EXPLANATORY STATEMENT
Issued by the authority of the Minister for Energy and Emissions Reduction
Industry Research and Development Act 1986
Industry Research and Development (Regional and Remote Communities Reliability Fund Program) Instrument 2019
Purpose and Operation
Section 33 of the Industry Research and Development Act 1986 (the IR&D Act) provides a mechanism for the Minister for Industry, Science and Technology to prescribe programs, by disallowable legislative instrument, in relation to industry, innovation, science or research, including in relation to the expenditure of Commonwealth money under such programs. The Minister has delegated the power under subsection 33(1) to prescribe the Regional and Remote Communities Reliability Fund Program to the Minister for Energy and Emissions Reduction (under subsection 33(6)).
The statutory framework provided by section 33 of the IR&D Act enables a level of flexibility to provide authority for Commonwealth spending activities in relation to industry, innovation, science and research programs. This allows the Government to respond quickly and appropriately to the need to implement innovative ideas and pilot programs on an ongoing basis and as opportunities arise. Prescribing programs in legislative instruments provides transparency and parliamentary oversight of Government programs and spending activities, whilst reducing administrative burden on the Commonwealth.
Once a program is prescribed under section 33, subsection 34(1) allows the Commonwealth to make, vary or administer arrangements in relation to activities under the program. Arrangements may include contracts, funding agreements or other arrangements, and may provide for money to be payable by the Commonwealth to one or more third parties. The power conferred on the Commonwealth by subsection 34(1) may be exercised on behalf of the Commonwealth by a Minister or an accountable authority of a non-corporate entity, or by their delegate (under section 36).
The purpose of the Industry Research and Development (Regional and Remote Communities Reliability Fund Program) Instrument 2019 (the Legislative Instrument) is to prescribe the Regional and Remote Communities Reliability Fund Program (the Program). The Program will provide funding of up to $50.4 million between FY 2019-20 and 2023-24 as part of the Australian Government’s commitment to securing reliable and affordable electricity in regional and remote communities. In particular, the Program will provide grants for feasibility studies into whether establishing microgrids in regional and remote communities is cost effective. A microgrid, for these purposes, is an electricity supply arrangement that can (but may not always) function autonomously, and generates and supplies electricity to multiple customers. Communities are considered regional and remote if located in an inner regional, outer regional, remote or very remote area as defined by the Australian Statistical Geographic Standard (ASGS) Remoteness Area available at http://www.abs.gov.au/websitedbs/D3310114.nsf/home/remoteness+structure.
Funding for the Program has been secured through the Department of the Environment and Energy’s 2019-20 Budget process and comes from Program 4.1, Outcome 4: Support the reliable, sustainable and secure operations of energy markets through improving Australia’s energy efficiency, performance and productivity for the community, as set out in the Department’s Portfolio Budget Statements 2019-20 [https://www.environment.gov.au/about-us/publications/budget/portfolio-budget-statements-2019-20] at page 71.
The Program will be delivered by the Department of Industry, Innovation and Science’s (AusIndustry) Business Grants Hub, on behalf of the Department of the Environment and Energy. The Business Grants Hub is a specialised design, management and delivery body with extensive expertise and capability in delivering similar programs.
The Program will be delivered through a mix of grant opportunities.
A competitive, merits based grant opportunity will be delivered through two rounds, with the first round launching in 2019-20. Eligibility for the first round will be limited to constitutional corporations and focus on feasibility studies into microgrids that have the objective of securing reliable and affordable electricity in remote and regional communities. It is expected that $20 million will be available for projects in this round. The second round may be expanded to include broader eligibility.
An ad hoc grant of $990,150 will be provided to Daintree Renewable Energy Pty Ltd to support a study for the deployment of a Daintree microgrid. This project will support reduced reliance on diesel fuel in the Daintree community.
The Program will be administered in accordance with the Commonwealth Grant Rules and Guidelines 2017 (https://www.finance.gov.au/resource-management/grants/). Eligibility and assessment criteria will be outlined in the grant opportunity guidelines available at business.gov.au.
Spending decisions will be made by the Minister for Energy and Emissions Reduction, taking into account the recommendations of an independent assessment committee.
Grants will be a minimum of $100,000 and a maximum of $10 million, to provide flexibility for the independent assessment committee to select a mix of projects which have the capacity to deliver the most impact. The expectation is that most grants will be between $1-3 million, depending on the scope and complexity of each project. The grant amount will be up to 100 per cent of eligible project costs.
The Program will not be subject to external merits review as it involves the allocation of finite resources and supports the implementation of policy decisions made by Government about the delivery of the Program.
