Crunch time for clean energy funding as ARENA board deadline looms

It is crunch time, yet again, for Australia’s leading source of funding for renewable energy innovation and research, as the Australian Renewable Energy Agency (ARENA), braces for a wholesale shake-up of its board.

According to a government directory of board members, the terms of the current ARENA board members are set to end on Friday (July 17), but no decision on their future has been announced by the Morrison government.

In April, the terms of the current members of the ARENA board were temporarily extended for a period of three months. That extension is set to expire at the end of the week.

But when queried about the board appointments, neither ARENA nor the office of energy minister and emissions reduction minister Angus Taylor would confirm whether the existing board members had been reappointed to the board, or if new appointments had been made.

If no new appointments are made by that time, the membership of the board will consist of only the secretary of the department, who holds a continuing ex-officio position on the board, and who is appointed by, and reports to, federal energy minister Angus Taylor.

Such a situation has already happened under the Coalition government at least twice previously, in both 2014 and 2016, with the department head left as the only available decision-maker over some of ARENA’s largest funding allocations.

To date, ARENA has awarded around $1.6 billion in funding grants for renewable energy research and development and has underpinned the emergence of a viable large-scale solar industry in Australia, along with a wide range of technological innovations created in Australia.

But its funds are now nearly exhausted, and mostly destined for either hydrogen plans or other storage projects such as pumped hydro in South Australia.

The delays in fresh ARENA board appointments raise questions about the future of ARENA, and whether it will be wound up – despite numerous protestations from the industry – or if the Morrison government is preparing to make sweeping changes to the board, including the prospect of the board being stacked with government allies.

The Morrison government is not without form in this regard, with an advisor to previous environment minister Josh Frydenberg appointed as CEO of the Great Barrier Reef Marine Park Authority, and a range of former government MPs appointed to the boards of other government agencies.

Taylor’s office has recently seen the exit of multiple advisers, including Josh Manuatu, who has since been appointed as the director of the Canberra Liberals, and John Hirjee, a former Deutsche Bank analyst and until recently Taylor’s energy adviser. It is not clear whether either suggestion has been approved for a board appointment.

The ARENA board is currently chaired by Martijn Wilder, a respected contributor to Australia’s climate and energy policy and governance, as well as a founding partner in advisory firm Pollination Group. Wilder has held a range of positions, including with WWF Australia, the NSW Climate Change Council, and led Baker & McKenzie’s Global Environmental Markets and Climate Change practice.

The board also includes Chair of the South Australian Centre for Geothermal Energy Research Susan Jeanes and former COO of the CEFC Meg McDonald, who have each served on the board since 2016.

More recent appointments include former COO of Sundrop Farms Dougal McOmish, former CFO of Transurban Limited Samantha Hogg and CEO of Horizon Power Stephanie Unwin, who were all appointed to the ARENA board in 2018.

The expiry of the current ARENA board is set to coincide with the first meeting of the National Cabinet Reform Committee for energy, which nominally replaces the COAG energy council after the COAG forums were abolished by prime minister Scott Morrison and replaced with the ‘national cabinet’ system.

It is understood that ARENA’s board appointments are caught up as part of a wider set of decisions being considered by the Morrison government around the long-term future of the agency, along with that of the Clean Energy Finance Corporation.

The Morrison government is currently in the process of making decisions about which measures will be included in the next federal budget, to be handed down in October.

The government has already announced a range of intended interventions in the energy market, including the Underwriting New Generation Investments (UNGI) program and potentially a new coal-fired generator in North Queensland.

This also extends to bilateral deals that the federal government has sought to negotiate with the state governments, with a deal with the New South Wales government the only such deal announced so far. ARENA has been tapped as a source of federal government support for this deal, having committed $5 million to support a study into the establishment of NSW’s first renewable energy zone in the Central-West Orana region.

But other than the small allocation from ARENA, the Morrison government has had no means to fund its other commitments, and Covid-19 disruptions to parliament have prevented necessary legislative amendments being made.

The Morrison government has indicated that it intends to make amendments to the investment mandates of ARENA and the CEFC, including the allocation of $1 billion in funding to establish the Grid Reliability Fund.

The Grid Reliability Fund is supposed to finance the Morrison government’s commitments under the UNGI program, but this has been hampered without the necessary legislative changes being able to be passed through the federal parliament.

Federal opposition leader Anthony Albanese sought to pre-empt these decisions in a recent address to the National Press Club, offering to provide support for the Morrison government’s plans to direct funding to carbon capture and storage projects, provided that ARENA and the CEFC were not used as the vehicles for this funding.

Whether or not a deal is struck to extend the life of ARENA, the agency will continue to receive additional budget allocations over the next two financial years as per the terms of its legislation, including $134.0 million in the 2020-21 financial year, and $132.4 million in 2021-22.

A board of some form will be required to oversee the allocation of ARENA’s remaining funds.