The promise to proceed with legislation to repeal the $10 billion CEFC and the $2.8 billion ARENA comes despite acknowledgment within the government that the CEFC could be crucial to meeting emission reduction targets.
Bob Baldwin, the parliamentary secretary for Industry, told the renewable energy industry gathering at Clean Energy Week in Sydney that the CEFC distorted the market and was not needed in an era of “budget emergency”.
He repeated age-old accusations that the CEFC invested in projects deemed too risky by the private sector. “This cannot be justified at a time of budgetary constraint,” he said.
Baldwin’s comments came as the CEFC unveiled its annual report which showed that it continued to deliver abatement at a net benefit to the government, as well as profits on its investments.
And it also came as Environment Minister Greg Hunt hinted that the CEFC could be directed to channel its investments towards emissions reduction activities. In other words,the government is considering relying on the very institution it wants to axe to meet its climate goals, in the absence of Direct Action which has yet to be presented to parliament. The CEFC has actually said it could achieve more than one quarter, and possibly even one half, of the targeted 5% reductions by 2020 at a “positive” abatement cost.
Baldwin’s threat to scuttle the CEFC also came as it unveiled new funding that will help unlock finance for solar leasing, removing upfront capital costs for households and businesses, and which will bring two US companies to Australia, including SunEdison.
It also announced $80 million seed funding for the country’s first clean energy investment fund that could be parlayed into a $580 million fund and attract other major superannuation funds to the market.
Baldwin also confirmed the government intended to proceed with its ARENA repeal act, which would see the agency reabsorbed by the government department and effectively denied new funding.
ARENA was created two years ago as an independent authority to give it more independence and commercial nous in its funding allocation. The failure of several high profile projects – although they did not result in the loss of money – highght what some people criticizes as poorly conceived contracts.
The government was forced to reappoint two directors last week to the board, as part of a “transition” period and to meet the requirements of the act to have commercial and industry expertise.
“It doesn’t need to be a stand alone agency,” Baldwin said.
The CEFC has now committed more than $1 billion in funds, and leverage private money at a ratio of $2.20 for each dollar invested. It has generated reasonable returns
“Through this portfolio of 40 direct investments and a further 25 projects co-financed under aggregation partnerships, the CEFC is delivering abatement estimated at more than 4.2 million tonnes of CO2e p.a., with a benefit to the taxpayer of around $2.40 per tonne of CO2e abated (net of government cost of borrowing), CEO Oliver Yates said.
The CEFC said it had funded projects involve more than 700MW of clean electricity generation capacity, installed or supported, covering renewables and low emissions technologies. And it had financed projects for business that employ more than 30,000 Australians and had partnered with all four major banks and more than 10 other domestic and international financial institutions.