CEFC wants green hydrogen to become the new ‘large-scale solar’ success story

The Clean Energy Finance Corporation is hoping to replicate the success of Australia’s large-scale solar sector through targeted investments in the emerging green hydrogen sector, and declared itself to ready to step in to support new grid investments.

The shift in focus comes as the CEFC announced that 2019-20 was a successful investment year for the government-owned green investment fund, confirming that it had made more than $1 billion in new project investments, supporting total clean energy investment of $4.24 billion in a year that felt the impacts of a challenging economic environment, and the Covid-19 pandemic.

The CEFC’s latest annual investment update also shows that funds repaid to the agency from its investments reached $942 million in 2019-20, which includes funds recouped through the repayment of loans and the sale of assets, allowing an almost equivalent amount of funds to be recycled back into new projects.

“As our investment portfolio matures, this is an increasingly important demonstration of our commitment to earn a positive return on our investments and reinvest our capital on behalf of the Australian community,” CEFC CEO Ian Learmonth said.

“We were really pleased with the way the last 12 months has gone. Even when it was a challenging year in the midst of the Covid-19 pandemic.”

The result highlights that the CEFC is approaching the point of being self sustaining, with returns from earlier investments now providing a sufficient flow of funds to facilitate continued re-investment into the clean energy sector without the agency needing to substantially draw down on its reserves.

Having provided finance to a large number of Australia’s early investments in large-scale solar projects, the CEFC is now looking to replicate these successes by directing up to $300 million in investment into an emerging Australian green hydrogen sector.

As it did with large-scale solar projects, the CEFC will look to work with ARENA co-fund early projects investing in green hydrogen electrolyser capacity, including some of the seven projects shortlisted for $70 million in ARENA grants.

By financing the early-stage projects, ARENA and the CEFC can help establish local experience and expertise in hydrogen projects, which will help drive down costs and improve private sector investor confidence for future projects.

The CEFC has seen facilitating the involvement of institutional investors, including managed investment funds and superannuation firms, as a key priority for attracting additional investment in the sector. Since its inception in 2012, the CEFC has helped support a total of $27.3 billion in combined public and private investment in Australia’s clean energy sector.

“CEFC capital has been critical to building the clean energy sector, and remains central to filling market gaps, whether driven by technology, development or commercial challenges. This was especially the case in 2019-20 as banks and other mainstream investors refocused their attention to address the challenges of the pandemic.” CEFC CEO Ian Learmonth said.

On Monday, the CEFC announced that it had made a $60 million cornerstone investment in a new ‘Australian Climate Transition’ indexed fund, which targets ASX 300 listed companies that are capable of driving a transition to zero net emissions, with the involvement of institutional investors QBE Insurance and First State Super.

It follows similar deals struck with Macquarie Bank, QIC and the the Australian Unity Green Bond Fund, which have sought to offer more mature green investment options for institutional investors, which are in turn facing growing pressure from their customers to offer climate friendly investment options and to reduce exposure to the fossil fuel industry.

The CEFC has also been tapped to manage the Morrison government’s $1 billion Grid Reliability Fund, which will make investments in new grid infrastructure and firm generation projects. However, the fund has encountered delays, as the legislative amendments required to allocate the addition funds, and amend the CEFC’s investment mandate to enable a wider range of investments, has been stalled by a suspended parliament.

However, Learmonth told RenewEconomy that the CEFC would not wait to make strategic investments in new grid infrastructure, recognising that momentum being built by the NSW government’s announcement of renewable energy zones, and AEMO’s Integrated System Plan, meant that investments needed to be made sooner, rather than later.

Despite the delays to the necessary legislative amendments, federal energy minister Angus Taylor welcomed the investment results from the Clean Energy Finance Corporation, recognising the large amount of private sector investment the agency had brought into the clean energy market.

“Reducing emissions without imposing new costs on households, businesses or the economy is central to the Government’s Technology Investment Roadmap,” Taylor said. “This is more important than ever as we recover from COVID-19.”