A clean start for the CEFC
Technology innovation is the key to cleaning up our energy supply. At a conference in Melbourne recently, Bryan Hannegan from America’s Electric Power Research Institute said that every dollar invested in new clean energy technology today will pay off 40 or 50 times in the decades to come. If we have the technology at a cost-effective price then much of the current debate becomes irrelevant.
In Australia, the federal government is proposing that a $10 billion Clean Energy Finance Corporation (CEFC) will be the circuit breaker to unleash home grown innovation in power generation, as well as a smarter and cleaner electricity grid. Viewed as part of the big picture, this investment is an insurance policy with no regrets. But it has already generated a healthy political debate and press releases at 20 paces. Its critics accuse the CEFC of being a magnet for shonks before it is even up and running. Which is a shame, because it is a game-changing idea that hasn’t yet been designed in any detail.
The CEFC will use carbon price revenue collected from the country’s biggest polluters and invest it back into clean energy. The CEFC will operate like a bank, run by an independent board of finance professionals. This independence is critical, as it keeps it at arm’s length from the political decisions of the day.
The UK’s conservative government is in the process of implementing a similar scheme, and countries like Germany and France have already introduced state-backed green investment banks of their own. This isn’t so much a case of test piloting a new multi-billion dollar concept to see if it flies, but building on the experience of other countries which have been there before us.
But the clean energy sector believes this new institution must be very carefully designed. The Coalition’s suspicion is not unreasonable. Taxpayers don’t want a series of publicly funded “white elephants” that seemed like a good idea at the time. They don’t want a waste of funding, or hand-outs to fly-by-nighters. What we are aiming for is an effective institution that will position Australia as an innovation leader and speed us towards a low-carbon economy.
In some ways, the CEFC taps in to the direct action approach of the Coalition. Direct action, by definition, means public money will be used to fund specific initiatives, whether it's a million solar panels on rooftops, carbon soil sequestration or investment in innovation. The difference is that the CEFC will loan the money and, if it gets it right, make a handy profit when the technology proves to be a runaway success. And whether the Coalition’s future energy policy is designed to promote renewable energy, carbon capture and storage or another new technology, they all face a tough time getting to market.
Investing in any new technology is risky. The risk needs to be spread across a portfolio of investments, and safeguards provided to help to unlock other sources of capital. You also must find a safe pair of hands to catch the ball and, in this case, those hands belong to Reserve Bank board member Jillian Broadbent. Broadbent has been announced as the Chair of an advisory committee that will help to design the way the CEFC works. She has also served on the boards of Woolworths, Woodside Petroleum and Qantas.
Over the coming months we need a mature debate with innovative thinkers from all sides of politics to ensure that the Clean Energy Finance Corporation does what it says on the label.
If it is designed poorly, waste is inevitable. Designed well, the future is at our fingertips.
Kane Thornton is director of strategy and operations at the Clean Energy Council
Comments on this article
Being a defeatist is not the same as a cynic
In response to Peter Winch:
I expect that the CEFC, or whatever similar body is set up by the Coalition in 2.5 years, will set up a lot of hoops for applicants to jump through.
Probably a third of the hoops will be reasonable, a third will be not too bad, and a third will be just plain stupid.
There will be some well-presented projects approved that will be a waste of time and money, and quite a few good projects rejected.
The former will cause no political problem because their good presentation provides the excuse. The latter is not a problem as no-one will care.
The real problems are the projects that are light in funding and backing, which are approved, and end "belly-up".
These allow the organisation, and the government of the day, to be attacked by the media and the opposition. The result will be even more hoops, and the refinement of existing ones.
The hoops, whether logical or not, are required to not only have due diligence, but more importantly, show that due diligence has been applied to each application.
The red tape is necessary, despite the "cost", which is the possible rejection of some worthy applications.
Expected the expected
The track record can be predicted in advance...for submissions, the reponse will be you should have been here yesterday, you are too small/too big, too technologically risky, too derivative not enough novelty, too much novelty, too small, too grandiose, no track record, partner with a Uni or CSIRO, great idea but doesn't meet the guidelines, sorry we used this years funds, you have two weeks to make a submission and answer the 400 pages of questions, the tax office requires annual audits and funds are taxed, must be commercial in two years, too commercial go seek funding somehere else, not green enough, flooded with applications see you in three years, who are you...get a sponsor.
I think I will be mostly right. These quangos alays become stuffed ith bureaucrats - lots of conferences and powerpoints, dare I say, more pink batts properly installed will produce better outcomes long term with the money spent.
In the end - a feeding trough for the well connected. Larger companies and Unis.
Will performance benchmarks be set? $10bn requires about a $1-2 billion p.a return to Govt to get its money back, i.e taxpayers get money back to invest in hospitals - this is not supposed to be waste of money. To get $1-2b pa, the economic activity needs to be of order 10 $bn allowing for economic multipliers. Will the benefits or outcomes of the spend be auditted for results?
No, this is a pacifier for the noisy minority using taxayers money to quieten other tax payers. Cynical hey.