2.1
This Chapter examines the key issues raised during the Committee’s inquiry and sets out the Committee’s views on the two Bills, concluding with a recommendation.
The rationale for an Australian Local Power Agency
2.2
Chapter 1 of this report outlined the rationale for the Australian Local Power Agency Bill 2021 (the ‘substantive Bill’) and the Australian Local Power Agency (Consequential Amendments) Bill 2021 (the ‘consequential Bill’).
2.3
The establishment of the Australian Local Power Agency (ALPA) was supported by many submitters and witnesses to the inquiry.
2.4
Inquiry participants cited a number of reasons for supporting the Bills, including that the ALPA would provide:
an alternative and easier to access source of project funding and technical advice than existing mechanisms via the Australian Renewable Energy Agency (ARENA) and the Clean Energy Finance Corporation (CEFC);
more reliable, stable and secure energy generation and distribution in regional Australia;
broad economic and social benefits including increased investment in the regions, improved employment and training prospects, and lowering the cost of energy for local consumers; and
a way for regional communities to engage more fully with the climate mitigation and other environmental benefits that renewable energy can provide.
An alternative to ARENA and the CEFC
2.5
As noted in Chapter 1, the ALPA is proposed to be a ‘sister agency’ to ARENA and the CEFC. Inquiry participants provided their perspectives on why a new agency, separate to ARENA and the CEFC, was necessary. These included that the ALPA would assist communities to better overcome the regulatory and technical complexities of the existing programs conducted by ARENA and the CEFC; and that remits for existing programs did not specifically cater for the needs of regional communities.
2.6
Repower Shoalhaven told the Committee that the ALPA would be helpful because:
A lot of the grants we've looked at have looked at very specialised, innovative projects such as battery storage…We didn't feel that we qualified, even though we were developing a solar farm to stabilise the grid…we have looked quite a bit, but our projects never quite tick the boxes.
2.7
The Community Power Agency told the Committee about how the ALPA could be more accessible for regional communities by providing an example of its own work:
Community Power Agency have worked with over 60 local community energy groups across Australia over the last 10 years and their experience has been that the ARENA and the CEFC funding is often inaccessible to them because they are not a microgrid or because their model is not innovative enough or because their funding need is too small or too bespoke, or because the application process is too onerous or unsuited to the type of organisation and the type of support they need. This is not to discount the important work of ARENA and the CEFC but rather to say they have not been set up to address the unique needs and challenges of community energy.
2.8
ARENA acknowledged the complexities of its grant programs but stressed that it was looking to engage with stakeholders to manage the perceived barriers to entry:
…you have to get your head around how to approach ARENA and what our criteria are. There's paperwork to fill out, there are applications to go through, there's a panel. We have a very strong technical advisory panel to help us on the technical merits of programs. And all of those things can appear to be barriers for people, depending on their level of sophistication in approaching a group like ARENA. We're obviously always looking to engage as best we can with the markets, and we're very much stakeholder focussed. But…we need to be very sure, given that we're custodians of taxpayer money, that the projects that are coming forward to us meet our criteria and are worthy of our funding.
2.9
Ensuring that communities were engaged with proposed projects rather than having projects imposed upon them by developers was seen by inquiry participants as a way to build social licence and acceptance of projects within regional communities. Renewable Energy Mansfield argued that the ALPA was necessary for regional communities because neither ARENA nor the CEFC:
…has an appropriate remit to effectively service the requirements of community scale endeavours. To do funding justice to regional communities the establishment of a separate agency is essential for a proper focus on and champion of, the projects regional communities want and need.
2.10
Mr David Jochinke of the National Farmers’ Federation told the Committee that existing funding programs offered by ARENA and the CEFC lacked broader consultation with communities whereby:
…you're put into a lottery and if you meet the criteria or whatever the choice of the panel is, of the day, your entity might be able to get some support, but it doesn't go beyond recognised organisations. It doesn't go down to the small level of community members, and it doesn't recognise any of the impact you've had that isn't directly associated with the project. Notably, a lot of landholders in our area have had roads degraded because of the amount of traffic going through their property to a project. They don't get any benefit out of the project...
2.11
By contrast, the CEFC stated that ‘…we ensure that there has been suitable community engagement and that there is a social licence to operate in all the regions of Australia where the projects that we finance or invest in take place’. The CEFC also advised the Committee that since its operations began, it has lent some $621 million to community organisations as defined in the substantive Bill.
2.12
While broadly supportive of the substantive Bill, the CEFC was concerned that ALPA may replicate its role:
…the suggestion of another $470 million or so to be lent into these arrangements feels much like something the CEFC could or would do, so it might be worth talking about whether or not that's necessary.
2.13
ARENA told the Committee that there are existing avenues that enabled community energy projects to grow, and allowed for leadership from regional communities, including its Advancing Renewables Program:
The eligibility criteria and merit criteria are clearly set out. There's nothing in there that prevents a community from coming forward with their project idea, so long as it ticks the boxes on our investment strategy…I think it would be fairly well known that we are very supportive of growing renewable energy in Australia and that is likely to occur in the regions and remote areas, so we would expect to be…approached by communities.
Benefits to regional Australia
2.14
The Explanatory Memorandum to the substantive Bill states that, if established, the ALPA would ensure that ‘regional communities share in the benefits of renewable energy’. Inquiry participants saw the benefits as:
the provision of reliable, stable and secure energy with less reliance on traditional transmission and distribution systems; and
supporting regional interests in climate change mitigation and renewable energy.
Provision of reliable, stable and secure energy
2.15
Inquiry participants highlighted the potential for local projects (such as microgrids) to improve reliability, stability and security.
