A Cleanish Energy Finance Corporation and an Australian Something Energy Agency?

In a busy energy policy week for the federal government, the  Prime Minister today announced several new “buckets” of funding for a range of potentially emissions-reducing initiatives. These include a handful of funds targeted at specific activity, such as Technology Co-Investment Fund ($95m), Carbon Capture Use and Storage Development Fund ($50m), Future Fuels Fund ($74m), a hydrogen export hub, microgrids support, buildings energy efficiency and a framework for offshore clean energy development. How these differ from similar existing initiatives such as the Carbon Capture and Storage Flagships program or the Future Fuels CRC remains to be seen.

But the headline items are a funding refresh for ARENA and CEFC along with a broadening of their mandate. To some extent the latter is another way to wedge Labor, but it is also a pragmatic response to the changes in the technology landscape since these agencies were created by the Gillard government. It can also be seen as a recognition by the Coalition of its failure to abolish them in its first two terms of government and that it is better off working with them.

In terms of the numbers ARENA is getting a “guaranteed” (noting politician’s guarantees are not always all they are cracked up to be) $1.43bn. Over ten years, this is a lower funding rate than it previously enjoyed. In the seven years to 2019, it dished out $1.44bn in grants as well as covering its own running expenses of around $30m/year. However, its funding will be boosted with a share of the $2bn climate solutions fund and an additional $193.4 million for a clean technology grants hub (how this is different from what ARENA normally does is anyone’s guess for now). Even if the legislation widening its mandate goes through, it may not make that much difference. ARENA has already moved beyond wind, solar and battery funding with grants for hydrogen, biofuels and electric vehicle development. Which projects to fund will still be decided by ARENA’s independent Board, noting that the composition of the Board has changed recently. The likelihood of ARENA or CEFC putting their money into, say, a new coal plant, is just a greenie’s nightmare rather than a realistic possibility. And the arms’ length decision-making of an independent Board means that the next election won’t see a cleantech version of the sports rorts.

It’s a similar story with the CEFC. The difference is that the CEFC is designed to mostly get its money back. Last year it was repaid almost the same amount as it deployed – actually $5m more. Given repayments were triple the previous year’s, it may be too soon to declare it self-financing. However, it has a total of $10bn to deploy, which as it works as a co-financier, is likely to leverage a further $10-15bn of private capital. Its mandate has already been expanded in the last couple of years through new initiatives such as the Reef funding program, sustainable cities investment program and Grid reliability fund. It’s this last one that has sparked claims of the CEFC funding fossil fuel projects as the government seems keen to use the fund for its Underwriting New Generation Investment program.

Part of the problem is this proliferation of funds and programs under the umbrella of CEFC/ARENA, which is designed as much as anything to give the government lots of “announceables”. Next week is supposed to see the release of the Technology Investment Roadmap which should at least make clearer what kinds of technologies the government thinks are close enough to commercial reality for ARENA and/or CEFC to give them that final push.