CEFC a distraction, not a solution, claims BZE

Renewable energy think-tank Beyond Zero Emissions (BZE) has released its response to the government’s Clean Energy Finance Corporation (CEFC) legislation as it was recommended by the CEFC Expert Review in April 2011.

The $10 billion CEFC was announced as part of the Clean Energy Future Package to invest in firms and projects utilising renewable energy, energy efficiency and low-emissions technologies, as well as manufacturing businesses that focus on producing the inputs required. It will not invest in carbon capture and storage technologies and will not provide grants.

The CEFC is intended to be commercially oriented and to make a positive return on its investments. Rather than competing with the private sector in financing the clean energy sector, it should act as a catalyst to private investment that is currently not available for clean energy technologies.

In its statement titled ‘The CEFC, a distraction not a solution’, BZE assesses the policy against two key questions:

1. Will it create more renewable energy generation than existing policies?
2. Will it deploy important, but currently more expensive, types of renewable technologies that would not be installed under existing policies, pushing them down the cost curve?

The paper notes, “The CEFC Review has absolved itself of any responsibility to expand the Renewable Energy Target, negating the first point. If we accept the necessary goal to move Australia to 100% renewable energy, the only other possible benefit of the CEFC is if it achieved the second point, primarily by investing in concentrating solar thermal power with storage (CST). BZE is not confident that the CEFC as proposed will see much, if any, CST constructed.”

The first complaint was on the lack of promises in the review - there were no guarantees on the type of renewable energy to be invested in and no guarantees that these investments will not distort the existing Renewable Energy Target scheme (RET) for existing projects. The only guarantee was that the CEFC will not see any additional amount of renewable energy built above what would already have been built under the RET, as CEFC-funded projects can receive Large Generation Certificates, with no corresponding increase in the 2020/2030 RET targets. The statement further suggested that the CEFC may invest in projects which have been ‘greenwashed’ - made to appear greener than they really are.

The BZE states that the current CEFC “will do nothing to actually support the installation of additional renewable energy beyond the current 20% by 2020 target. Instead the policy appears designed to distract the media and the public, and to obscure the very real difference between government-defined ‘clean energy’ and truly clean renewables.”

The CEFC intends to address “capital market barriers that hinder the financing, commercialisation and deployment of renewable energy, energy efficiency and low-emissions technologies”, but the BZE notes that it is not addressing non-financial barriers to renewable energy, including:

• Inability to sign favourable power purchasing agreements
• The monopoly of vertically integrated energy companies
• Poor state planning policies (eg, anti-windfarm laws)
• The structure of the RET scheme that has kept Large Generation Certificate prices low
• The lack of adequate grid connection access for many renewable projects

The CEFC Review discussed a number of non-financial barriers, but stated, “The CEFC has little capacity to address some of these barriers.” The BZE therefore believes in the need for a comprehensive, uncapped policy which addresses both financial and non-financial barriers.

BZE’s alternative to the current policy is a German-style Feed-in-Tariff (FiT), claimed to be the world’s most successful policy to deploy large volumes of multiples types of renewable energy. The main components are:

• Tiered tariffs for each type and size of renewable technology
• Obligations on electricity market participants to accept renewable electricity production
• Obligations on transmission providers to build transmission connections to new installations

It was noted that successful FiT schemes have already been implemented in Australia, with $4 billion invested in 2010-11 in solar PV installation in Australia - almost half the amount which the CEFC is expected to invest over 10 years.

BZE therefore proposes the following policies for expanding Australia’s renewable energy sector:

1. Fix up the RET - Remove the ‘phantom’ certificates from the market that were created by the solar multiplier scheme. This would increase the Large Generation Certificates prices immediately and make wind farms instantly more viable.
2. Restore the state-wide FiT schemes for solar PV on a national level, with tariffs that reflect the true value of these technologies.
3. Extend the FiT scheme to other technologies at appropriate rates and installation capacities, particularly to CST.
4. Removal of discriminatory and anticompetitive state level planning policies that excessively restrict wind energy installations.

To read the full statement, visit http://media.beyondzeroemissions.org/BZE_CEFC_statement.pdf.