2.16
The Australia Institute commented on the ability of local projects to improve resilience for regional electricity networks:
…community-scale projects located in weak parts of the distribution network will be a very cost effective solution to maintaining the security of the grid. The two factors … are: frequency and inertia, which propagates across a region; and system strength and voltage control, which are always very much more local. So it is actually more appropriate to solve the local factor in security with local assets.
2.17
The Australia Institute further observed that community-based power created better cost-efficiency:
Few people realise that the value of local energy is higher than just importing energy for consumers from the grid average, because it's located very close to customers, so less energy is lost during transmission. These benefits would never have been delivered by a commercial developer for the simple reason that it was not a commercial-scale project.
2.18
The Goulburn Murray Climate Alliance told the Committee that in its region of north-east Victoria, communities are:
…on the outskirts of the grid rather than in a more central, well-supplied area. For these communities, blackouts and grid constraints are a regular issue. For these communities, local energy is needed to bolster the grid and provide reliable power. Given these communities also deal with natural emergencies of fire and flood every few years, a reliable energy supply when towns are cut off from the grid is also essential for the safety of people.
2.19
Renewable Energy Albury Wodonga (RAW) said that:
The recent catastrophic floods and windstorms experienced in Victoria highlight again how vulnerable our current centralised energy systems are to weather induced disruption… Every bushfire season we are vulnerable to the loss of towers and power lines. Renewable energy owned by the community and locally based allows a far more resilient industry and community.
2.20
Community Power Agency made the related point that localised energy generation and storage could provide faster re-establishment of energy services following natural disasters.
Supporting regional interests in climate change mitigation and the transition to renewable energy sources
2.21
Evidence given to the Committee indicated that Australia’s regional communities, just like their metropolitan counterparts, have a strong interest in mitigating the impacts of climate change and transitioning to more renewable sources of energy.
2.22
Veterinarians for Climate Action saw the opportunity that renewable energy could bring to regional communities following years of expressing environmental concerns:
Concern about climate and the environment first stirred our conscience back in the 1980s. And from that time on, as individuals intensely aware of the need to reduce greenhouse gas emissions, we have attached solar panels and solar heating to our roofs. We have written letters to our Members of Parliament pleading for climate action in this country. We have marched in the streets and risked arrest to highlight the critically rising temperature and the urgent need to transition from fossil fuels to renewable energy sources.
2.23
Farmers for Climate Action submitted to the Committee that the ALPA:
…will provide our regions with the tools required to build resilience in the face of a changing climate. In 2019-20 bushfires, towns like Corryong and Mallacoota were cut off from the grid for days. Only weeks ago we saw towns in Victoria’s Dandenongs region without power from the grid for weeks. As scientists have been warning for decades, these sorts of extreme weather events are set to become more frequent and extreme. Not only will localised power sources decrease reliance on the grid and therefore reduce the chances of being cut off in extreme weather, it will reduce reliance on the coal and gas that is contributing to climate change.
2.24
Submitters were enthusiastic about building momentum for renewable energy within their communities. Local government submitters were also conscious of the desire to support the transition to more renewable sources within their communities, noting the enthusiasm of local community groups.
2.25
The Australia Institute added that the establishment of the ALPA would assist regional communities through enhancing Renewable Energy Zones (REZ). These are currently being developed in NSW, Victoria and Queensland; are located in areas with significant solar, wind or hydro resources; take advantage of economies of scale in transmission infrastructure; and provide increased reliability through geographical diversity. The Institute was of the view that:
[The ALPA] would enhance REZs, engaging regional communities financially, sharing benefits from large-scale renewable projects and also establishing small- and medium-scale renewable energy projects to complement new REZ generation.
Benefits to communities and local government
2.26
Evidence to the Committee also proposed that local generation of renewable energy could bring broader economic and social benefits to regional communities and local governments.
2.27
The North East Regional Sustainability Alliance (NERSA), which is an alliance of like-minded sustainability groups across North East Victoria, submitted to the Committee that:
There are substantial benefits for regional economies in the local generation of renewable energy – driving investment and employment and increasing the resilience of business by reducing fluctuations in prices and business cycles. In addition, addressing the urgent need for action on climate change will provide longer term benefits in reducing the cost of extreme weather events and the insidious impacts of global warming including droughts and heatwaves.
2.28
Bendigo and Adelaide Bank’s submission to the inquiry noted that it has been involved in successful community-led renewable energy initiatives in regional Victoria:
We have seen the positive impact these projects have had on those communities through the generation of new employment opportunities, encouraging local procurement, skills development, and the creation of a new sustainable source of income for community investment. Importantly, these initiatives also deliver a reduction of each community’s carbon and environmental footprint.
2.29
Banyule City Council was of the view that the ALPA would assist communities to make the transition to zero emissions ‘more strategic, accessible and collaborative’. In terms of developing a plan to unlock the benefits of community energy, it stated that the Australian Government should consider developing a target for community energy, a range of engagement models, a strategic community grants program and consideration of groups such as renters and those on low incomes.
Investment and economic development opportunities
2.30
Many submitters argued that broader investment and economic development opportunities could be generated in regional Australia.
2.31
Community Power Agency highlighted how Victoria’s community hubs program (upon which aspects of the present Bills have been modelled, discussed later in this chapter) had reinvigorated local economic outcomes in regional communities, submitting that:
The Victorian Government piloted a Local Power Hub $900,000 program across three regional towns from 2017-2019 which delivered a 13-to-1 return on Government investment and generated more than $14.5 million in value. Under the Local Power Hub component of the ALPA proposal alone, the Government could see a possible $4 billion increase in economic activity in regional Australia.
