Morrison urged to act as ARENA funding about to be exhausted

A leading think tank has called on the Morrison government to extend the funding of the Australian Renewable Energy Agency (ARENA), as the agency edges towards faces a funding cliff that may see Australian funding for clean tech renewable energy research and development dry up.

The Australia Institute has says the Coalition government should provide an additional $460 million in funding out to 2024, and has outlined the case in a pre-budget submission to the federal government.

ARENA was established in 2011 under the Gillard government, as part of a package of policies that accompanied the introduction of the carbon price, and which included the Clean Energy Finance Corporation, and the Climate Change Authority. It has served as the primary funder of Australia’s clean tech research.

Since its creation, ARENA has provided $1.44 billion in grant funding to almost 500 projects across Australia, leveraging almost $5.5 billion in total research spending that has included world-leading solar photovoltaics research, large-scale demonstration projects, grid integration research and a ramping up of Australia’s renewable hydrogen industry.

One of ARENA’s key successes has been its support of large-scale solar demonstration projects, which has seen more than a dozen large scale solar projects completed across the country, with a combined 645MW of generation capacity, that kick-started the large-scale solar boom in Australia.

Despite these successes, ARENA’s very existence has come under question at multiple points in its history, with the Abbott government having set out to abolish the agency altogether. These efforts were stymied by the unlikely intervention of mining magnate Clive Palmer, who recognised the agency’s popularity and joined Labor and the Greens to block attempts to pass legislation abolishing ARENA in the senate.

While ARENA ultimately survived, its original funding allocation of $2.5 billion was cut to $1.9 billion in a negotiated truce with the Labor party under prime minister Malcolm Turnbull.

That remaining funding allocation is now quickly drying up, with ARENA representatives telling a senate estimates hearing in December that the agency had just $200 million in unallocated funding remaining, with $70 million set aside to support projects developing renewable hydrogen production and export technologies.

ARENA’s funding window is set to end in the 2021/22 financial year and would represent the end of Australia’s funding to clean energy research and development, despite the need for the energy sector to address new challenges in grid integration and storage.

In particular, the Australia Institute has suggested a boost in ARENA funding could help the Coalition government realise a ‘technology investment roadmap’ flagged by federal energy minister Angus Taylor as part of a recent embrace of Australia’s clean energy future and its march towards almost 50 per cent renewable by 2030.

“ARENA has been essential in bringing down the cost of renewable energy in the last decade but its work is far from finished,” the Australia Institute’s energy policy lead Dan Cass said.

“The next renewable energy challenges for Australia are grid integration, storage and reliability, as well as new export opportunities in green hydrogen and zero-emissions electricity.”

Citing federal energy minister Angus Taylor’s comments to the most recent round of United Nations climate change negotiations held in Madrid late last year, Cass said it was crucial that the funding for ARENA was extended to ensure further progress in Australia’s clean energy transition.

“Angus Taylor told the UN Climate Conference in Madrid last December that innovation is at the core of Australia’s strategy to reduce emissions and should be an international priority. Australia needs ARENA, if we are to do our fair share of global emissions reductions,” Cass said.

“While a 10-year funding commitment of at least $2.5 billion is ultimately needed to guarantee the long-term future of ARENA, a two-year fully funded extension for the agency will keep clean energy innovation in Australia thriving in the short-term.”

To provide ARENA with the additional funding, amendments would need to be passed to the legislation establishing the agency through the federal parliament.

Alternatively, the federal government could direct the Clean Energy Finance Corporation to pay its annual dividend to ARENA to fund further research and demonstration projects, rather than pay the funds back into government coffers.

While the Coalition government has sought to abolish ARENA, this hasn’t stopped the government from taking credit for ARENA’s achievements and praising the agency’s success at driving down the cost of renewables in Australia.

A review of government statements completed by the Australia Institute found that the Coalition government had praised ARENA almost 150 times over a six-year period.

ARENA has proven to be exceedingly popular with the general public, with almost two-thirds of respondents to an Australia Institute commissioned poll expressing support for extended funding to ARENA.

The poll saw a majority of respondents in support of extended ARENA funding from across all sides of the political spectrum, including 64 per cent of Coalition voters.