If you shake hands with Malcolm Turnbull, you best count your fingers to see whether they are still there.
In short, he’s “keeping” ARENA, except that it has no funds, its grant function will be terminated and organisationally it will be absorbed into the CEFC. He starting a new fund, called the Clean Energy Innovation Fund, a subsidiary fund of the CEFC, to lend out to bankable ‘innovative’ ventures, but the funding is less than is already there, and will be dribbled out at the princely rate of $100 million per year for the next 10 years so as “not to overwhelm the market.”
In other words, pretend you are brave and forward-looking, but don’t do anything that might disrupt coal’s predominance any time soon.
The focus will be on bankable projects that yield one per cent more than the government bond rate, compared with the CEFC’s target of 4 per cent above the government bond rate.
John Grimes is the chief executive of the Australian Solar Council, put it this way:
- The Federal Government has presented to the people of Australia what sounds like a fantastic announcement, $1 billion for renewable energy investment. It’s a bit like an exquisitely decorated Easter egg. The only problem is that it looks good on the outside, but on the inside it’s a rotten egg.
Greg Bourne, the former chairman of the ARENA, says innovation will have to look elsewhere, probably overseas:
- “If one looks at multiple ARENA projects that have been kicked off since 2012, a significant number of them required the grant to move things along the innovation chain,” Bourne told RenewEconomy in a phone interview on Wednesday.
“That innovation chain does not start near commerciality. It starts earlier. If we are to be an innovation nation we have got to start earlier in the innovation chain, and that requires grant, equity and debt.”
The Australian Renewable Energy Agency (ARENA) and the Clean Energy Finance Corporation (CEFC) were set up as complementary organisations by the Gillard government. ARENA gave grants to stimulate research and develop new clean energy technologies. CEFC lent funds to projects that would achieve a return on investment.
Abbott tried to nix them both, which required legislative change. The Senate has refused to oblige, with the CEFC legislation having been rejected twice.
ARENA still has a legislated spending program with $1.3bn in uncommitted funding over the next six years. Abbott/Hockey tried to axe the remaining funding in the 2014 budget. Turnbull has now confirmed Abbott’s policy.
Under Turnbull, the terms of last of the six external directors of the ARENA board have now expired without replacement, leaving only the Secretary of the Department of the Environment. However the remaining executives will now assess Clean Energy Innovation Fund projects which will be approved by the CEFC board. The ARENA name will be kept, but that’s all – the Easter egg is empty.
The CEFC was set up as a $10 billion fund with $2 billion per year from 1 July 2013 to 2017. It has already lent $1.4 billion for projects worth a total of $3.5 billion returning an average of 6.1%. Turnbull’s announcement of $1 billion in ‘new’ funding, is in fact old funding at a fraction of the rate.
Turnbull is trying to pretend he’s not Abbott, but is not making much of a fist of it. Giles Parkinson asks whether he should be wearing Abbott’s budgie smugglers too!