2.32
Glen Innes & District Community Centre submitted that there were several current renewable energy projects within its community to supply power to the Australian Capital Territory over the next 20 years, but that local financial benefits from these current projects had been limited to dividends to individual investors, small grants from the local council and payments to individual landholders who host wind turbines.
2.33
Glen Innes & District Community Centre advised that while it had benefitted from Commonwealth and state government initiatives to bring local power projects to the region, the creation of the ALPA offered a new approach, providing:
…far more strategic and targeted support for communities, not only to implement, and benefit from, such schemes, but also, to undertake the preparation and development work that underpins a successful project.
2.34
According to RAW, the passage of the Bills could:
accelerate the ability of local rural and regional communities to share in the social and financial benefits of local renewable power generation;
allow new financial streams that can improve the financial resilience of regions; and
ensure that profits derived from local community energy projects can be kept within the Australian community rather than be sent offshore.
2.35
One example was provided by the Mayor of the City of Greater Bendigo who advised the Committee that:
For Greater Bendigo, this is about changing our energy system from being an importer of energy to a generator of renewable energy. Transition to a local energy economy would represent over $200 million per year remaining in our community. That would have many flow-on benefits—namely, affordable energy, new jobs and a safer climate.
Employment and training opportunities
2.36
Inquiry submitters emphasised the employment and training opportunities that could flow into local communities as a result of local renewable energy projects.
2.37
Glen Innes & District Community Centre expressed concern that despite a number of renewable energy projects being established in its local area:
There has been little, if any, local employment generated by the wind farms. In the construction phase firms from as far away as Perth sent workers to undertake various roles…
2.38
In contrast, Murrindindi Climate Network Inc submitted that an organisation such as the ALPA could be a catalyst for generating job opportunities in the local renewable energy sector, stating that the ALPA could:
…assist the knowledge transfer, the setting up of regional training opportunities and the creation of local jobs in the renewable energy sector so that rural and regional renewable energy projects don’t have to bring in contractors from urban centres, who are normally more expensive and who don’t want to be involved in ongoing long-term maintenance after installation. Thus, ALPA would assist regional communities to build up an industry of their own local accredited contractors, who are able to design, install and maintain renewable energy projects of various sizes.
2.39
The Australia Institute cited an example of how the development of a REZ in NSW would boost electricity capacity in regional Australia and with it, stimulate employment:
NSW’s first REZ is in the Central-West Orana region and will unlock 3,000 MW of new electricity capacity in the next five years, enough to power 1.3 million homes and support 3,900 construction jobs in the region.
2.40
Murrindindi Shire Council believed that projects that ALPA may support could appeal to workers in its region, stating that:
…with the increasing shift towards people working from home, localised power generation will be a major pillar in successfully supporting growing community needs and the consequent economic growth in our Shire.
Lowering the cost of energy
2.41
Some inquiry participants were of the view that locally-generated energy projects would help to lower the costs of energy for regional communities and in turn for local consumers.
2.42
The National Farmers’ Federation (NFF) told the Committee that in the Victorian town of Horsham:
…there are a few proponents there seeking to establish some community energy generation. And, as a part of that, not only is the cost of energy being pushed down via a group of community members getting together to negotiate access agreements to the network, but actually generating and offsetting your own energy … you can then afford to install equipment that you wouldn't be able to if you were doing it on your own.
2.43
Citizens Climate Lobby (Cunningham Branch) was of the view that locally-generated energy would also mean ‘more competition in the electricity market, hence downward pressure on prices’.
2.44
Murrindindi Climate Network emphasised the role that the ALPA could play as a mediator, voice and ombudsman for regional renewable community energy projects and improving the competitiveness of local energy provision by ensuring:
…that Network Providers do not misuse their (inherent) status as a natural network monopolist by hindering the creationof decentralised regional community energy projects with disadvantageous fee structures, disadvantageous technical up-grade decisionsor disadvantageous governance regulations.
2.45
Some submitters considered that the establishment of ALPA could assist in lowering the cost of energy for those living with insecure energy supply or those, such as apartment dwellers or renters, who are unable to install amenities such as solar panels.
2.46
Banyule City Council submitted that community energy projects generally:
…should also be socially inclusive; creating opportunities for social and public housing tenants, renters and those who are locked out of the solar market due to site constraints such as overshadowing or multi-unit development.
2.47
Original Power was of the view that the ALPA would enhance energy security and social and public health indicators within First Nations communities and their regions, by enabling them to develop community-led and owned projects and directly share in the benefits of clean energy:
In remote and regional communities chronic energy insecurity results in household and community economic disruption, exposure to heat and cold stress and the spoiling of foods and medicines… Many of these communities are identifying access to lower cost and more reliable power through solar and battery storage as a key priority area to underpin improvements in social, economic and public health indicators.
Perspectives of community energy organisations
2.48
Across Australia, many community energy groups have formed as local initiatives and work with local people, business and government to develop energy projects. Smaller projects are often developed with limited resourcing and little government support, frequently relying on community financial contributions. As such, community energy organisations contributing to the Committee’s inquiry saw the ALPA as an invaluable opportunity to further their community development work and also as a conduit to develop bigger and more ambitious projects.
2.49
Community Power Agency, an organisation that provides advice and support for the development of community energy, provided the Committee with a brief overview of the scale of the community energy sector in Australia:
The community energy sector has grown from three groups in 2009 to over 110 groups in 2021. Projects range in scale, technology, ownership model and motivations, including community owned windfarms like Hepburn Wind, bulk buy rooftop solar programs such as Sunny Shire, to revolving funds for solar installations on community buildings from CORENA [Citizens Own Renewable Energy Network Australia].
