Taylor files new regulations to push ARENA into CCS and gas projects

Federal energy and emissions reduction minister Angus Taylor has moved to open up the Australian Renewable Energy Agency (ARENA) to fund carbon capture and storage projects, and potentially gas projects, in new regulations quietly published on Tuesday.

The amendments to ARENA’s regulations, published on the federal legislation register on Tuesday, attempt to implement an extraordinary expansion of ARENA’s functions to non-renewable energy projects.

ARENA was created, as its name suggests, as a body to provide dedicated funding to Australia’s emerging renewable energy sector, but will now include financial assistance across a wide range of the Morrison government’s “technology not taxes” emissions roadmap.

It continues a remarkable transition for ARENA, which the Coalition tried to dismantle when it got into power nearly eight years ago. A substantial amount of ARENA’s funds were taken away under the Abbott government and Taylor has since appointed close friends and former political advisers to sit on its board. Its discretion over investments has been largely reduced, under the new regulations.

ARENA’s functions will now include funding initiatives under the Technology Investment Roadmap, the Future Fuels Fund, the Freight Energy Productivity Program, the Regional Australia Microgrid Pilots Program and the Industrial Energy Transformation Studies Program.

The regulations, which are already in effect, say ARENA’s funds could be used to support carbon capture and storage or utilisation projects, as well as “clean hydrogen”, which may include “blue” hydrogen produced from fossil fuels, materials manufacturing and soil carbon projects.

The new regulations say that ARENA may provide financial assistance to any project that “could reasonably be expected to control, reduce or prevent anthropogenic emissions of greenhouse gases to a material extent.” This, based on earlier statements by the Morrison government, could open the door to ARENA funding being provided to gas projects.

Under the Future Fuels Fund, ARENA would now be used to fund biofuel refuelling infrastructure, electric vehicle charging infrastructure, hydrogen refuelling stations and the development of new battery technologies for electric vehicles.

The new regulations also include an expansive definition of “clean energy technologies,” which extends to “low-emissions technologies.” The Morrison government has made clear that it considers gas to be a “low emissions” technology.

Not only do the regulations attempt a significant expansion of the functions of ARENA, but they also represent a significant reduction in the level of independence with which ARENA is able to operate from the federal government.

Previously ARENA had substantial discretion over the types of renewable energy projects it supported – but the new regulations now direct ARENA to specifically support Morrison government policies.

ARENA was established by the Gillard government in 2012, as part of a Clean Energy Future Package negotiated with the Greens and crossbench independents. Former Australian Greens leader Christine Milne described the new regulations as “spit in face of renewable energy”.

In the 2020 federal budget, the Morrison government allocated a fresh $1.4 billion in funding to ARENA over the next decade.

The Morrison government flagged at the time plans to amend the investment mandate of ARENA, as well as that of the Clean Energy Finance Corporation (CEFC), to open up the clean energy funding agencies to non-renewable energy projects, including carbon capture and storage projects, and new gas infrastructure.

The Morrison government announced that it would establish a new Grid Reliability Fund, to be administered by the CEFC, to fund a number of new generation projects, including new gas and pumped hydro energy storage projects as well as carbon capture and storage and potentially loss-making gas projects.

With legislation that would establish the $1 billion Grid Reliability Fund stalled in the federal parliament, it appears that Taylor has sought to bypass parliament altogether by using his powers to set new regulations.

Regulations may be set at the discretion of ministers and do not need to be approved by parliament. However, regulations cannot be inconsistent with the primary legislation, in this case, the ARENA Act, under which they are made.

The objects of ARENA’s legislation, which formally spell out the purpose of the legislation, say that the role of ARENA is to “improve the competitiveness of renewable energy technologies” and to “increase the supply of renewable energy in Australia.”

These objects remain unchanged, and there is a clear question around whether the new regulations published by Taylor – that attempt to extend the activities of ARENA into funding carbon capture and storage projects, soil carbon projects and potentially gas projects, none of which are renewable energy technologies – are consistent with ARENA’s primary legislation.

An explanatory memorandum issued with the new regulations makes clear that the government understood that the Act restricted ARENA’s functions to renewable energy projects, but says it will use the regulations to overcome this restriction.

Source: Explanatory Statement to Australian Renewable Energy Agency Amendment (2020-21 Budget Programs) Regulations.

Angus Taylor’s office has been contacted for comment.

See also: Revealed: Energy lobby group, Rio Tinto to receive ARENA grants