Created by the Gillard government in 2012, ARENA will run out of money by the end of the year without a fresh infusion of funds. The Morrison government has also recently overhauled ARENA’s board prompting questions about whether it will continue to prioritise renewables.
Over the years, ARENA has pumped in $1.58 billion to support 543 projects with a total project value of $6.48 billion, it says. It would have backed more ventures if the Coalition hadn’t sliced about $1 billion from its initial target along the way. It had funds of $88 million as of June 30.
While some projects have flopped, such as several wave-energy ventures, ARENA’s aid for the University of NSW-based Australian Centre for Advanced Photovoltaics has contributed to the design of $50 billion of solar panels globally. That support is due to end by 2022, UNSW says.
Those supporting ARENA’s continued existence even as renewable energy costs tumble, point to firms such as Canberra-based Solcast that is trying to figure out how the grid can accommodate more renewable energy while maintaining grid stability.
Using a grant of just less than $1 million, Solcast is developing a so-called Nowcasting technology capable of making predictions of wind velocities and cloud cover down to 1-2 kilometre grids across South Australia. That state’s 1300 megawatts-plus of rooftop solar easily makes it the largest source of electricity.
The project, which counts as partners grid manager the Australian Energy Market Operator (AEMO) and battery giant Tesla, aims to provide accurate forecasts out to six hours.
Nick Engerer, Solcast’s co-founder and a former meteorology lecturer at the Australian National University, says that without ARENA’s support, the $3 million project he dubs “very mission-critical”, probably wouldn’t have gone ahead.
Engerer, the recipient of three ARENA grants of a similar magnitude, says the early-stage technology risks are deemed too high for private-venture capital and its scale too small to be worth the while of other government agencies such as the Clean Energy Finance Corp (CEFC).
“In each case we take a technology that industry needs or wants but lacks the proof of concept for a company to take it on,” Engerer says.
The Morrison government appears to back ARENA’s existence – unlike the Abbott government which tried to abolish it but got blocked in the Senate by Clive Palmer’s senators – but has yet to provide any additional money.
And Angus Taylor, the federal Minister for Energy and Emissions Reduction, says he supports ARENA as a “key delivery agency” along with the Clean Energy Regulator and the CEFC to deliver his so-called Energy Technology Roadmap unveiled in May.
“These agencies have the experience and expertise to ‘crowd in’ private-sector investment and deliver against the government’s priorities,” he says.
“Our technology-not-taxes approach will reduce emissions without imposing new costs on households, businesses or the economy.”
The roadmap will prioritise low-emissions technology as well as strengthening the economy and supporting the “road to recovery from COVID-19”, the government said.
Given the government’s recent promotion of the development of new gasfields as a keystone component of its post-coronavirus recovery effort, one concern is ARENA will end up being much less about renewable energy but extend its remit into other areas such as carbon capture and storage of emissions.
Without such technology, gas and coal will be increasingly at odds with decarbonising efforts at home and abroad to counter the risk of climate change.
One former ARENA official who requested anonymity says the government, though, was “trying to make [the agency] not just renewables but all energy”.
Opposition to a change in direction is less likely to come from within ARENA, however, given the board changes.
Taylor removed the agency’s chair, respected climate lawyer Martijn Wilder, two-years shy of his maximum term. In his place is well-regarded carbon investor Justin Punch who happens to be one of Taylor’s long-time friends.
Taylor also replaced two experienced board members with his former political advisor John Hirjee – now covering energy at ANZ – and economist Anna Matysek.
Matysek is the co-founder and associate of BAEconomics, a consultancy that last year published a report that was critical of Labor’s climate policies.
Taylor declined to comment on the specifics of his relationship to the new board members including the choice of Hirjee, who served as a Liberal staffer for a year until last August. He also declined to detail the progress of efforts to get new funding for ARENA.
Taylor’s office and ARENA also declined to say whether any of the three new appointees had advised him of the keystone energy policy, the energy technology roadmap. ARENA itself was consulted on the plan.
The Herald and The Age understand ARENA’s new board, with experience in investment and corporate governance, has been selected to help target innovative projects and leverage private investment.
Richie Merzian, an energy researcher at The Australia Institute and former government climate negotiator, says the new appointments smacked of “cronyism”.
He noted too that BAEconomics consults on various government projects including Taylor’s Liquid Fuel Security Review.
“There’s a good chance [the government] will change ARENA’s mandate,” Merzian says, adding he expects to see ARENA move into carbon capture and storage, the process of trapping and sequestering emissions from coal and gas plants.
So-called blue hydrogen developed from fossil fuels rather than “green hydrogen” from renewables may also become an ARENA priority, he says.
According to its Act, the agency’s mandate is to “improve the competitiveness of renewable energy technologies; and increase the supply of renewable energy in Australia”.
Also taking a dim view of the changes is Greens leader, Adam Bandt: “Having been stopped by Parliament from abolishing ARENA, Angus Taylor’s strategy now is to let the organisation run out of money in 2020 while silencing the board in the meantime.”
Bandt says he did not cast “any aspersions on how they’ll do their jobs and I wish them well. But I don’t think Angus Taylor went looking for people who would push hard to replace coal with renewables”.
Labor, whose support would be needed to back any mandate change in the Senate, is similarly defensive about the agency.
“Angus Taylor has refused to secure ARENA’s future and continues to undermine their mission to support renewable energy industries and jobs,” Mark Butler, Labor’s climate spokesman, says.
The government prefers “to engage in new coal and nuclear power boondoggles, rather than accepting Anthony Albanese’s call for a bipartisan energy policy to finally give industry some policy certainty and deliver the jobs and investment Australia desperately needs,” he says.
Others such as Kane Thornton, the head of the Clean Energy Council, see the ARENA board makeover as proof that the Morrison government is serious about the agency “sticking around for the future”.
“The critical issue now is around funding,” Thornton says. “There’d be a real risk the pipeline of projects will grind to a halt [without fresh money], and you’ll lose some critical staff.”
With applications often taking many months to prepare and hundreds of thousands of dollars each, “people need to know it’s going to be worth their while” to apply, he says.
Frank Jotzo, director of the Australian National University’s Centre for Climate and Energy Policy, says one thing that is clear is that the board will be “very politically connected.”
Jotzo says ARENA still had a key role to play as the decarbonising of “hard to abate” industries other than the electricity sector still had a long to go.
Energy efficiency, storage, emissions-free cement and even so-called green steel that is produced without coking coal all offered useful research support opportunities, he says.
ARENA has also already become active in hydrogen, focusing on the electrolyser-end of the process that produces fuel from electrons rather than the source of the energy.
Still, even if Taylor did succeed in shifting the priorities, it is not clear private sector partners will be in a hurry to put their own money up.
Supplying “blue hydrogen” to potential buyers such as Germany, Japan or South Korea, for instance, would be a hard-sell if the reason for those nations investing in the new fuel source was to stop greenhouse gas emissions.
Solcast’s Engerer too notes that more than $1 billion of funds had been available over the years for carbon capture and storage but its commercial viability had never stacked up.
By contrast, Australia “will always have a hell of a lot of solar energy around”, he says.
With Mike Foley
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Peter Hannam writes on environment issues for The Sydney Morning Herald and The Age.