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The good, the bad and the shell game – what Turnbull's clean energy shift means The good, the bad and the shell game – what Turnbull's clean energy shift means
(5 months later)
Malcolm Turnbull’s clean energy investment announcement is part good news, part bad news, part ideological shift and part shell game.Malcolm Turnbull’s clean energy investment announcement is part good news, part bad news, part ideological shift and part shell game.
The good news is the Clean Energy Finance Corporation is safe. The $10bn CEFC was derided by the former prime minister Tony Abbott as “Bob Brown’s bank” and was so despised by the Abbott government that trying to stop its lending was one of the Coalition’s first acts after it was elected in 2013.The good news is the Clean Energy Finance Corporation is safe. The $10bn CEFC was derided by the former prime minister Tony Abbott as “Bob Brown’s bank” and was so despised by the Abbott government that trying to stop its lending was one of the Coalition’s first acts after it was elected in 2013.
Related: Coalition announces $1bn clean energy fund to invest in emerging technologies
Now the CEFC can continue its highly successful work, which has so far provided $1.4bn in loans to projects worth $3.5bn while at the same time generating a 6.1% return on the lending. It will no longer labour under the uncertainty of a government determined to abolish it, or a government periodically bending to the pressure from climate sceptics or anti-windfarm advocates by seeking to limit its investment mandate.Now the CEFC can continue its highly successful work, which has so far provided $1.4bn in loans to projects worth $3.5bn while at the same time generating a 6.1% return on the lending. It will no longer labour under the uncertainty of a government determined to abolish it, or a government periodically bending to the pressure from climate sceptics or anti-windfarm advocates by seeking to limit its investment mandate.
The bad news is the Turnbull government seems to be cementing in the $1.3bn in cuts that the Abbott government factored in to its 2014 budget from the Australian Renewable Energy Agency although it was never able to legislate them.The bad news is the Turnbull government seems to be cementing in the $1.3bn in cuts that the Abbott government factored in to its 2014 budget from the Australian Renewable Energy Agency although it was never able to legislate them.
Because those cuts were not legislated, despite being accounted for in the budget bottom line, Arena still has a legislated spending program with $1.3bn in uncommitted funding over the next six years. Presumably the Turnbull government believes it will be able to legislate to change that after the federal election. By retaining it as government policy it can continue to book the saving.Because those cuts were not legislated, despite being accounted for in the budget bottom line, Arena still has a legislated spending program with $1.3bn in uncommitted funding over the next six years. Presumably the Turnbull government believes it will be able to legislate to change that after the federal election. By retaining it as government policy it can continue to book the saving.
The ideological change comes in Arena’s new role. It is effectively being subsumed into the CEFC, becoming the administrator of the new Clean Energy Innovation Fund, a subsidiary fund of the CEFC, lending money from the CEFC’s allocation. And the final decision on that lending will be made by the CEFC board.The ideological change comes in Arena’s new role. It is effectively being subsumed into the CEFC, becoming the administrator of the new Clean Energy Innovation Fund, a subsidiary fund of the CEFC, lending money from the CEFC’s allocation. And the final decision on that lending will be made by the CEFC board.
In the short term it will finish doling out the grants programs it has already announced. In the longer term, instead of giving out grants, Arena will be simply be administering the new fund, which will make loans at a lower rate of return to earlier stage clean energy projects.In the short term it will finish doling out the grants programs it has already announced. In the longer term, instead of giving out grants, Arena will be simply be administering the new fund, which will make loans at a lower rate of return to earlier stage clean energy projects.
Clean energy groups are concerned at the abolition of grants funding, saying grants are essential at the earliest stages of technology development. Turnbull says this is a deliberate change in direction.Clean energy groups are concerned at the abolition of grants funding, saying grants are essential at the earliest stages of technology development. Turnbull says this is a deliberate change in direction.
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“This reflects a very big change in the way the government ... is now approaching this type of investment,” he said on Wednesday. “Historically ... the federal government has been very much like an ATM, it’s been making grants ... without, frankly, a lot of follow-up as to whether it’s effective.“This reflects a very big change in the way the government ... is now approaching this type of investment,” he said on Wednesday. “Historically ... the federal government has been very much like an ATM, it’s been making grants ... without, frankly, a lot of follow-up as to whether it’s effective.
“We believe ... the government should seek to be a partner and investor, seek to get a return. It doesn’t have to get the same high return that a private venture capital firm or a private bank would seek to get. It can get a very long-term return but, in doing that, by ensuring that you take a more economic approach, you will ensure that you have a much more rigorous analysis and that you will get a better quality of investment and a better quality of project.”“We believe ... the government should seek to be a partner and investor, seek to get a return. It doesn’t have to get the same high return that a private venture capital firm or a private bank would seek to get. It can get a very long-term return but, in doing that, by ensuring that you take a more economic approach, you will ensure that you have a much more rigorous analysis and that you will get a better quality of investment and a better quality of project.”
And then the shell game. The “new” Clean Energy Innovation Fund is not “entirely new”, as billed by the government and enthusiastically accepted by some media reporting, but is in fact funded entirely from the CEFCs existing borrowings and is more like another of the subsidiary funds the CEFC has set up – this time with the leeway of achieving a slightly lower rate of return so it can take on slightly higher levels of risk.And then the shell game. The “new” Clean Energy Innovation Fund is not “entirely new”, as billed by the government and enthusiastically accepted by some media reporting, but is in fact funded entirely from the CEFCs existing borrowings and is more like another of the subsidiary funds the CEFC has set up – this time with the leeway of achieving a slightly lower rate of return so it can take on slightly higher levels of risk.
And despite the government’s insistence that Arena has been “retained” as a separate agency, and that it has not been merged with the CEFC, that appears to be the case only in name, if it now functions as a subset of the CEFC and very soon will no longer be making grants with its own money.And despite the government’s insistence that Arena has been “retained” as a separate agency, and that it has not been merged with the CEFC, that appears to be the case only in name, if it now functions as a subset of the CEFC and very soon will no longer be making grants with its own money.
Turnbull’s attitude to the CEFC is big shift from his predecessor – in real terms and symbolically – but Arena appears to have been “retained” in name only.Turnbull’s attitude to the CEFC is big shift from his predecessor – in real terms and symbolically – but Arena appears to have been “retained” in name only.