CLIMATE SPECTATOR: Sizing up ARENA's renewables funding

The Australian Renewable Energy Agency has released its draft funding strategy and while it is too early to pass judgment, there is hope the Agency has learnt from the mistakes of the past.

Climate Spectator

Last week the Australian Renewable Energy Agency released for consultation its draft general funding strategy covering the period 2012-13 to 2014-15. Once finalised and approved, this strategy will set the main objectives and priorities for ARENA’s activities and also the processes through which it will provide financial assistance for renewable energy.

While ARENA will not play much of a role in driving the deployment of wind or small-scale solar PV; its strategy means a great deal for those engaged in less mature technologies such as geothermal, and those engaged at the research and development and capability-building end of the renewable energy industry.

The paper confirms that of the $3.2 billion in funding ARENA has been allocated, $1.5 billion is already committed to projects funded under prior programs. This leaves $1.7 billion of money still available to support new projects. However if the past is any judge, it seems likely that a lot of the projects already allocated the $1.5 billion will not fully proceed. So it’s possible ARENA will have substantially more than $1.7 billion at their disposal.

Within the next three years though the amount of money ARENA is able to disperse is much smaller as outlined in the table below. This current budget provides for $84 million to be spent this financial year and next on new projects, with $217 million in 2014/15.

ARENA Budget – 2012/13 to 2014/15

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Considering ARENA has only just been established this year, it would be unrealistic to expect it to spend a larger proportion of its funding over this early period. Outside of wind and rooftop solar PV, there are relatively few shovel-ready renewable energy projects, so it will take some time before ARENA money could make its way out the door.

Although ARENA does have somewhat of a running start, as it will build upon the staff and past renewable support programs run by the Department of Resources, Energy and Tourism. Of note is that the draft strategy states:

"ARENA will consider providing funding support to the unsuccessful short-listed PV projects from Round 1 of the Solar Flagships program, as well as the Solar Dawn solar thermal project.”

This is likely to be welcome news to Infigen, Pacific Hydro and TruEnergy as well as First Solar and Suntech as PV panel suppliers. Their large-scale solar PV projects are well advanced, and could provide some quick-wins for ARENA, and the government as well.

In terms of the overall strategy it seems that the ARENA board is keeping its options wide open.

The strategy doesn’t really rule out much that it won’t do. Solar, geothermal, ocean power, bioenergy and even micro-hydro projects could be recipients, but with wind, quite appropriately, left out of consideration. It is also open to funding enabling technologies and activities such as energy storage, as well as forecasting, modelling and demand management tools and technologies that would enable better management of wind and solar weather variability.

In addition, the strategy also suggests it might get involved in assisting transmission and grid connection infrastructure. However considering its relatively limited funding, ARENA couldn’t afford to build much new physical infrastructure. Instead the funding might be best directed at simulation studies assessing the capacity for the grid to connect new generation. If done with transmission companies fully engaged, such studies could alleviate a great deal of the angst involved in developing renewable energy projects. 

In terms of the processes for allocating financial assistance, ARENA is are also keeping its options open. The board wish to continue with the past model of providing grants via tenders using qualitative criteria, but will thankfully look at alternatives. They mention the potential use of reverse auctions and prizes, which might provide funding based on achievement of hard quantitative outcomes, reducing the reliance on the subjective judgements of experts.

In the end, because the draft strategy is so broad and open, it is hard to make strong judgements on whether ARENA will represent a major step forward over the failures of the past. The draft strategy at present looks like a bunch of bare bones that are yet to be assembled into a skeleton, let alone have flesh added to them.

It will only be once ARENA gets down to the nitty gritty of developing strategies for each technology category that we’ll have enough detail to make any significant judgements. In this respect ARENA could learn a lot from the Australian Solar Institute.

The Solar Institute was an important advance because it brought together a group of people who genuinely understood the technology they were trying to advance and put them at arm’s-length from the government. This all sounds pretty logical but often seems to get lost in a mindless pursuit of "technological neutrality”.   

Thankfully the chief executive, Ivor Frischknecht, and chair, Greg Bourne, have extensive private sector experience in energy technology and climate change issues, and so are well aware of what has gone wrong in the past. And no one should doubt their desire to do better.