For the competitive grant opportunities, applications will be assessed against the eligibility criteria and assessment criteria set out in the grant opportunity guidelines in two stages. At first instance, applications will be assessed by AusIndustry against the eligibility criteria. An independent assessment committee will then consider eligible applications against the assessment criteria. This will include comparing the applications and scoring each application out of 100. The committee will be comprised of persons with relevant technical, regulatory, consumer and commercial expertise. The independent assessment committee may seek input from independent experts to inform their assessments.
Applications must address the eligibility and assessment criteria, and provide relevant supporting information. The amount of detail and supporting evidence should be relative to the project size, complexity and funding amount requested. Larger and more complex projects should include more detailed evidence. To be competitive, applications must score highly against each assessment criterion.
After considering the applications, the independent assessment committee will make recommendations to the Minister for Energy and Emissions Reduction (the Minister) - regarding those applications suitable for funding. The Minister will make the final decision about which grants to approve, taking into consideration the independent assessment committee’s recommendations, and the availability of grant funds. The Minister will not approve funding if there are insufficient Program funds available across relevant financial years for the Program.
For the ad hoc grant opportunity, a proposal will be provided by the potential grantee which will be assessed by AusIndustry for value for money before recommending to the Minister as suitable for funding. The Minister will make the final decision to approve a grant.
Both successful and unsuccessful applicants under the Program will be informed in writing. Unsuccessful applicants have an opportunity to discuss the outcome with AusIndustry.
Persons who are otherwise affected by decisions or who have complaints about the Program will also have recourse to AusIndustry. AusIndustry will investigate any complaints about the Program in accordance with its complaints policy and procedures. If a person is not satisfied with the way AusIndustry handles the complaint, they may lodge a complaint with the Commonwealth Ombudsman.
Specified legislative powers
The Legislative Instrument specifies that the legislative powers in respect of which the instrument is made are the corporations power, the external affairs power, and the Territories power.
Corporations power
Section 51(xx) of the Constitution empowers the Parliament to make laws with respect to ‘foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth’ (together, constitutional corporations).
In Williams v Commonwealth (2014) 252 CLR 516 (Williams No 2) the High Court, considering section 32B of the Financial Management and Accountability Act 1997 (FMA Act), held (at [50]) that:
A law which gives the Commonwealth the authority to make an agreement or payment of that kind is not a law with respect to trading or financial corporations. The law makes no provision regulating or permitting any act by or on behalf of any corporation.
However, the relevant provisions of the IR&D Act are substantially different to the provisions considered by the High Court in Williams No 2. Section 34 of the IR&D Act corresponds to s 32B of the FMA Act considered by the High Court in Williams No 2. However, the FMA Act contained no provision in terms equivalent to those of section 35 of the IR&D Act.
Subsection 35(2) of the IR&D Act limits the arrangements made under section 34 so that, where a party to an arrangement made under section 34 is a constitutional corporation, the arrangement must be subject to a written agreement containing terms and conditions under which money is payable by the Commonwealth. The corporation must comply with the terms and conditions. The activities of the corporation are therefore regulated through the terms and conditions made under each agreement pursuant to subsection 35(2).
Further, subsection 35(3) provides that the agreement must provide for circumstances in which the corporation must repay amounts to the Commonwealth.
The Program prescribed by the Legislative Instrument provides funding to successful applicants for feasibility studies into whether establishing microgrids in regional and remote communities is cost effective. The Instrument provides that one of the eligibility criteria relating to the Program is that an applicant is a trading or financial corporation to which paragraph 51(xx) of the Constitution applies. The Program imposes terms and conditions on the successful applicant under a grant agreement in accordance with section 35 of the IR&D Act, in relation to receipt of benefits under the Program.
External affairs power
Section 51(xxix) of the Constitution empowers the Parliament to make laws with respect to ‘external affairs’. The external affairs power supports legislation implementing Australia’s international obligations under treaties to which it is a party.
Australia has international obligations under the United Nations Framework Convention on Climate Change (UNFCCC), the Kyoto Protocol to the UNFCCC and the Paris Agreement.
In particular, Article 4.2(a) of the UNFCCC requires Australia to adopt national policies and take corresponding measures on the mitigation of climate change, by limiting its anthropogenic emissions of greenhouse gases and protecting and enhancing its greenhouse gas sinks and reservoirs. Article 10(b)(i) of the Kyoto Protocol requires Australia to implement programs containing measures to mitigate climate change, including in relation to the energy sector. Article 4.4 of the Paris Agreement requires Australia to continue enhancing these mitigation efforts.
