The CEFC board: (L-R) Michael Carapiet, Martijn Wilder AM, Jillian Broadbent AO, Andrew Stock, Anna Skarbek, Paul Binsted, Ian Moore.

18 November 2013 — The Abbott Government is committed to repealing the Clean Energy Finance Corporation, but a quick look at the CEFC’s 2012-13 annual report raises the question: why?

In the report, released this month, CEFC chair Jillian Broadbent stated that the CEFC was making the government money, in one year abating almost four million tonnes of carbon at a cost of negative $2.40 a tonne.

The CEFC has been a strong contributor to the property sector.

In commercial property, there has been a partnership Commonwealth Bank to provide finance to the $100 million Energy Efficient Loan program. This has facilitated  upgrades including lighting, building management systems and metering, boiler upgrades, heating ventilation and airconditioning upgrades, cogeneration/trigeneration installation and small-scale solar PV.

The CEFC also has had an active role in environmental upgrade agreements.

Low Carbon Australia, which was integrated into the CEFC, provided $10 million in EUA financing, along with ANZ and Eureka Funds Management, to install Sydney’s Central Park development’s $26.5 million trigeneration plant.

The CEFC also contributed to the EUA financing of the former Ansett building at 501 Swanston Street in Melbourne. The $7 million upgrade is expected to more than halve energy use.

“The CEFC believes these programs are ready to scale up to funds of over $100 million as additional councils adopt and roll out EUA programs,” the report stated.

A good earner

“The CEFC portfolio of contracted investments is presently expected to earn an average return of approximately seven per cent, around four per cent above our benchmark return of the Government five-year bond rate,” Ms Broadbent stated in her chair’s report.

“This positions us well to cover our operating costs. It demonstrates the potential for us to readily meet the target of providing a steady flow of dividends to [the Australian Renewable Energy Agency].

“By adopting a robust commercial risk management approach, the CEFC has no adverse impact on Government net debt.”

In fact, “the CEFC actually makes money for government while assisting industry to abate CO2 emissions”, the report stated.

The abatements in the first year of operation stood at an impressive 3.9 million tonnes of CO2-equivalent.

And the cost? Negative $2.40 a tonne.

“Within its first year of operation, the CEFC has catalysed investments responsible for 3.9 million tonnes of CO2-equivalent abatement annually, which has been generated at a negative cost (net benefit) of approximately $2.40 per tonne,” Ms Broadbent stated.

However, taking into account CEFC operational costs and federal grants received, the total abatement cost to government was estimated at $0.22 a tonne.

The CEFC was also stimulating private sector investment. For every dollar invested by the CEFC, there was $2.90 of private sector investment.

This was no small figure either. The CEFC portfolio as of 20 August 2013 was worth $536 million, and with private investment this equated to $2.2 billion worth of investment being facilitated by the body.

Good for jobs

This was good news for jobs in the growing clean tech sector, too.

“Our pioneering of new aggregation finance and corporate facilities has increased awareness and adoption of energy efficiency across a broad market sector,” said Ms Broadbent.

“This has encouraged the development of new employment opportunities and assisted the growth of new enterprises.”

Many, however, are worried this good news will be undone by the repeal.

The Australian Manufacturing Workers’ Union came out against the Coalition’s repeal plans in September, saying thousands of new jobs from clean energy projects were at risk.

“There are jobs for AMWU members in the wind tower industry which would have gone to China and Korea if the CEFC had not arranged the final loans to get local companies over the line,” said AMWU National secretary Paul Bastian.

“Knocking down this avenue of funding would put Australia back behind the rest of the world in  alternative energy – it would cut this country out of an emerging $7 trillion global industry.”

Picking winners?

And while the government has tried to frame the CEFC as “picking winners”, the CEFC has stated its diversified investment strategy acts to expand options in the space rather than trying to pick winners.

“Our current portfolio represents a diverse mix across the economy, with projects comprising 56 per cent of renewables, 30 per cent in energy efficiency and 14 per cent in low emissions technologies,” CEFC chief executive Oliver Yates said.

Though, even if you viewed the CEFC as picking winners, as Dick Clarke said in an article for The Fifth Estate in June, “the CEFC’s very existence is entirely consistent with Abbott’s ‘direct action’ policy of picking winners rather than allowing the free market to pick its own winners.”

Environment minister Greg Hunt has labelled the organisation a “green hedge fund”, “borrowed in taxpayers’ name for investing in speculative ventures”.

Responding to the government’s hostility to the CEFC, Ms Broadbent made reference to similar institutions internationally.

“Comparable institutions to the CEFC around the globe have attracted bipartisan support for their work and achievements,” she stated.

“Despite the lack of such support in Australia, it is reassuring that use of a commercial approach and of private sector skills has been well received across the finance and new energy technology industries.

“Through interfacing with the market daily, we have seen a reactivation of capital expenditure in emissions reduction projects.”

Only scratching the surface

Sadly, a lot more good work may not get to be done.

Mr Yates said the CEFC currently had “179 project proponents for projects to the estimated value of $14.9 billion in our pipeline at varying stages of development”.

Projects, many of which were directly targeting the built environment, included:

  • Creating a green residential mortgage product to replicate international energy efficient housing programs and incentivise energy efficient new housing construction
  • Expanding availability of finance for Environmental Upgrade Agreements to promote energy efficiency in existing commercial buildings
  • Developing financing options for rooftop residential and commercial solar solutions such that solar solutions are easily accessible to everyone
  • Expanding co-finance vehicles targeted at energy efficiency and small-scale emissions reduction projects in small to mid-sized businesses for improved energy productivity across the economy
  • Investing in community renewable projects to make renewable investment accessible for participants in smaller and regional communities
  • Working with Australian manufacturers and service providers to participate in projects to build supply chain capability for growth and jobs in the lower carbon economy
  • Developing an ungeared listed vehicle to enable pension funds and other retail investors to benefit from the stable cash generation properties of renewable energy projects
  • Supporting remote renewables projects to reduce their reliance on diesel generation and provide long-term energy cost savings
  • Encouraging the reduction in transmission capital expenditure and consequent consumer changes by promoting efficient demand management and appropriate augmentation activities
  • Further supporting the expansion of utility scale solar projects where they can demonstrate progressively improved economic gains

Mr Yates said that the CEFC had “only scratched the surface of opportunities available”.

Read the full report.