ARENA warns future funding for renewables is ‘unclear’

The Australian Renewable Energy Agency has conceded that its future funding is “unclear” and warned the Australian clean energy industry to take this into consideration when making applications.

ARENA – established in 2012 as an independent statutory body by the Labor/Green coalition, and armed with $3.2 billion to invest in emerging renewable technologies – has been one of the few clean energy institutions to remain largely in tact under the Abbott government.

But a series of raids on its budget – initiated by the Labor government and followed through by the Coalition – has reduced and deferred much of its funding, and it has little spare capacity in coming years.

The agency has only $103 million in uncommitted funds to spend out to 2016/17, as of the end of January, it told a Senate Estimates hearing earlier this year,  following a $435 million reduction in the Abbott government’s carbon pricing repeal legislation and a further $45 million cut in the mid year economic review (MYEFO).

But the status of even this money has been clouded by confusion over ARENA’s role in the million solar roofs program. RenewEconomy last month reported speculation that ARENA could be stripped of more funds in the May budget, and could even be folded back into a government department.

“Given the fiscal outlook and media speculation concerning the forthcoming budget on 13 May, 2014, the future of ARENA’s funding is unclear,” ARENA CEO Ivor Frischknecht wrote in a letter to stakeholders.

“You may wish to take this into consideration, particularly when developing your applications.”

Frischnecht said any decisions about ARENA’s “funding envelop” would not affect projects that already have a funding agreement in place with ARENA. And for the moment, it continues to assess new applications.

Industry observors said it was an “unusual” letter to send out, and could indicate that the agency was preparing for more significant budget cuts

Frischknecht later told RenewEconomy that the letter was prompted by a flood of inquiries about the funding status. “We are getting lots of questions, but right now we don’t have the answers,” he said.

He said he issued the warning, because some applicants would spend a lot of time and money developing their proposals, including securing land, contracts and finance. He said funding was a matter for government.

The clean energy industry believes the stripping back of funding for ARENA is most likely to affect its ability to fund large-scale solar projects, although it has remained steadfast in its determination to continue with its hybrid renewable program to bring solar and other technologies to mining projects and other remote locations.

ARENA has worked alongside the Clean Energy Finance Corporation in many of its projects, but the CEFC is also under attack from the Coalition. It has tried once to dismantle the $10 billion CEFC, but the attempt was blocked in the Senate.

The government is trying a second time with legislation, which could provide a trigger for a double dissolution. The future of the CEFC in the new Senate, which sits from July 1, is unclear because some independent Senators support its role.

That could. However, also be a protector for ARENA, because any changes to its funding arrangements also require a change to the legislation.