In that regard, the Legislative Instrument makes feasibility studies that relate to microgrids that can reasonably be expected to reduce emissions of greenhouse gases eligible for funding under the Program. This could include, for example, feasibility studies into projects that take a regional or remote community off the more emissions intensive national grid and onto a less emissions intensive microgrid.
Territories power
Section 122 of the Constitution empowers the Parliament to ‘make laws for the government of any territory’.
In that regard, the Legislative Instrument makes feasibility studies that relate to a microgrid that would be located in a regional or remote community within a Territory eligible for funding under the Program.
Authority
Section 33 of the Industry Research and Development Act 1986 provides authority for the Legislative Instrument.
Consultation
In accordance with section 17 of the Legislation Act 2003, the Attorney-General’s Department and the Department of Industry, Innovation and Science have been consulted on this Legislative Instrument.
Regulatory Impact
It is estimated that the regulatory burden is likely to be minor (OBPR reference number 24859).
Details of the Industry Research and Development (Regional and Remote Communities Reliability Fund Program) Instrument 2019
Section 1 – Name
This section specifies the name of the Legislative Instrument as the Industry Research and Development (Regional and Remote Communities Reliability Fund Program) Instrument 2019.
Section 2 – Commencement
This section provides that the Legislative Instrument commences on the day after registration on the Federal Register of Legislation.
Section 3 – Authority
This section specifies the provision of the Industry, Research and Development Act 1986 (the IR&D Act) under which the Legislative Instrument is made.
Section 4 – Definitions
This section provides for definitions of terms used in the Legislative Instrument.
Section 5 – Prescribed program
This section prescribes the Regional and Remote Communities Reliability Fund Program (the Program) for the purposes of section 33 of the IR&D Act.
The Program provides grants for feasibility studies into whether establishing microgrids in regional and remote communities is cost effective.
For the purpose of the program, a microgrid is an electricity supply arrangement that can (but may not always) function autonomously, and generates and supplies electricity to multiple customers.
Communities are considered regional and remote if located in an inner regional, outer regional, remote or very remote area as defined by the Australian Statistical Geographic Standard (ASGS) Remoteness Area available at http://www.abs.gov.au/websitedbs/D3310114.nsf/home/remoteness+structure.
Section 6 – Specified legislative power
This section specifies that the legislative powers in respect of which the Legislative Instrument is made are the power of the Parliament to make laws with respect to foreign corporations and trading or financial corporations formed within the limits of the Commonwealth (within the meaning of section 51(xx) of the Constitution), external affairs (within the meaning of section 51(xxix) of the Constitution) (in particular, with respect to Australia’s obligations under various climate change treaties), and measures in, or in relation to, a Territory (within the meaning of section 122 of the Constitution).
Section 7 – Eligibility Criteria
This section sets out the eligibility criteria relating to the Program for the purposes of subsection 33(4) of the IR&D Act. The eligibility criteria include that an applicant must be a trading or financial corporation to which section 51(xx) of the Constitution applies, or the feasibility study must relate to a microgrid that can reasonably be expected to reduce emissions of greenhouse gases or that is located in a Territory.
Additional eligibility criteria will be set out in grant opportunity guidelines.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Industry Research and Development (Regional and Remote Communities Reliability Fund Program) Instrument 2019
This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Legislative Instrument
The Legislative Instrument prescribes the Regional and Remote Communities Reliability Fund Program for the purposes of subsection 33(1) of the Industry Research and Development Act 1986. Section 34 of that Act authorises the Commonwealth to enter into arrangements for funding to be provided under prescribed programs.
The purpose of the Remote Communities Reliability Fund Program is to provide grants for feasibility studies into whether establishing microgrids in regional and remote communities is cost effective.
A microgrid, for these purposes, is an electricity supply arrangement that can (but may not always) function autonomously, and generates and supplies electricity to multiple customers.
Communities are considered regional and remote if located in an inner regional, outer regional, remote or very remote area as defined by the Australian Statistical Geographic Standard (ASGS) Remoteness Area available at http://www.abs.gov.au/websitedbs/D3310114.nsf/home/remoteness+structure.
Human rights implications
This Legislative Instrument may engage the right of women in rural areas to enjoy adequate living conditions, particularly in relation to electricity (Article 14.2(h) of the Convention on the Elimination of all forms of Discrimination Against Women).
Establishing microgrids in remote and regional communities may improve the reliability and affordability of electricity for residential customers, including women, in those areas. Accordingly, to the extent this right is engaged, it is promoted by this Legislative Instrument.
Conclusion
This Legislative Instrument is compatible with human rights because, to the extent it engages human rights, it promotes the protection of those rights.
The Hon Angus Taylor MP
Minister for Energy and Emissions Reduction