2.50
Community Power Agency described how community energy groups help to deliver outcomes for their communities through:
creating social licence for large-scale renewable energy development, such as facilitating community co-investment to provide ‘enhanced local benefit and engagement resulting in wider community acceptance for other developments in the region’;
better regional development outcomes, where the economic benefits derived from community energy projects can be 1.5 - 7 times greater than renewable energy projects by corporate developers;
ensuring a fairer transition to clean energy, such as via the Darebin Solar Savers project which allowed 300 low-income pensioners to install rooftop solar in Melbourne using a rates-based financing mechanism; and
increased community resilience, empowerment and self-determination, such as the Marlinja installation of community-owned solar power on their remote Northern Territory community centre which is addressing extreme energy poverty while providing low cost clean energy.
2.51
The Committee was offered a significant number of examples of community energy projects as part of its inquiry. One such example of the impact of community power organisations in regional Australia was provided by Totally Renewable Yackandanda (TRY). TRY is working to transition its local community to 100 per cent renewable energy by 2022. TRY told the Committee that:
…the successes are mounting through a range of diverse and innovative projects. Some of these include 210 homes, businesses and community buildings as part of a virtual power plant, which collectively has reduced power bills across our small village by more than $625,000 in just three years. There is a 58 per cent uptake of rooftop solar, whilst the national average is in the mid-20s. We can post three separate microgrids, which share power across the grid and community. TRY has also fostered the creation of a community owned electricity retailer called Indigo Power, which returns 50 percent of profits to the community. In addition, rooftop solar was installed on all community buildings, with a large proportion of those having battery storage as well. Most recently, TRY has raised $104,000 within three months for a groundbreaking, retail facing, 270 kilowatt-hour community owned battery.
2.52
TRY outlined the benefits to the community from the projects:
The renewable energy generated has reduced emissions and is the equivalent of taking 1,000 cars off the road in the last three years. Over 50 homeowners have installed new-generation hot water services, reducing heating costs by an average of $640 per year. In Yackandandah, households that have added solar panels have, on average, reduced their electricity bills by 63 per cent, and that figure jumps to a 73 percent reduction when battery is added. The microgrids, local batteries, virtual power plant and newly installed community battery have all contributed to a more robust and resilient power supply. This buffers against the extremes in weather and the pre-existing inherent weaknesses in the electricity grid and saves on network upgrade costs.
Challenges for community energy organisations
2.53
Despite their successes, most community energy organisations are small in scale and run by volunteers with access to limited resources.
2.54
Volunteers are at the core of many community energy organisations and are unlikely to have the resources, technical expertise or support structures to manage larger community energy projects. The risk of burnout amongst volunteers due to the high workload required was also noted in evidence to the inquiry. The Committee was told that some organisations overcame these challenges once some level of remunerated assistance was available—a scenario envisaged under the local community hubs aspect of the Bills.
2.55
Renewable Energy Mansfield cited how the establishment of the ALPA could assist its volunteer workforce, stating that:
…we are all full-time workers with young families. Time is our most precious resource and although we have engaged well with our community it is the administrative burden to accessing the highly complex energy systems and market which is a handbrake on our efforts to do more. The first two pillars of the Local Power Plan seek to negate these barriers through the establishment of the local power hubs, which would both support and fund community groups in prosecuting their renewable energy plans.
2.56
Ms Heather Smith noted in a supplementary submission to the inquiry that limited resources can impact the ability to apply for funding:
The limits on time, resources, the legal ability and internal capacity community energy groups have, are non-trivial barriers. We can't apply for, or sign up to funds and grants when the threshold is too high.
2.57
Energetic Communities Association, for example, told the Committee about one of its own projects which:
…required a huge amount of volunteer and pro bono professional advice to get through feasibility stages. We were able to do this for a relatively simple rooftop project, however we would not be able to afford resources in volunteer time and approvals processes for a more complicated project requiring planning approval, for instance.
2.58
Capital raising and project support by community energy organisations to the extent required to develop projects was identified as another challenge. Community Power Agency submitted to the Committee that funding and support in the early stages of a project would assist to ensure that projects are ‘investment ready’ because ‘… unlike private enterprise or government bodies, community actors do not typically have large reserves of capital upon which to draw’.
The Australian Local Power Agency Bills
2.59
This section will consider the evidence received on specific provisions and concepts within the Bills.
Preliminary matters
Object
2.60
Submitters to the inquiry were supportive of the object of the substantive Bill as set out in Clause 3, in particular subclause 3(c) which is to ‘ensure that regional communities share in the benefits of renewable energy’.
Definitions
2.61
Clause 4 of the Bill defines terms used within the proposed legislation.
2.62
The World Bioenergy Association expressed concern about the use of the terms ‘energy’ and ‘electricity’ in the Bills and stated that the term ‘energy’ is ‘used in technical writing to cover all forms of energy, and specifically the aggregate of heat energy, chemical energy (usually as transport fuels) and electrical energy’. As such, World Bioenergy Australia argued that:
Any technical document, including legislation, must recognize this if it is to be clear and not prone to being disputed or contested. When the fraction of renewable energy that is electricity is referred to in technical documents or language, it must always be made clear that it is this ‘renewable electricity’ component.
Clause 5: Meaning of community energy
2.63
Further to this view, the World Bioenergy Association also argued that the definitions at Clause 5 should be revised to allow for any renewable energy projects to be classified as ‘community energy projects’, and therefore supported by the ALPA, not just those relating to electricity.
