The new fund will receive the money over a decade from the $10bn in borrowings already allocated to the Clean Energy Finance Corporation

This article is more than 4 years old

This article is more than 4 years old

The Turnbull government is setting up a new $1bn clean energy fund alongside the Clean Energy Finance Corporation to lend to, or take an equity stake, in emerging technologies.

The fund – to be called the Clean Energy Innovation Fund – will receive $1bn over 10 years from the $10bn in borrowings already allocated to the CEFC.

As foreshadowed by Guardian Australia on Tuesday, it will in time take over much of the current role of the Australian Renewable Energy Agency (Arena), which provides grants to help commercialise emerging technologies.

The government said Arena would “continue to manage its existing portfolio of grants and deliver the announced $100m in large-scale solar projects”.

“Once the $100m large-scale solar round is complete, Arena will move from a grant-based role to predominantly a debt and equity basis under the new Clean Energy Innovation Fund.”

It said Arena would “be given an expanded focus beyond renewable energy to enable energy efficiency and low emissions technology options”.



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The government said the new fund would be “jointly managed by the CEFC and Arena”. Arena has no board members and is effectively run by the secretary of the department of the environment. The CEFC is a statutory authority governed by a board.

The chief executive of the Clean Energy Council, Kane Thornton, said the changes meant a new and extremely close alliance between Arena and the CEFC, which was “a good thing in principle”.

“But the government will no longer provide capital grants for new clean energy projects because this new fund is focused on debt and equity, and that is disappointing because we think it is capital grants that have brought forward a lot of technology under Arena’s existing operations,” he said.

“Arena will obviously complete its existing grants, but it is unclear what role it will have beyond that.”

The government said the new fund would target projects that had gone beyond the research and development stage but were not yet sufficiently established to attract private sector capital – for example, large-scale solar storage, offshore energy, biofuels and smart grids.

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The Abbott government sought to abolish the CEFC and Arena, and then to ban the CEFC from wind farm investments, and to cut Arena’s funding and make no new appointments to its board.

Soon after he was elected prime minister in 2013, Tony Abbott said: “The Coalition does not support the CEFC nor its expenditure of $10bn of borrowed money on projects that the private sector deems too risky to invest in”, and the former treasurer Joe Hockey labelled the CEFC a “giant $10bn slush fund”.

The legislation to abolish the CEFC has been rejected twice by the Senate and is, technically, a double dissolution trigger, but the prime minister, Malcolm Turnbull, said on Monday he would not use the bill as a trigger and the government has indicated it will keep the CEFC in some form.

After Turnbull was elected, the anti-wind farm directive was softened to a request that the CEFC focus on “offshore wind technologies” as well as cities and the built environment. The environment minister, Greg Hunt, has said that abolishing the investment bank is still the government’s long-term policy but is not likely to pass the Senate.

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The CEFC has always been “off balance sheet” – set up as part of the former Labor government’s carbon pricing package, effectively as a bank to finance, at commercial rates, proven clean energy projects that the big banks were not funding.

In its first budget, the Abbott government announced it would axe Arena, but in a deal with the Palmer United party to get its Direct Action climate policy through the Senate, it said it would keep the agency, but cut or defer almost $1bn of its funding. It has already booked those savings in the budget, even though Arena was never abolished.