ARENA’s future in doubt

In a highly unusual move ARENA's CEO has issued a letter to potential funding applicants which suggests the organisation's future is in serious doubt. And the response from the Minister to the letter is not reassuring. Is the RET next?

The Australian Renewable Energy Agency has issued a letter to stakeholders that can only be interpreted as an open warning that they believe their remaining uncommitted funding to 2016-17 of about $100m, and the more than billion dollars beyond this period is in serious danger of being slashed in the forthcoming May Federal Government Budget.

The letter states,

The Australian Renewable Energy Agency Act 2011 determines ARENA’s funding envelope and profile; however, this legislation can be changed by the Australian Parliament.

Given the fiscal outlook and media speculation concerning the forthcoming Budget on 13 May 2014, the future of ARENA’s funding is unclear. You may wish to take this into consideration, particularly when developing your applications.

Such a warning is extremely unusual. You don’t issue a letter like this, telling industry they might want to think twice before putting effort into funding applications, unless you’ve got very good grounds for believing that there is a real risk that effort will be wasted.  

Such a letter carries a range of negative consequences. Most importantly it’s likely to completely undermine industry confidence to participate in ARENA programs. Business people aren’t stupid, they can read between the lines. Secondly it fuels bad media publicity for ARENA and the government, and could even lead to board members losing their positions.

Given the extensive experience of the ARENA board, it’s hard to believe such a letter would have been issued flippantly, just because there happened to be media speculation about general budget cuts. The only realistic conclusion is that they’ve learnt the organisation’s budget will be reduced to such an extent that in spite of the negative consequences, stakeholders needed to be alerted.

Climate Spectator sought a response from Minister Ian Macfarlane's office as to whether they could reassure stakeholders about the ongoing future of ARENA's funding. Their response was far from reassuring. A spokesperson said, 

"The Minister’s office won’t speculate on what will be in the Budget, however the Government has been clear that it is a tight fiscal outlook and savings have to be achieved to return the Budget to surplus. The Government is looking at all uncommitted funding with a view to repairing the Budget deficit."

In spite of being elected to government telling stakeholders repeatedly in public that the Coalition  “fully supported ARENA”, they cut its uncommitted funding over the forward estimates from over $600m down to $160m in November and December.  Now what’s left could go in May.

Given this, one has to wonder what the Coalition’s support for the 20% Renewable Energy Target will ultimately be interpreted to mean after they’ve completed their review of the scheme.

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