ALPA’s financial assistance function
2.64
As outlined in Chapter 1, the ALPA’s financial assistance function allows the ALPA to provide financial assistance for the research, development, commercialisation, or deployment of community energy projects, or the storage and sharing of relevant information and knowledge. The relevant Minister may also request the ALPA to consider funding for specified projects.
2.65
Some submitters commented on this proposed function. The Clean Energy Council (CEC) was supportive of it, submitting to the Committee that the ALPA’s financial assistance ‘has the potential to facilitate the deployment of distributed generation assets in regional areas, providing cost savings to those communities’.
2.66
In considering how financial support should be provide to community energy organisations through the ALPA, Community Energy 4 Goulburn was of the view that it would require:
A rigorous but not crippling assessment process, bearing in mind the voluntary nature of most community groups
A relatively simple method of reporting and administering any grants
Flexibility to enable the project to develop with changing technologies over its lifetime
Financial support for staffing to relieve some of the burden on volunteers
Support for community part ownership of large scale renewable projects.
The ALPA’s investment function and community investment scheme
2.67
Under the substantive Bill, the ALPA would have an investment function to allow it to assist communities in realising community energy projects, through the Underwriting New Community Investment Scheme (UNCI) for mid-scale community energy projects. In addition, the Bill would establish the Community Renewable Investment Scheme (CRIS) to facilitate local people’s investment in larger community energy projects.
Mid-scale energy projects - the Underwriting New Community Investment Scheme (UNCI)
2.68
The project underwriting scheme enshrined in the substantive Bill is known as the Underwriting New Community Investment Scheme. The substantive Bill outlines the ALPA’s investment function, and empowers it ‘to invest, directly and indirectly, in community energy projects’. An investment mandate may be issued by the responsible Minister, to give the ALPA Board directions about the performance of the ALPA’s investment function.
2.69
Contributors to the inquiry were supportive of the UNCI concept because the scheme provides the ALPA with the ability to invest in projects that may otherwise be uneconomic or risky for commercial investors.
2.70
Community Power Agency told the Committee that:
The mid-scale, the community based sector, is a missing piece in Australia and it's this piece that ALPA addresses. Through providing a trusted local broker through the hubs and enabling financial support, we believe that this bill could unlock opportunities for communities to participate and to really benefit, while also supporting the broader social licence for large-scale renewables development.
2.71
Hepburn Wind was also supportive of the UNCI, observing that:
For new projects across Australia, they will be even less likely to secure finance without a bank guarantee being provided, which would be unsurpassable for many community energy groups. This is one of the key reasons why we strongly support the Australian Local Power Agency Bill 2021 as it could provide worthy projects with the underwriting they need to get off the ground.
2.72
Hepburn Wind characterised the UNCI as:
...essentially a guaranteed floor price, the government would subsidise eligible energy projects for a minimum target price of $80 per megawatt hour when the average wholesale price falls below that target price. This essentially would be risk free.
2.73
Projects supported under the ALPA’s UNCI scheme would ‘still have to go through the same planning process[es]’ as larger projects. The Australia Institute spoke to accountability standards and the high level of community engagement in projects:
You're owned by the people who are the beneficiaries. There's a complete alignment between the profit motive of the project and the community who are the owners and beneficiaries of the project, so it can lend itself to a much better process of planning and development.
2.74
The CEFC, while supportive of some aspects of the Bills, was concerned that the economies of scale required for community energy projects to be viable might be challenging. It advised that project sizes are increasing:
…because the economics required for those projects to get up need to be of a certain scale. Community groups wanting to build small one- or two-megawatt solar farms or five- or 10-megawatt wind farms will always be challenged by the economics of those projects…the biggest penetration in the uptake of renewables across the grid are going to be larger projects, many hundreds of megawatts in wind and solar, in the right parts of the grid, tapping into the right wind and solar resource and being connected to the right part of the transmission grid. I think community groups need to be engaged with those projects. They could have some economic interest in them, or they could be beneficiaries…
Large-scale energy projects (The Community Renewable Investment Scheme)
2.75
As outlined in Chapter 1, Part 2 Division 4 of the substantive Bill establishes a scheme described in materials supporting the Bills as the ‘Community Renewable Investment Scheme’.
2.76
Clause 30 requires that regulations be made under which a project involving the construction, modification or expansion of a large renewable energy generation facility in Australia can only be carried out with the approval of the relevant Minister. Large projects are defined as those with a maximum capacity of 10 MW or more.
2.77
Such ministerial approval for large projects may be granted:
…if, and only if, the Minister is satisfied, on the basis of advice given to the Minister by ALPA, that all individuals living within 30 km of the facility (the locals) have been given a reasonable opportunity to invest in the project…
2.78
A ‘reasonable opportunity to invest in the project’ means the ‘rights to at least 20% of the profits from the project being offered to the locals’ at reasonable market value. Locals must be given a reasonable opportunity to consider and respond to such an offer, and it must be structured in such a way as to include a large number of locals, not just a few individuals.
2.79
Many inquiry contributors were of the view that the CRIS would be of significant benefit to regional communities within proximity to large-scale renewable energy projects. Reasons for this support included that:
the Scheme would assist project developers to build community acceptance and social licence;
community co-investments will reduce and spread project risk and require limited government intervention; and
the Scheme would significantly boost economic activity within the regions through investment returns to locals.
