Battle looms over future of Clean Energy Finance Corp

A quite extraordinary battle is looming over the future of the $10 billion Clean Energy Finance Corporation. But the fight in the short term is not likely to be on whether the CEFC can spend its money, but how.

The CEFC has become one of the defining issues that differentiates the conservative view of energy (and the world) and the transition to a low-carbon economy. And the Coalition has vowed that it will seek on its first day in office to close its doors. But it’s not going to be able to do that.

Like the carbon tax, the Coalition can only repeal the CEFC if it can pass legislation through both houses of parliament. That is unlikely until at least July 1 next year, and may still be difficult after that, depending on the new make-up of the Senate after Saturday’s election. (Senators elected this Saturday don’t take their seats until July 1 next year).

That leaves the CEFC in operation, and with another $1.5 billion to spend (it has already allocated $500 million), until the end of the financial year. Just how it gets to spend that money should be interesting to see.

The Greens today released opinion from the clerk of the Senate supporting the view that an Abbott government could not stop the CEFC from undertaking its legislative obligations to fund clean energy projects around the country, without the parliament amending legislation.

Milne said Opposition leader Tony Abbott and Finance spokesman Andrew Robb are “arrogantly assuming” they can usurp the role of the parliament to direct the CEFC to halt its legislative function.

“They can’t,” Milne told the National Press Club today. “Only the parliament can repeal the carbon price and only the parliament can stop the roll out of renewable energy by the CEFC.” The Greens want funding for the CEFC to be increased to $30 billion.

The CEFC is of the same view about the repeal. After Abbott wrote a letter in early August instructing it to cease investments, the CEFC chairwoman Jillian Broadbent wrote back to say that the institution would respect the caretaker conventions, but noted that under the Clean Energy Finance Corporation Act 2012, “it is not improper for the CEFC to continue to undertake its functions and apply the law as it is presently in force.”

She said in that letter that if the Coalition forms Government after the election, the CEFC will “welcome the opportunity to consult with the incoming responsible ministers in the context of the legislative framework prior to undertaking any further action.”

Those discussions, however, will not focus around how to close the CEFC down, but it could influence how it makes its investment decisions. It has already allocated $500 million on energy efficiency, wind projects, and a new solar farm.

Those negotiations will likely be held with Robb, as the CEFC falls within the finance department. That should be interesting as Robb has been the most outrageously critical of the CEFC – describing it as a “slush fund which will fund projects that the private sector won’t touch with a bargepole.” More recently, after the CEFC did, in fact, support projects that private sector was heavily invested in, he described it as a “wanton waste” of money.

As long as the CEFC Act stand in place, the CEFC’s investments will have to be made “in the spirit of the act” – which revolves around clean energy, energy efficiency, and emission reductions.

That means pumping it into a new coal-fired power station would be out of order, but it could mean that an Abbott government could push it towards investments in energy efficiency, or hybrid technologies, rather than new stand-alone renewables.

The Coalition have also muttered about “double dipping”, which suggests they may move to stop projects receiving funds and finance from both the CEFC and the Australian Renewable Energy Agency, as well as renewable energy certificates under the Renewable Energy Target.

(ARENA is also facing cuts but Coalition spokespeople insist that it will not, as the Australian Financial Review reported today, be repealed. It will, however, face cuts in funding from 2014/15 on. These cuts have yet to be announced).

Insiders say that direction can be given by ministers on aspects such as risk or return, eligible technologies, allocation, concessionality, the types of instruments, and broad operational matters.

That means, an Abbott government could, for instance, lift the required rate of return, or rule out investments that require discounts on interest rates (concessionality). It could not, however, require the board to make, or not to make, a particularly investment, or one that is inconsistent with the act.