A ban on wind and small-scale solar investments for the Clean Energy Finance Corporation is the latest salvo in the Abbott government’s war on the clean economy, and there’s little sense behind the move.
It was bad enough when on Sunday morning it was announced the government would give a directive to the CEFC banning it from further investments into wind energy. But on Sunday evening it was also revealed that the ban would extend to small-scale solar investments, one of the CEFC’s largest investment sectors.
All up solar accounts for 33 per cent of the CEFC’s investments (including large scale), with wind not far behind on 21 per cent.
Finance minister Mathias Cormann trotted out the old line that if a project stacked up “it would attract finance from commercial lenders in the usual way”.
We know, though, that this is a nonsense in what is still a nascent market where commercial lenders have relatively little experience.
In an interview with ABC’s Lexi Metherill in 2013, CEFC chair Jillian Broadbent explained the role of the CEFC in providing assurance to commercial lenders to participate in clean energy investments.
“I think the financial sector’s experience with clean energy isn’t sufficiently practised for them to have a great appetite to participate,” she said. “So we tend to be the catalyst to bring them to the table, and either by persuasion or arm twisting, get them to progress these activities.”
And it has been working a treat: for every $1 invested by the CEFC, $2.20 of private sector investment is mobilised. So the CEFC acts to provide certainty for commercial lenders.
Investment mandate challenged
The Clean Energy Finance Corporation Investment Mandate Direction 2015 from Treasurer Joe Hockey and Mr Cormann states:
“The Corporation is a mechanism to help mobilise investment in renewable energy, low emissions and energy efficiency projects and technologies in Australia, as well as manufacturing businesses and services that produce the required inputs. The Corporation will invest at the demonstration, commercialisation and deployment stages of innovation. The Corporation has been established to finance Australia’s clean energy sector using financial products and structures to address the barriers inhibiting investment.”
Mr Cormann interprets the statement to mean that the CEFC should be investing solely in less-developed sectors (at the same time as demanding larger returns, no less, and maintaining the same risk profile!), but fails to appreciate the huge investment barriers that plague the solar industry – particularly for commercial, multi-residential and low-income applications.
Innovation in the small-scale solar space
While small-scale solar is a mature market for residential homes in Australia, there are multiple areas where the market is underdeveloped.
This is where the CEFC has been most active, working to “expand and deepen” the market.
Two weeks ago the CEFC announced a $100-million 12-year partnership with Origin Energy to support no-upfront-cost solar for business and residential.
Under power purchase agreements, Origin would install and manage solar on businesses and residences (particularly low-income households) that could not cover the upfront costs of solar energy.
This follows last year’s announcement of $120 million in finance for three solar leasing and power purchase agreement programs to be run by Tindo, SunEdison and Kudos Energy, targeting residential, small business, and commercial and strata-titled properties.
Other small-scale solar investments include $443,000 to Australian Agricultural Company Limited, and the $100 million Energy Efficient Loan program with the Commonwealth Bank, which lists solar PV as an eligible technology.
While current investments are expected to be unaffected, at a time where Australia is being pressured to step up to its international obligations regarding its post-2020 greenhouse gas target, impairing the ability of the CEFC to lower barriers to low-cost emissions reduction is nothing short of reckless.
And in the context of approving a new coal mine to be built on prime agricultural land in the same month, this attack on the clean economy is shameful.
The CEFC released a statement saying that receipt of the draft investment mandate did not affect existing investments or co-financing programs.
“These and the CEFC’s investment activities, including development of new investment opportunities continues as previously, in line with the CEFC’s purpose and responsibilities,” the statement said.
“The CEFC Board is obliged to, and continues to, govern the Corporation consistent with its legal duties under the Clean Energy Finance Corporation Act 2012 and the Public Governance, Performance and Accountability Act 2013.
“This is focused on ensuring the attainment of the CEFC’s purpose as set out in section 3 of the Clean Energy Finance Corporation Act 2012, namely ‘to facilitate increased flows of finance into the clean energy sector’. The CEFC will continue do so by performing its investment function in accordance with Part 6 of the Clean Energy Finance Corporation Act 2012 by investing, directly and indirectly in clean energy technologies.”
The CEFC is currently seeking legal advice on the matter.