2.80
Energetic Communities Association suggested that there be a requirement that large renewable energy projects offer the local community a chance to co-invest:
There are existing examples of this successfully occurring in some overseas jurisdictions. This does not prevent projects going ahead if community investment does not come to fruition, but offers great investment opportunities for those communities where projects occur. Such a policy would ensure further local economic development, as without them, we can see continued economic leakage out of those communities though non-local large energy development companies…
2.81
Ms Heather Smith was of the view that a requirement for community inverstment would assist rather than burden larger energy businesses, because ‘…as our energy transition becomes more decentralised, the network businesses will need to build local consultative mechanisms and work more closely with local community energy groups’. Ms Smith further believed that large energy businesses could in turn provide backup for local community projects, to ensure continuity of supply if local organisations fail to sustain themselves.
2.82
In terms of the practicalities of how an investment offer under CRIS could be made, Community Power Agency was of the view that the ALPA should ensure that minimum stipulations are developed and met:
…to ensure adequate and appropriate awareness in the community. For example, proof of running community forums to advertise the offer, or letters of support from local organisations.
Basis and precedents
2.83
In considering the CRIS, some inquiry participants provided the Committee with examples of precedents that existed within renewable energy projects and other industries.
2.84
There are few examples of this type of scheme in Australia, however
Re-Alliance told the Committee about the Sapphire Wind Farm: a $590 million, 270 MW farm located near Inverell in regional NSW, which ran a moderately successful community co-investment scheme.
Re-Alliance suggested that the Sapphire experience could be instructive in relation to the CRIS model.
2.85
In that scenario, an offer was made on a first-come-first-served basis to residents located in the Federal Division of New England, with priority given to wind farm neighbours and residents of the Inverell and Glen Innes Shires.
2.86
Re-Alliance submitted to the Committee that:
This call out was successful, with pledges of $7.4 million (1.2% of the project value) received from local residents. However, by the time the product offer closed, drought had hit the New England hard and many local residents were not able to proceed with their investment pledges. The investment offer was extended to all residents of NSW and the ACT and ultimately, only $1.8 million (0.3% of the project value) was invested.
2.87
Re-Alliance provided examples of more successful community ownership schemes in Europe:
Overseas, community ownership, community co-ownership and community co-investment are commonplace for renewable energy projects, particularly wind farms, and these models enjoy high levels of community support. For example, in Denmark in 2001, 86 percent of the wind turbines in the country were cooperative owned, and in 2013, 46 per cent of Germany’s 63 GW of renewable energy was locally owned. In the Danish private sector there has been a long established requirement of all new developments that a minimum of 20 per cent ownership is offered to the local community. In general, the European wind industry found its feet through community investment and provides many examples of how the sector could be opened up in Australia.
2.88
Bendigo and Adelaide Bank highlighted the success of its ‘community bank’ model, which has some potentially analogous features to the CRIS, and noted that:
profits made from the banking business are shared equally between Bendigo and Adelaide Bank and the community that generated them; and
the model aims to ‘create an alternative and sustainable source of income communities can use to fund (and leverage funding for) the initiatives and activities they choose to be most important to them’.
Concerns about the CRIS
2.89
Some inquiry participants expressed concerns about the CRIS, in particular whether a mandated equity position for investor returns along with the associated Ministerial approval for projects was viable.
2.90
From an Australian Government perspective, DISER warned that:
You can see what the intent of the clause is, but you would need to proceed with caution in implementing it and ensure there weren't any perverse outcomes in terms of deterring investors.
2.91
Similarly, while supportive of local community engagement in large-scale renewable energy projects, the CEFC was of the view that the CRIS proposal:
…would certainly introduce a complication to that project. How would you do that fairly? You would have to then have an offering to the community that would comply with and seek requirements. There would have to be the right licensing. Everyone would have to be informed as to the risks involved in making that investment if they were to put money in… If you required or gave a chance to the community to invest up to 20 percent of the equity at a fair price, the same price maybe as the rest of the investors, then you would have to go through what's effectively a retail offering to the community.
2.92
The NFF told the Committee that while it did not disagree with the profit-sharing arrangement, it was a question of threshold:
…is 20 per cent the right amount and then what are the consequences at that level? It's very hard to answer what the right level would be without further investigation and analysis. Having an agency to look into these matters is exactly why something like the ALPA is needed.
2.93
The CEC told the Committee that it did not support ‘the concept that a single form of benefit sharing should be mandated’, for four reasons:
it is overreach that government should mandate a single form of infrastructure investment - no other form of private investment in essential infrastructure is subject to such a requirement in Australia;
it deviates from the principle that communities should be consulted on the form of benefit sharing that they would most value;
given that large scale projects are often valued in the ‘hundreds of millions of dollars, and in some cases some of the new megaprojects that we're seeing are worth billions of dollars’ smaller communities would be unlikely to have the financial capacity to secure the right to 20 per cent of profits, and as such the requirement to make such an offer would be inefficient; and
while community co-investment schemes are feasible, they are resource intensive from the perspective of the proponent and would require strong community support and capacity to contribute to the project.
2.94
Geni.Energy was concerned that the arbitrary stipulation of an offer being made to residents within 30 kilometres of a proposed project may not be appropriate as:
In the Northwest of NSW, many of the towns have a retail catchment radius of around 50km, whereas, at Walgett this might be more like 200km and further toward the eastern seaboard it might be more like 30km. This is a natural distance of grouping that surrounding people travel to their most centrally located business district.
2.95
Some expressed concerns about the requirement for Ministerial approval embedded in the Scheme. CEC expressed its concern to the Committee that:
Development assessments and approvals are granted under state planning laws, so it's unclear on what basis the federal minister would be given a veto power over these projects. Currently, the federal government approval for a development is only required where there's an interaction with the [Environment Protection and Biodiversity Conservation] Act or potentially under foreign investment rules. So such powers afforded to the minister would represent a significant overreach in Commonwealth powers with relation to large-scale major infrastructure projects and would create another layer of complexity and uncertainty for investment in an already challenging regulatory environment.
