The Morrison government is set to make a series of generous concessions to the gas industry, including propping up failing fossil fuel projects that are operating at a loss, by co-opting the agency originally created to support investment in clean energy projects.
As reported by RenewEconomy on Thursday, federal energy and emissions reduction minister Angus Taylor has finally tabled proposed amendments to legislation establishing the Clean Energy Finance Corporation (CEFC) that will enable to the agency to fund the Morrison government’s embrace of the gas industry.
The legislative amendments are designed to establish a $1 billion grid reliability fund, which will invest in energy storage, electricity generation, transmission or distribution infrastructure as well as ‘electricity grid stabilisation’ infrastructure.
What the amendments make clear is that the fund will be opened up to gas projects by including them in an expanded definition of ‘low emissions technology’, including projects that may operate at a loss, with the CEFC potentially being used to funnel taxpayer funds into unprofitable gas projects, without any requirement that those projects ever deliver a financial return to government.
As stated in the Explanatory Memorandum to the legislation tabled by Taylor on Thursday:
“Regulations may be made to clarify that an activity specified in the regulations is an investment related to making a grid reliability fund investment for the purposes of this Act. An example could be a particular type of revenue floor arrangement which underpins a [Grid Reliability Fund] investment, but would not generate a return.”
In essence, the CEFC could be directed by the government to top-up the revenues of a failing gas project, without ever requiring that project to deliver a profit.
“Angus Taylor creating a public fund to hand a billion dollars to the offshore shareholders of hand-picked loss-making fossil gas companies will put them in unfair competition with batteries and renewable energy, which are the cheapest forms of new energy” Greenpeace Australia spokesperson Jonathan Moylan said.
“This plan would be unhinged at the best of times, but is even crazier at a time when millions of unemployed Australians are looking for real and secure work.”
This is not a concession offered to the CEFC’s investments in renewable energy projects, which according to the latest investment direction issued by Angus Taylor, are expected to deliver an average annual investment return that is the equivalent of 3 to 4 per cent above the five–year Australian Government bond rate.
As it currently stands, this requires the CEFC’s clean energy investments to deliver investment returns of more than 7 per cent per annum, and provides virtually no room for any loss making projects.
This has long been the subject of an ideological argument from successive Coalition governments, that the CEFC should not be investing in loss-making renewable energy projects.
Yet, it is about to do exactly that in the gas sector.
The Clean Energy Council described the amendments as a ‘distraction’, adding that the Morrison government was overlooking more pressing concerns in the Australian energy market, with the key to cutting costs for energy consumers being the need to unlock further investment in network infrastructure.
“Allowing the CEFC to invest in gas generation is an unnecessary distraction and could further undermine investor confidence in new renewable energy and the energy sector in Australia. The CEFC should continue to focus on clean technologies. The Clean Energy Council, therefore, encourages the Australian Parliament not to support the proposed change to the ‘low-emission technology’ definition which would allow it to support higher emissions generation,” the Clean Energy Council said in a statement.
“The biggest challenges facing our energy system relate to network congestion and constraints. We need further investment to build and strengthen our electricity system through both poles and wires as well as new smart grid supporting technologies that address highly technical issues such as system strength.”
The move to direct taxpayer funds into an unviable gas sector was also slammed by progressive think tank The Australia Institute, which raised additional concern about an exemption that the Grid Reliability Fund will receive from requirements to ensure at least 50 per cent of its investments are made in renewable energy projects, which applies to the wider CEFC.
“This new legislation shows the Government’s hand by changing CEFC from an explicitly profit-making investor of renewable energy projects for the Australian people, to a potentially loss-making underwriter of fossil fuel projects,” said Richie Merzian, Climate & Energy Program Director at the Australia Institute.
“These amendments pave the way for dud taxpayer investments in gas power generation and leaves the door wide open to fund other non-renewable, climate polluting technologies.”
“How the Government will justify its amendments that ensure the Clean Energy Finance Corporation is no longer obligated to fund at least 50% of its projects from renewable energy is beyond me,” Merzian added.
The Australasian Centre for Corporate Responsibility (ACCR) has suggested that the move is a clear demonstration of the hold the gas industry has over the Morrison government, with a submission made by fossil fuel lobby group APPEA to the Finkel Review suggesting these exact amendments.
“Rarely do we see such a blatant demonstration of state capture, in this case the redefining of ‘clean energy’ to suit a handful of gas companies, to the detriment of the rest of the country,” ACCR director of climate and environment Dan Gocher said.
“Throughout COVID-19, APPEA has been off the leash, engaging in what can only be described as predatory lobbying. As members, BHP, Origin Energy, Santos and Woodside must be held accountable for such appalling and cynical advocacy during a pandemic.”
The legislation is currently before the House of Representatives, and will be debated in future sitting periods.
Labor energy and climate spokesperson Mark Butler told RenewEconomy that Labor will consider the legislation, but was mindful of the Coalition government’s motives given its prior attempts to abolish the CEFC altogether.
“We will work our way through this Bill,” Butler said. “We are conscious the Government has form on trying to abolish and undermine the CEFC on a number of occasions over the last seven years.”
“Labor established the CEFC, we have consistently protected the integrity of the CEFC as a renewable energy financing body, and we will continue to do so.”