ARENA outlines strategy for emerging renewables

One thing that the new appointed chairman and chief executive of Australia’s Renewable Energy Agency, Greg Bourne and Ivor Frischknecht, cannot assume in the first few months of their new jobs is that they will have empty in-trays.

As the head of the newly created agency, with some $3.2 billion to spend, Bourne and Frischknecht hold virtually the sole avenues to additional funding for the clean energy industry apart from the renewable energy target – and the RET is expected to be completely dominated in the next few years by the current least cost clean energy source, wind.

For the rest – be they from solar PV, solar thermal, storage technologies, wave energy, geothermal, biomass, or any other technology – it means detailed submissions to ARENA and long queues outside the offices of Bourne, a former head of BP Australia and WWF Australia, and Frischknecht, a former investment manager for a private equity fund, who along with their board could now be regarded as the country’s Emerging Energy Czars.

They have some $1.7 billion in unallocated funding in ARENA, to be spent over the next eight years, and another $1.5 billion in funds that have already been committed. But some of the latter could be repatriated from projects that have made no progress.

“We will redirect funding away from stalled projects. We don’t want to have unproductive capital locked away,” Bourne told the Clean Energy Week conference in Sydney on Thursday, in his first public outing since his appointment.

Among the first decisions that ARENA will be making will be on the fate of the three solar PV projects that were shortlisted for the Solar Flagships scheme, and for the $1.2 billion Solar Dawn project in Queensland that won the solar thermal component of the flagships scheme but couldn’t raise the finance, despite a $464 million grant pledged by flagships and $75 million (now withdrawn) from the Queensland government.

All applications are expected to resubmitted shortly, but are likely to be on a much smaller scale than envisaged in the flagships program – around 30MW instead of the original 150-160MW in the case of PV.

They will need to be. While Solar Flagships originally promised $1.5 billion of funding by 2015, ARENA will have a grand total of $385 million of uncommitted funds over the next three years – for all projects. This comprises $84 million in 2012/13, a similar amount in 2013/14 and $217 million in 2014/15.

Bourne told RenewEconomy in an interview that the updated applications were due soon and ARENA intended to make prompt decisions about these projects. “We will move fast,” he said. “We owe it to the proponents to be decisive on this.”

However, he suggested that flagships was effectively dead as a separate funding scheme: the solar projects will now be competing with others to make a case for funding with ARENA. Under its funding strategy for the next three years, solar does remain a key focus. Apart from the flagships considerations, it will consider a new program of large-scale solar thermal projects, including hybridisation, “building on the lessons learned from round 1 of Solar Flagships.” And it will consider the “appropriate program support for continued PV project deployment.”

ARENA is also contemplating a range of schemes to help biofuels, geothermal – where it will consider direct use geothermal heat as well as power and hybrid applications, support for pilot and demonstration ocean energy projects, as well as micro-hydro, infrastructure, and enabling technologies such as forecasting, storage and off-grid installations.

The Emerging Renewables program, the renewable Energy Venture Capital Fund and the Australian Solar Institute will continue as part of the broader program.

Bourne said ARENA was interested in more flexible funding mechanisms beyond mere grants, which have generally been required to have matching funding from other sources. He described this as a “blunt” instrument, and said ARENA would consider other mechanisms, such as reverse auctions, which could guarantee revenue for the project, rather than just up-front capital.

ARENA may also consider regional projects with a variety of technologies, as a way of spreading the balance of system costs, which are often far greater than the technology costs, particularly in first up projects. “I can envisage where we will have onshore wind farm, an offshore wind, farm, a wave farm and maybe even a solar thermal plant in one continuous area. That way you can get the benefits of scale.”

Bourne said it was clear that there were no magic bullets for renewable energy. “It is hard, hard graft,” he said. “What we are trying to do is to bias the rolling of the dice. You are hoping that most will come up sixes, but you know that some will come up snake eyes.”