2.96
The CEFC was also concerned that in terms of the ministerial approval of projects ‘those sorts of arrangements could well lead to slowing down the important rollout of renewables across the country’.
ALPA’s provision of technical expertise and project support
2.97
Under Clause 8 of the substantive Bill, one of the functions of the ALPA is ‘to provide technical expertise (including to governments, community organisations and the public) for the purposes of developing community energy projects’. To operationalise this function, subclause 34(1)(c) of the substantive Bill provides that the ALPA’s general strategy includes ‘the provision of technical expertise by the ALPA for the purposes of developing community energy projects’.
2.98
Taken together, these clauses enable a central element of the Australian Local Power Plan, to ‘establish 50 Local Power Hubs across regional Australia to support communities to develop their own renewable energy projects. Each Hub will provide technical and project support to community energy groups’.
2.99
Many who contributed to the inquiry were supportive of the potential development of local power hubs under the Bills. Veterinarians for Climate Action saw local hubs as a real opportunity for communities to take charge of their own futures:
Now, communities have the means to bring all this together and develop their own local energy hub. Renewable energy, sun, wind, wave or hydro, can be harnessed locally and it has become feasible for local communities to construct, develop and control their own local renewable energy system.
2.100
Coalition for Community Energy submitted that:
We see these hubs as a critical resource, providing tailored support and information for the region they serve. Communities range in their resources, knowledge and capacity to deliver community energy projects. The hubs would bring those with less experience up to speed with the benefits, process and development pathways for community energy.
2.101
Inquiry participants told the Committee about the types of support required for community energy projects, which could be offered by local power hubs, including:
the development of community energy projects through grants and technical assistance;
independent technical advice and knowledge;
capacity building and sharing within and between communities and other hubs; and
assistance for communities in coordinating and negotiating with network providers for access to networks, relevant data and associated technical support.
2.102
Energetic Communities Association advised the Committee that the hubs should ‘provide state-based toolkits, legal templates and business models to help groups implement projects’, and further submitted that hubs:
…can provide engineering, legal, regulatory, financial, and community engagement expertise, to support development of community energy projects. Such hubs could also provide information and resources for young people to learn about the career opportunities in the renewables sector, facilitate energy literacy and support vulnerable households through home energy advice, energy efficiency, accessing Distributed Energy Resources (DER) and community scale batteries, and supporting climate adaptation in households.
2.103
The Committee was told about the successful implementation of a similar initiative by the Victorian government. Coalition for Community Energy told the Committee that:
In Victoria, the State Government has piloted a similar program called the Community Power Hubs. Initially in the Latrobe Valley, Ballarat, and Bendigo regions, these hubs financed and commissioned 15 community energy projects during their two year pilot.
Furthermore, it had a 13-1 return on Government investment. The Hubs enabled $11 million in regional economic benefits from these projects, with a further $45 million expected from the project pipeline. These Hubs also saw large gains in social awareness regarding community energy. There is a large opportunity for a similar program to be deployed nationally, ensuring that more regions unlock these benefits.
Governance
2.104
Some inquiry participants felt that some aspects of the governance framework for the ALPA could be improved, notably requirements for the ALPA Board, and the general strategy.
Board of ALPA
2.105
Clause 46 of the substantive Bill provides that in appointing members to the ALPA Board, the Minister must ensure that the Board (taken as a whole) has requisite experience or knowledge in five key areas: community energy projects; regional development; Indigenous community development; development or commercialisation of renewable energy businesses; and environmental and natural resource management.
2.106
Inquiry contributors suggested that some additional qualifications should be articulated for Board appointees:
persons who live and work in rural or regional areas;
persons from a First Nations background; and
representatives from the social services sector, particularly as it relates to energy efficiency and community energy models that support social housing, renters and equity and climate adaptation.
General strategy
2.107
Subclause 34(1) of the substantive Bill provides for the development of a general strategy for the ALPA in each financial year. Some submitters emphasised that the views, needs and aspirations of Australia’s First Nations and Torres Strait Islander people should be considered in developing the strategy. Original Power submitted to the Committee that:
The strategy needs to include working with First Nations communities and organisations to develop economic opportunities through First Nations procurement, on the job training and local employment to enable communities to be prepared to fully participate in project opportunities where they occur on First Nations’ lands and regions.
2.108
Community Power Agency echoed this sentiment, submitting that:
The ALPA strategy needs to address the policy and other technical and resource issues leading to extreme energy insecurity experienced across the country by Aboriginal and Torres Strait Islander peoples, particularly in homelands, outstations and in many remote communities. The strategy needs to include working with relevant First Nations communities and organisations to develop economic opportunities through First Nations procurement, on the job training and local employment.
Committee comment
2.109
The Committee wishes to acknowledge the work of Dr Helen Haines MP in bringing forward the Australian Local Power Agency Bills. Dr Haines has undertaken significant community consultation in what is a very difficult and complex area of policy.
2.110
The Committee also acknowledges and applauds the many individuals and groups, including those who contributed to the inquiry, who are taking the lead in developing and implementing renewable energy solutions within their local communities across Australia.
2.111
Australia’s energy system is undergoing a rapid transition as it seeks to lead and engage with international efforts to decarbonise, and to capitalise on the benefits of renewable energy. It is clear from this inquiry and others conducted by this Committee, that all Australians want access to affordable, reliable and secure energy into the future. Successive Australian Governments have worked to meet these challenges.
2.112
Evidence to this inquiry has indicated that some Australians, particularly those who live in regional and rural areas, believe that they are not sufficiently considered as part of the transition and would like to share more fully in its opportunities and benefits.
