ARENA grants to end, to be absorbed into new fund

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The move has drawn criticism from some parts of the renewable energy sector. However, it has been welcomed by the Clean Energy Finance Corporation (CEFC), which has had its future secured by the government restructuring of the key Australian renewable energy agencies.

The move, announced by the Australian government today, will see ARENA no longer able to provide grants to clean technology projects – after the successful projects under its large scale solar program are unveiled. After this point, ARENA’s role will change to one in which it provides debt and equity financing under the auspices of the new AU$1 billion ($760 million) Clean Energy Innovation Fund. ARENA and the CEFC will jointly administer the new fund. ARENA will continue to manage its previously initiated projects.

ARENA is expected to announce the successful projects for its large scale solar program in the coming months.

While the Clean Energy Innovation Fund body itself is new, its funding will not be. ARENA will essentially lose the AU$1.3 billion ($990 million), to be allocated through to 2022, assigned to it by the previous Labor federal government. The Clean Energy Innovation Fund will make AU$100 million in debt and equity investments into "emerging clean energy technologies" per year over the next decade, Environment Minister Greg Hunt said in a statement.

“This is really two steps forward, one step back for clean energy innovation in Australia,” said the Clean Energy Council’s Kane Thornton. “We are however disappointed that the government’s proposal would eliminate the grants funding for future renewable energy projects through ARENA, which have been crucial to the success of the agency to date." Thornton welcomed the government’s move to retain the CEFC, after some years of uncertainty and legislative attempts to scrap the organization.

The Australian Solar Council reacted angrily to the government’s defunding of ARENA.

“The Turnbull Government has tried unsuccessfully to abolish ARENA and the CEFC. This is a backdoor way to gut ARENA,” said ASC CEO John Grimes. “ARENA has AU$1.3 billion in allocated and unspent funds between 2016-2022. The Government has announced it will replace this with AU$1 billion in funds between 2016 and 2026, taken from the Clean Energy Finance Corporation’s existing AU$10 billion budget.” Grimes noted that early stage renewable technologies are best supported through grants rather than debt or equity investments.

“By its very nature early stage research is speculative," Grimes noted. "Almost no projects will be fundable under this model. This will cut the guts out of renewable innovation in Australia.”

Not everyone within the Australian solar industry has condemned the move, with some acknowledging that Prime Minister Malcolm Turnbull has been able to maintain the CEFC against the wishes of more conservative members of his own party.

“Are we losing ARENA? I would say no,” Ray Wills, from Australian-Indian prospective solar and storage project developer Sun Brilliance told pv magazine. “What Turnbull has done is actually quite clever in that he has managed to placate his backbench at the same time and achieve the certainty that the CEFC will continue to exist.”

Wills notes that with an Australian federal election potentially taking place on July 2, the move is an indication that Prime Minister Turnbull would like to demonstrate to the electorate that his government will take action on climate change and support renewables against the wishes of some of his own government members.

“The [Turnbull] coalition government had to do something to address the issue that the Labor opposition will be going into the election campaign with a 50%-by-2030 renewable energy target [policy].” Wills added that he expects the government to make additional announcements in support of renewables over the next 12 weeks, as the prospective election date looms.

“This is the first shot in that war [with Labor over renewables]. Hopefully, it won’t be the last,” said Wills.

The CEFC reacted positiviely to the creation of the Clean Energy Innovation Fund.

“The creation of the CEIF will help innovative entrepreneurial companies build their commercial strength so that they can make a positive contribution to the Australian economy and our national emissions challenge," said CEFC CEO Oliver Yates.