The Government isn’t really interested in funding new coal fired power stations, it wants to destroy investment in renewable energy and the agencies responsible for driving the transition away from coal.
Prime Minister Malcolm Turnbull and Environment and Energy Minister Josh Frydenberg are two intelligent individuals who both have experience in the world of finance.
They understand that when every potential private investor in coal-fired power says they aren’t interested, it makes it virtually impossible for another coal-fired power station to ever be built in Australia again.
But they also think the politics of climate change and energy means renewable energy is enemy number one.
Their latest idea about allowing the Clean Energy Finance Corporation to invest in coal power is a part of an ongoing campaign to destroy renewable energy investment in Australia. This is happening even as the CEFC has invested more than $2 billion in renewable energy, energy efficiency and renewable energy technology, while making a return for tax payers.
There are several big hurdles that prevent the CEFC from investing in coal.
First, the Government would have to stop expecting the CEFC to make returns for the taxpayer.
The Government, through an investment mandate, requires the CEFC to make a return on its investment.
When the Coalition came to Government it increased the required rate of return. The CEFC has continued to meet this higher requirement and has invested more than $2 billion in renewable energy, energy efficiency and renewable energy technology.
If the Government wants the CEFC to invest in coal power, the CEFC would have to invest knowing that it would never recoup taxpayers’ money, let alone earn a return on it.
Second, there would need to be an investment partner.
The CEFC doesn’t invest in projects on its own, it strategically co-invests. Therefore it would logical that any new coal fired power station would need a proponent and other financiers to approach the CEFC as a partner. There is simply no appetite for this type of investment in Australia. As the CEO of CS Energy, one of the biggest generators of coal-fired power in Queensland told ABC’s 7.30 this month, “it would surprise me greatly if there was any more coal-fired technology built in Australia”.
Finally the Government would need to rewrite the legislation of the CEFC, allowing it to invest in coal-fired power stations.
Even if these changes were made and challenges overcome, the board of the CEFC still makes the final investment decision on projects.
In all likelihood, the current board will choose projects in renewable energy that earn a return for the taxpayer rather than projects in coal that will lose them money.
If they didn’t, what kind of responsible board would they be?
Apart from the financial implications, the Australian Prudential Regulation Authority, a central regulator of Australia’s financial system, just last week warned that financial institutions must be aware of the liability of company directors and the disclosure requirements in relation to the risks of climate change.
Board members of the CEFC must also take climate risks into account when considering which investments to tick off on.
The terms for the majority of CEFC board members expire over the next two years, so the Government could replace them with more agreeable individuals, or leave their positions vacant so the operation of the agency grinds to a halt and no projects are approved.
We’ve seen this happen already with one agency, the Climate Change Authority.
This would be a sad waste of valuable expertise, sacrificed for political expediency.
Even if all the above machinations occurred, it is still unlikely new coal-fired power stations would be built, then but neither would any renewable projects receive funding and Australia’s energy transition would dramatically slow.
The CEFC managed to ride out the Abbott years and one would have thought the organisation’s odds of survival would have improved under Prime Minister Turnbull and Energy Minister Frydenberg.
However, since Turnbull assumed the leadership the Government has partially defunded the Australian Renewable Energy Agency and has now turned its sights on the CEFC.
The innovation nation that Prime Minister Turnbull envisioned continues to retreat further into the background as the politics of energy begins to engulf a successful and respected institution.
The Prime Minister and Minister Frydenberg are smart enough to know that new coal-fired power stations will never be built in Australia.
But the debate might help destroy a successful national institution and with it Australia’s ability to accelerate its energy transition and appropriately deal with climate change.
Matthew Rose is the Australian Conservation Foundation’s economist