An Australian Local Power Agency
2.113
Regional communities, local governments and community energy organisations play a growing role in Australia’s transition to a cleaner energy future. The Committee recognises that these entities perceive a gap in their access to cheap, reliable and renewable energy, and its associated economic and social benefits, particularly when compared to residents in more metropolitan settings.
2.114
These Bills seek to address these concerns, and empower regional communities to better determine their own futures through providing the tools necessary to take a local approach to renewable energy projects.
2.115
The Committee understands the perspectives that have informed the development of these Bills and these have been discussed in the course of this inquiry. The Committee accepts the evidence submitted by inquiry contributors that some regional community energy projects struggle to be realised for reasons including project size, geographic location or limited commercial attractiveness.
2.116
At the same time, the Committee considers that the creation of another new Government agency, with attendant costs and bureaucracy, should not be considered lightly. A strong argument is needed to justify why a new agency would be necessary, instead of the proposed functions of the ALPA being undertaken by existing agencies.
2.117
The Committee acknowledges that strengthened support for local energy projects can have real impacts for regional communities. In particular, there is considerable opportunity available for the development of microgrids.
2.118
In the Committee’s view, the existing agencies which fund renewable and clean energy technology and associated projects are the appropriate bodies to consider how government can best support renewable energy projects in Australia.
2.119
The Australian Government may wish to consider conducting a review of the adequacy of ARENA and CEFC’s programs in light of feedback provided by submitters that existing grant and investment mechanisms do not adequately support projects in regional Australia due to reasons including project size, technical capacity, geography or commercial viability. In doing so, the Australian Government could also consider whether technical or other support is also needed to adequately address the needs and aspirations of rural, regional and remote communities.
The Australian Local Power Agency Bills
2.120
The Bills before the Committee reflect the keen interest of many regional Australians in the benefits and opportunities presented by a renewable energy-driven future.
2.121
In the Committee’s view, while the potential regulatory and technical barriers are acknowledged, reasons exist for why they are in place. In particular, ARENA and the CEFC carefully assess projects against robust criteria to determine viable proposals to appropriately manage investment risk using taxpayer funding.
2.122
Community energy projects should continue to be diligently considered by ARENA and the CEFC. To alleviate perceptions that these projects are not deemed worthy, the Australian Government should consider how ARENA and the CEFC can better assist smaller community organisations seeking to develop energy projects with managing their regulatory, financial, governance and technical frameworks.
Underwriting New Community Investments Scheme
2.123
An argument that is well borne out in the evidence is that medium-sized projects, such as those up to 10MW in regional communities, are often seen by project developers as uneconomic. This is despite communities expressing an interest in the development of smaller-scale renewable projects to assist in achieving their energy security and environmental objectives.
2.124
Evidence given to the inquiry included examples of projects that failed to proceed for reasons of economy of scale or inability to procure finance. The UNCI provides one solution for how smaller projects can be underwritten, mitigating risks and providing security for potential investors in mid-scale renewable projects.
2.125
In the Committee’s view, there is a community desire to see these smaller projects proceed. The Australian Government may wish to, through ARENA and the CEFC, establish a dedicated mechanism for small communities and community energy organisations to better engage with energy companies, project developers and financiers to attract development and to develop more optimal solutions for their needs. Where necessary, the Australian Government could consider how the remits of the existing agencies can be designed to ensure that realistic project opportunities at the community level can be facilitated.
2.126
The Committee is of the view that the Australian Government may wish to explore funding options within ARENA to support community energy projects, noting concerns raised by the community that existing funding streams are ill-suited to their needs.
2.127
Further, it is the Committee’s view that the Australian Government should consider providing properly resourced technical assistance, delivered through ARENA, for community groups in regional Australia that wish to develop their own community energy projects. In considering such assistance, the Australian Government could be informed by existing assistance programs including the Victorian Power Hub.
The Community Renewable Investment Scheme
2.128
The Committee acknowledges a desire in regional communities to see more local benefits from large scale energy projects.
2.129
The Committee is concerned about the impact and possible unintended consequences of Clause 30 of the substantive Bill, which mandates that all individuals living within 30 kilometres of a proposed new or upgraded large renewable energy facility must be provided with the opportunity to invest in at least 20 per cent of the potential profits from the project.
2.130
This is a novel concept, with limited precedent in Australia. The Committee notes that the model has been applied overseas and has some parallels with schemes operated in the domestic community banking sector.
2.131
Nevertheless, the Committee recognises and shares concerns expressed by some inquiry participants about the proposed Scheme.
2.132
The first is that the Scheme will impose a burden on project proponents while potentially resulting in few offers actually being made and accepted, due to the size of most current projects and the significant financial outlay therefore likely to be required from individuals.
2.133
Secondly, where offers are made to qualifying residents, the Committee is not satisfied based on the current drafting of the Bill, that it would be incumbent upon developers making offers to ensure that recipients, presumably individual community members, had sufficient opportunity to seek independent legal and financial advice prior to acceptance. Such a requirement could negatively impact both the individuals involved, and other proponents and investors due to reduced confidence in project viability.
2.134
A related concern with the Scheme is the requirement for Ministerial approval to be granted for new or upgraded large renewable energy generation facilities. The Committee notes the concern expressed during the inquiry that such a requirement potentially conflates state and Commonwealth responsibilities, and that it would add complication, delay and expense to the commencement of large projects and therefore the expansion of renewable energy in Australia.
2.135
The Committee recommends that the Bills not be passed.
Mr Ted O’Brien MP
Chair
16 February 2022