Does Ferguson have it in for Renewables?

Yesterday the Australian National Audit Office provided us with yet another damning indictment on a grant tendering program administered by the Australian government bureaucracy – the Renewable Energy Development Program (REDP).

Energy Minister Martin Ferguson is probably the last person in the current government that you'd want to task with fostering the development of the renewable energy industry. His passion clearly lies more with pulling fossil fuels out of the ground, than keeping them there.

But as the saying goes: ‘when you have a choice between a conspiracy and a cock-up – take a cock-up every time'. And this has never been more applicable than in the case of Australian government carbon reduction and clean energy grant tendering programs.

The biggest problem with the REDP, which the ANAO barely mentions, is that it hasn't actually got much to show for itself after several years. Of the six projects awarded a total of $329.4 million in grants under the program, only two are showing any sign of contributing a megawatt-hour to the grid.

Meanwhile, Geodynamics has barely seen a cent of the $90 million pledged to it, and its cornerstone investor, Origin, has today written its shareholding in Geodynamics down to zero.

Petratherm (MNGI) has shifted its focus to developing wind farms, as no one will give it any money to continue geothermal drilling activity.

The Solar Oasis solar dish project is yet to reach financial close. Although it does have a PPA in place and can at least point at a fully functioning prototype that was in place before it was granted REDP funding.

The Ocean Power Technology project is also yet to reach financial close and had issues with finalising its government funding agreement due to the need to demonstrate the version of the power buoy technology it intended to use.

But there are some other problems which are symptomatic of this lack of meaningful progress.

According to ANAO the Department failed to have any risk assessment or implementation plan in place until October 2009, eight months after the launch of the program. But more importantly this was more than 23 months since the Labor Party was installed in government with a commitment to a $500 million Renewable Energy Fund, modelled almost exactly on the Howard government's Low Emission Technology Demonstration Fund.

Yet according to the ANAO report, the department had been rushed into launching the program as a response to the global financial crisis.

Sorry did I miss something here? It takes them over a year to launch a program that basically mimicked programs they had already been running in the past, and this was a rush that excused them from undertaking a risk assessment? If it wasn't for the GFC, when exactly did they intend on launching this program?

In addition, the ANAO has stated that “the assessment process administered by the department fell short of the transparent and accountable decision-making processes for grants expected by government, with insufficient documentation retained by the department to evidence key aspects of the process.”

This is not just bureaucratic nitpicking. We should rightly ask for detailed documentation justifying why particular projects were favoured over others, when several of the winning applicants quite clearly fell short of the minimum tender requirements specified by the government.

The Hydro Tasmania hybrid wind, solar and biofuels project located on the small and remote grid on King Island clearly does not meet the requirement for projects to be large, utility scale.

Also the two geothermal projects, as well as the wave project, were awarded grants even though they were still to resolve major uncertainties around technological viability and performance.

Does this mean these technologies shouldn't have received support? Not necessarily.

But “technology neutral” tendering programs providing grants to large-scale demonstration projects aren't the way to drive advancement in renewable energy. 

Each technology-type is vastly different in terms of its key challenges, technological readiness and funding requirements. Some aren't ready for commercial-scale demonstration, but if that's the only money that's on offer, then they'll pretend that they are. And government, in its anxiousness to have something to show from its program, will go along with the charade. But once the press releases are out, government will then insert all manner of conditions on funding to cover their backsides.

There is a need to take a more strategic, long-term approach to renewable energy that uses a mixture of programs to support technologies along the various stages of technological maturity from idea to widespread market deployment. This needs to be complemented with a well-informed, long-term strategy for each technology the government intends to support.

This should be ARENA's first priority, and must be undertaken in co-operation with the Clean Energy Finance Corporation.