The Clean Energy Finance Corporation (CEFC) is the latest unwitting victim of Australia’s climate wars, now the subject of a new round of legislative renovations attempting to refashion the agency into a vehicle that could reform national energy policy.
Federal Energy and Emissions reduction Minister Angus Taylor last week introduced new legislation that would enable the CEFC to invest in fossil fuels and change its investment rules to allow it to invest in loss making projects.
The investment changes relate to a new $1 billion Grid Reliability Fund introduced by the Morrison Government last year to enable it to underwrite new firming generation under the government’s proposed Underwriting New Generation Investment (UNGI) program.
It’s all a long way from home for both the CEFC and the Federal Government.
The UNGI scheme was first flagged in 2018 by Taylor expressing the Federal Government’s growing, and possibly quite valid, concern that Australia’s world-record pace of renewable investment was not being sufficiently matched or supported by firming capacity that could kick in when renewables weren’t generating.
Taylor shortlisted a dozen projects under the scheme albeit without a clear head of power or funding mechanism. Energy policy, including the approval of new generation, is the jurisdiction of the states.
The Federal Government has a co-ordinating role with energy ministers through the National Electricity Market (NEM). Its only legal authority is to legislate to enforce international agreements it commits to, like the Kyoto Protocol and Paris Accord. In other words, it only has legislative authority to reduce emissions, not increase them.
Independent politician Zali Steggall raised concerns about this with The Australian National Audit Office (ANAO), which is currently investigating the matter.
There’s an additional problem for Taylor: last week The Australian Energy Market Operator (AEMO) issued its 2020 Electricity Statement of Opportunities (ESOO) which basically gave the NEM a clean bill of reliability health for the rest of the decade. In other words, it was a “thanks, but no thanks” to the offer of extra firming generation from UNGI.
This is all something the team at the CEFC could probably do without. The CEFC has been in the political crossfire since it was first proposed by Climate Change Minister Greg Combet back in 2012.
The CEFC was originally designed to be an enabler of demonstration and pre-commercialisation clean energy technologies that grew out of the technology incubator at ARENA.
The essential idea for the CEFC was it was supposed to be able to take risks commercial banks wouldn’t, helping to accelerate the development process. It was in response to the scarcity of this type of venture capital in Australia, demonstrated by emerging wave and geothermal technologies companies listing on the ASX to raise capital, only to all eventually blow up a few years later. There was a sense that governments were better placed to de-risk technologies rather than mum and dad investors.
Criticism of Taylor by the left-wing Australia Institute for undermining the CEFC’s track record as a profit-making investor of renewable energy misses the point completely. Many of the deals done by the CEFC to take profit just crowd out commercial banks. Its original role was to be prepared to take on more risk and to be prepared to lose more skin to find out whether a technology could deliver.
The Federal Government may privately justify their leap across the constitutional Rubicon, claiming that firming clean energy, whether it’s with pumped hydro, batteries or gas, is just as important as building renewable generation itself. But maybe that’s a job for the market and the agencies charged with that role.