Planned changes to CEFC investments ‘dangerous’, former CEO says

The former head of the Clean Energy Finance Corporation (CEFC) has slammed the Morrison government plans to open up the investment fund to fossil fuel projects, telling a Senate inquiry that plans for the agency to invest in ‘dirty deals’ were dangerous.

The Senate is currently considering a series of legislative amendments being pursued by federal energy minister Angus Taylor, which would see the types of projects that the CEFC can invest in expanded to include a new definition of ‘low emissions technologies’ that includes new gas projects.

While the amendments would see an additional $1 billion in funds allocated to the CEFC as part of the Morrison government’s Grid Reliability Fund which is seeking to underwrite investments in new gas generators, the amendments would also hand greater control of the agency’s investments to Taylor as the energy minister, and could see the fund used to underwrite potentially loss-making fossil fuel projects.

Speaking to the senate inquiry via videoconference on Tuesday, former CEFC chief executive officer, Oliver Yates, said that the Morrison government’s planned changes to the CEFC could undermine confidence in the independence and performance of the CEFC.

“Any attempt to change the way the CEFC invests, making it invest in dirty deals or loss making investments, could destroy it’s very important global demonstration role and slow down global action on climate change. We need all countries around the world to have an institution like the CEFC, and knowing they can have that without costing their taxpayers money is absolutely critical,” Yates told the inquiry.

“The [amendments] are dangerous, as, although seemingly innocuous, the changes to the definition of ‘investments’ insert a provision that allow the minister, not parliament, to change the way the CEFC invests its money by regulation.”

“This simple change allows the minister to effectively play around with $1 billion in this fund, outside of parliamentary oversight, including making loss making investments,” Yates warned.

Deputy secretary of the Department of Industry, Science, Energy and Resources, Jo Evans, later told the inquiry that a requirement for at least 50 per cent of the CEFC’s funds must be used to invest in renewable energy projects, would not apply to the additional $1 billion being allocated under the Grid Reliability Fund.

Yates served as the inaugural CEO of the Clean Energy Finance Corporation for a period of five years, after being appointed by the Gillard government to the post in 2012. Yates has since been a strong advocate on behalf of the clean energy sector since leaving the role and ran as an independent candidate against former energy minister Josh Frydenberg in the Kooyong electorate at the 2019 federal election.

Yates told the inquiry that the Morrison government did not need to amend the investment mandate of the CEFC to fund new gas projects, as the government could do so via other means without compromising the role of the CEFC as a financier of clean energy projects.

“There is absolutely no need for the CEFC to do this. If the government wants to go and invest in gas fired generation, it can go and do it outside the CEFC.” Yates told the inquiry.

“Not to mention the risks involved in distorting an organisation and destroying the morale of staff, and having its mandate corrupted so that it can’t manage the $10 billion that at current taxpayers have exposed to it.”

“Why would a government actually want would want to go and risk all of that, just for a couple of investments in gas if it desperately wants to do it? It’s a government can do it itself,” Yates said.

CEO of the Clean Energy Council, Kane Thornton, who also appeared before the senate inquiry, said that the combination of renewable energy technologies like wind and solar with energy storage was the cheapest way to build new reliable supplies of electricity, and that proposals to invest in gas were a ‘distraction’.

“Anyone with any credibility in the energy sector recognises that investments today, if you’re making a new investment in a power station, renewable energy plus energy storage is by far the most commercial investment,” Thornton told the inquiry.

“This has been confirmed by people like Alan Finkel, the chief scientist, who has looked at this issue in some detail, the CSIRO and the Australian Energy Market Operator, who undertook modelling as part of the Integrated System Plan.”

“The discussion about gas, as it relates to an increasing role of in the electricity generation sector, to be frank, is a distraction because the reality is that investors are not going to put their money in new gas-fired generation, irrespective of the short term politics or rhetoric in relation to this issue,” Thornton added.

When asked about submissions made by the CEFC that openly supported the changes to the CEFC Act, Yates suggested that the views of the agency would be shaped by recent changes to the agency’s board, which Yates said placed people aligned with the views of the Morrison government onto the board.

“The board has been changed and the board has close relationships with the government,” Yates said. “[The CEFC] is meant to be responsible and reporting to Parliament as a statutory authority and the people on the board are meant to operate completely independently other than to pursue their statutory obligations as officials.”

In this submissions, Yates added that the proposed changes to the CEFC’s investment approach could demoralise the agency’s staff, who have successfully run an agency that has supported strong investment in new clean energy projects at a profit on behalf of taxpayers, by forcing them to support projects that use fossil fuels or operate at a loss.

Yates warned the inquiry that Angus Taylor had not been clear around the reasons why he needed greater control over the investment decisions of the CEFC, and that the true intention would only become clear once the legislation had been passed by the parliament.

“Look, I can’t look into the minister’s mind. I can only assume, because I cannot work out why he needs this power that he’s putting in here, that you will see the impact of that power used after you have passed this legislation,” Yates told the inquiry.

“[Taylor] will not come clear with you as to why he wants to have that power in this Act, that if you let this go through, you will find out in hindsight.”