CEFC and ARENA to manage new Clean Energy Innovation Fund

The Turnbull government has announced a project to reinvigorate the Clean Energy Finance Corporation (CEFC) and the Australian Renewable Energy Agency (ARENA), encouraging the two agencies to work together to provide capital investment in Australian businesses and emerging clean energy technologies.

The agencies will act as the joint managers of the newly established Clean Energy Innovation Fund (CEIF), a $1 billion initiative to help emerging technologies make the leap from demonstration to commercial deployment. The fund will provide both debt and equity for clean energy projects, targeting projects such as large-scale solar with storage, offshore energy, biofuels and smart grids.

ARENA will continue to manage its existing portfolio of grants and deliver the $100 million large-scale solar round, and will be given an expanded focus beyond renewable energy to enable energy efficiency and low-emissions technology, providing greater alignment with the CEFC. Once the large-scale solar round is complete, ARENA will move from a grant-based role to predominantly a debt and equity basis under the Clean Energy Innovation Fund.

The announcement has been welcomed by the CEFC, with CEO Oliver Yates saying the fund will “help innovative entrepreneurial companies build their commercial strength, so they can make a positive contribution to the Australian economy and our national emissions challenge”.

“The CEIF will focus on companies, businesses and projects at early stages of development that are now seeking growth capital or early-stage capital to assist their businesses get to the next stage of their development,” he said.

Yates described the CEFC as “a flexible policy tool” and said the corporation was “pleased to be able to assist government in supporting complementary initiatives and policies through Investment Mandates that are consistent with the CEFC Act”. Under the CEFC Act, the Australian Government can provide direction to the CEFC through an Investment Mandate regarding the type, rate and risk of investments the CEFC should undertake.

The Australian Wind Alliance (AWA), meanwhile, said the fund ensures the survival of the CEFC and ARENA for the next 10 years, marking the end of a tumultuous period which saw the Abbott government’s attempted abolition of the CEFC rejected twice by the Senate.

However, while AWA National Coordinator Andrew Bray said that the protection of these renewable energy agencies is “an important step back from the Abbott government’s anti-renewables stance”, he claimed that it’s “not a game changer”.

“The government has a lot of catching up to do when it comes to clean energy policy,” said Bray. “We will need a full range of renewable technologies to complement wind, and today’s changes make it much harder for start-ups and innovative ideas to gain financial support.”

Bray acknowledged that the CEFC can still invest in wind farms under the changes and there may still be openings for the CEFC to strategically invest in wind projects.

The Australian Solar Council has been more openly opposed to the news, claiming it results in a $1.3 billion cut to renewables funding. This is because ARENA currently has $1.3 billion in allocated and unspent funds between 2016–2022, but the government intends to replace this with $1 billion in funds between 2016 and 2026, taken from the CEFC’s existing $10 billion budget.

The council is also concerned about early-stage renewable R&D and commercialisation being funded by debt and equity, noting that early-stage research is, by its very nature, speculative. The council thus believes that almost no projects will be fundable under the new model.