions relating to:

  • the transfer of responsibilities from the department to ARENA, including projects oversighted by the Australian Centre for Renewable Energy (ACRE) Board; and
  • the transfer of projects, assets, liabilities and staff from ASI to ARENA or the Commonwealth on or before 1 January 2013.[45]

1.38      The C & T bill also prepares for ASI to be deregistered and for its functions to be assumed by ARENA.[46]

1.39      In addition to these transitional arrangements, the C & T bill makes two consequential amendments: first, the repeal of the Australian Centre for Renewable Energy Act 2010 (thereby abolishing the ACRE Board); and second, by amending the Clean Energy Regulator Act 2011 to allow protected information to be disclosed by the clean energy regulator to ARENA.[47]

1.40      The proposed key transitional provisions are briefly described below.

Transfer of assets and liabilities (Commonwealth to ARENA; ASI to Commonwealth or ARENA)

1.41      The C & T bill identifies the Commonwealth funding agreements which will, in future, be administered by ARENA (transferred Commonwealth funding agreements). These agreements are identified by reference to the relevant Commonwealth funding program, including:

  • the Solar Flagships Program;
  • the Renewable Energy Demonstration Program;
  • the Renewable Energy Venture Capital Fund;
  • the Emerging Renewables Program;
  • the Geothermal Drilling Program;
  • the Second Generation Biofuels Research and Development Program; and
  • solar energy projects known as 'ACRE solar projects' or funded from the Low Emissions Technology Demonstration Fund.[48]

1.42      From 1 July 2012, the assets and liabilities of the Commonwealth under the transferred Commonwealth funding agreements will become assets and liabilities of ARENA. Accordingly, ARENA will be responsible for providing the contracted financial assistance using funding provided to it by the Commonwealth under Part 5 of the bill.[49]

1.43      The C & T bill makes similar provision for the transfer of assets and liabilities under funding agreements administered by ASI prior to 1 January 2013 (the transferred ASI funding agreements). In addition, any remaining assets and liabilities of ASI will be concurrently transferred to the Commonwealth, a prerequisite to deregistration of the company.[50]

1.44      The C & T bill enables the minister to specify, by legislative instrument, additional transferred Commonwealth funding agreements. According to the Explanatory Memorandum, this would enable agreements entered into between 12 October 2011 (when the C & T bill was introduced into the House of Representatives) and 1 July 2012 (when ARENA is formally established) to be transferred to ARENA (for example, the Australian Biofuels Research Institute initiative).[51]

1.45      Special provision is made in respect of an existing funding agreement between the department and Geoscience Australia. This agreement relates to a project involving the establishment of solar resource monitoring ground stations and the collation of solar mapping and site selection data (the Provision of Spatial Information for Solar Resource Mapping Relating to the High Solar Prospectivity Regions and Expansion of the Solar Observation Network). At present, the agreement is in the form of a Memorandum of Understanding (the MOU), which is not legally binding. The bill deems the MOU a transferred Commonwealth funding agreement as from 1 July 2012.[52]

Office holders and staff of the Australian Centre for Renewable Energy and ASI

1.46      The C & T bill addresses the treatment of existing ACRE and ASI office holders and staff upon enactment of the bills. For example, there is no transfer of appointment of a member of the ACRE Board to the ARENA Board, or ASI directors and employees to either ARENA or the Commonwealth; and the minister may terminate the appointment of any director of ASI prior to 1 January 2013.[53]                                                                                                       

1.47      Section 72 of the Public Service Act 1999 enables the Public Service Commissioner, if satisfied that it is necessary or desirable in order to give effect to an administrative re-arrangement, on behalf of the Commonwealth, to engage any person as an APS employee in a specified agency.[54] According to the Explanatory Memorandum:

It is intended that ASI Limited employees who are engaged in RET in these circumstances would be among the staff made available to ARENA under [item 62 of the bill].[55]

Miscellaneous

1.48      Part 4 of the C & T bill sets out various miscellaneous provisions relating to references in certain instruments, legal proceedings and records; Part 5 of the C & T bill sets out accountability provisions relating to the ACRE Board's final annual report, and various ASI reports and returns; and Part 7 of the C & T bill deals with various transitional matters, for example, delegation by the minister and regulations.[56]

Issues regarding the bills

1.49      The committee received broad support for the establishment of ARENA and in particular, from two of the entities which it is replacing – ASI and ACRE.[57]

1.50      Submissions identified concerns with the provisions regarding ARENA's financial arrangements; and transferred Commonwealth funding agreements.[58] Chapter 2 of this report discusses the concerns raised in submissions, as well as providing the committee's conclusions and recommendation.

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