11 September 2013 – Alexi Lynch of Ironbark Sustainability, which specialises in work for local councils, met with potential new Minister for Climate Action, Environment and Heritage Greg Hunt in late August to find out how the Coalition’s Direct Action carbon policy would impact on local government and energy efficiency opportunities and those who have Community Energy Efficiency Program funding from the previous government.
The Basics
The Coalition intends to scrap the carbon price and Clean Energy Finance Corporation. Whether this happens sooner rather than later will depend on how the ALP chooses to vote. If they seek to block any repeal, then the Coalition will have to wait until the new Senate is installed in July 2014. The final makeup of which, and more importantly what they stand for, is anyone’s guess.
So what will the Coalition introduce? It’s easy enough to find the basics of the Coalition’s Climate Action, Environment and Heritage policy. It rests on four pillars:
- Direct Action on Climate (Emissions Reduction Fund, One Million Solar Roofs, 20 million trees)
- Clean Land Plan (the Green Army, Landcare Recovery)
- Clean Water (the Murray-Darling Plan, a Plan for Water Security)
- A National Heritage Plan (community heritage and national heritage icons)
Detail is a little harder to find at the moment. There is information online and you can get a good indication of Mr Hunt’s thoughts on addressing climate change through market mechanisms in a speech he gave to the Grattan Institute in July 2013.
There is no doubt that Mr Hunt is a very intelligent and astute politician. Regardless of politic persuasion, he understands the importance of dealing with climate change and the opportunities presented by energy efficiency. His biggest challenge may be dealing with other Coalition MPs who would like to remove the Renewable Energy and Emissions Reduction Targets completely.
Direct Action, Energy Efficiency Funding and Councils
Of the four pillars, Direct Action is the one that would have the most impact on councils for reducing their own corporate emissions. It involves a “reverse auction” of carbon permits, not direct energy efficiency funding. This means that if you have a project (or projects) then you would submit your project, your analysis, your data, your plans and the level of abatement you would expect to achieve.
If successful in this reverse auction (details of which have not been made clear), then you would receive payment for this abatement. This may be in the order of $5-$12 per tonne.
In many ways this is similar to “white certificate schemes” such as the NSW Energy Savings Scheme and the Victorian Energy Efficiency Target (VEET).
There would be room for aggregation across councils, which makes a lot of sense. In line with broader coalition values, the scheme will favour lowest cost of abatement projects so bigger projects with economies of scale and lower transaction costs will be more attractive. When we spoke to Mr Hunt he said that large collaborative projects such as the regional street lighting projects across Victoria would “fit perfectly” with their scheme.
How would Direct Action compare with the Community Energy Efficiency Program, or CEEP funding?
While there will be opportunities for funding energy efficiency projects under Direct Action our initial analysis indicates that it will be much less than the funding we have seen through CEEP. Crunching the numbers on some of the projects we’ve worked on would see the following changes:
- A building upgrade project that received around $2 million through CEEP would receive $92,000 to $220,000 through Direct Action*
- A street lighting project that received around $1.3-$1.4 million through CEEP would receive $330,000 to $520,000 through Direct Action*
On the flip-side, it may also mean that funds are spread to more councils, and those that missed out could essentially re-apply under Direct Action, only for less funding than originally sought.
Should I be worried about existing CEEP Funding?
If you have a signed funding agreement in your hands you have little to worry about. While any government (or organisation) can of course try and renege on a contract, the CEEP grants are relatively small in the scheme of Federal budgets and it would probably cost more in legal fees and payouts than to go back on legally binding contracts. What is more, it is doubtful they would seek or choose to remove CEEP even if they could.
If you have not signed your funding agreement you are on shakier ground. You may have received a letter from the Department of Resources, Energy and Tourism (DRET) in the last few weeks stating “in light of the caretaker conventions that the Australian Federal Government must currently adhere to, no Funding Agreements are going to be executed by the CEEP team until the outcome of the election is known.”
If you are one of those councils that were yet to sign then we’re happy to chat about options to advocate and ensure your project still gets over the line. While there is a strong anti-renewables push from sections of the new Coalition government, the types of energy efficiency projects successful in CEEP have generally had broad support.
What is certain is that those who were successful with CEEP and have signed funding agreements should make the most of the funds they have received. Assuming that the Coalition has two terms in office, CEEP is likely to be the last council energy efficiency funding program of this magnitude for at least six years. Our advice to councils who were successful in CEEP is to make sure you don’t put it in jeopardy.
In May this year we gave some advice to councils who were working with the Department on CEEP round 1 projects. We think it still holds firm and is worth revisiting to make sure no funding is jeopardised – after all we’re talking about big money that won’t come around again for a while.
Here’s some advice for councils:
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Be on top of communications with the Department – regular informal emails with updates can make a world of difference from a contract management point of view
- No surprises – anticipate any issues with your project and let them know in advance
- Be nice – relationship management is critical. You’ll be working with the department for years in some cases so make sure you have a good working relationship
- No unnecessary delays – the department understands that there will be things outside of your control but try and eliminate delays from council’s end.
Given this is likely to be the last major federal energy efficiency funding program for councils for many years we’d be extra wary of keeping up good communications with the Department over the next six months to make sure things are tracking OK.
There are some great and innovative projects being implemented so don’t put your funding at risk by missing milestone deadlines or through unnecessary delays.
Alexi Lynch is the Business Leader, Sustainability Strategy at Ironbark Sustainability, a specialist consultancy that works with hundreds of councils and organisations around Australia by assisting them to reduce energy and water usage through sustainable asset and data management and implementation.