ARENA could tag-team with CEFC, focus on off-grid and integration

Greg Bourne, the chairman of the newly formed Australian Renewable Energy Agency, has provided further insight into how the organization proposes to spend the $1.8 billion at its disposal – funding which will be crucial to emerging technologies competing for headroom in the Australian energy market.

The board’s funding strategy is yet to be finalized, but Bourne flagged a possible close co-operation with the Clean Energy Finance Corp, and a focus on remote and isolated grids. He said once the funding strategy is complete, likely in a few weeks, the board will move quickly to make a decision on the fate of the unsuccessful Solar Flagships contenders.

Bourne took up his position at the start of July, and has been working for the last three months with CEO Ivor Frischknecht and the new board to draw up a master plan for the agency. “We are close to solidifying our thinking on what we believe our near term investments ought to be,” he told the All Energy conference in Melbourne.

He said ARENA and CEFC, which has $10 billion allocated but whose status may be less certain should a coalition government be elected, could work in tandem, or as “teammates in a hurdle relay race.”

This could mean ARENA providing grants or other funds to the “riskier portion” of a near-commercial technology, while the CEFC provides lower risk assistance, though debt or equity, to build new generation.

“One of the outcomes that we both want to achieve is to improve the bankability, including the perception of the bankability of renewable technology,” Bourne said. “The complementarity is striking. There are many barriers to hurdle on the track from desktop to commercialisation. Falling at the last hurdle with the winning post in sight is something none of us want.”

He also said, with a possible anticipation of Solyndra-type political fallouts, that not all funding would succeed. “We can’t guarantee all our projects will be successful, but both successes and failures help improve knowledge of renewable energy technologies and business models in domestic and international investor communities.”

Bourne said that any technologies supported by ARENA would need to be suitable for the Australian energy environment. He hinted that one focus could be on the integration of renewable energy sources and fossil fuels, which he said will remain a “big challenge” given the size and status of the country’s transmission network.

Bourne noted the roadblocks that had emerged in the rollout of large scale solar (getting market support), and geothermal development (technological difficulties) and the potential of distributed generation. He said ARENA would week to help diversify renewable energy technologies away from wind energy, which will be deployed in large numbers under the Renewable Energy Target.

But he made special focus on the remote grids, particularly in the mining industry, which has been a notoriously tough not to crack for the renewables industry, but could offer huge potential because of the soaring costs of remote generation, particularly diesel. Miners have deep pockets, sometimes too deep to worry about energy costs, but the downturn in the commodity cycle may encourage some to focus more on such operational details.

Bourne said that while energy demand in the overall economy had been falling, and its future was difficult to predict, demand from the mining sector was expected to grow at 5.2 per cent a year. “We can see that renewable energy could either partially or completely displace on-site or isolated grid diesel generation,” he said. This could involve deploying either solar PV or wind technology, used as a stand alone power source or hybridised with either diesel or gas.

He also said isolated grids provide a useful platform to trial grid integration and storage technologies, which will be vital to wide scale deployment of renewables and allow generators to capture value by selling to the market when demand is greatest.

ARENA had already received “some interest” in integrating renewable energy projects in community and remote sites energy planning and Bourne said the agency is keen to hear from companies with an interest in the sector.

Of greatest near term interest to come companies will be its decisions on the large scale solar projects referred to ARENA by the Energy Minister Martin Ferguson.

These projects include the three projects that missed out on the solar PV section of the Solar Flagships funding – the Moree Solar Farm, the Infigen/Suntech proposal and TRUenergy’s Mildura solar project, and the Solar Dawn project in Queensland, which failed to get a power purchase agreement or banking finance for its 250MW solar thermal project in Queensland and lost funding from the state government. All the applicants are believed to have presented scaled-down versions of their proposals to ARENA. Bourne said these assessments would be concluded after the funding strategy is released in coming weeks.