Hunt learns to love the CEFC but delivers veiled threat on RET

Last night the Minister for the Environment, Greg Hunt, seemed to suggest the government had accepted the Clean Energy Finance Corporation was here to stay, and would now look at how the organisation could support government goals and policies.

At the same time he seemed to deliver a veiled message to the renewable energy industry that if they refused to compromise on the level of the RET, then regulatory uncertainty will remain and investment will be stifled.

Hunt’s position on the CEFC was an incredible contrast to a speech given at the same conference earlier that morning by Coalition MP Bob Baldwin. As reported yesterday, Baldwin told the Clean Energy Week conference that the government remained determined to abolish the CEFC, as well as ARENA, even though they have no chance of gaining Senate approval for such moves.

Hunt told an audience of several hundred members of the clean energy industry that while it may not have been the government’s preference for the CEFC to continue to operate, the organisation was clearly going to continue to do its work. Given this reality Hunt noted that it was good to see the CEFC focusing on developing financing products for energy efficiency projects and also the leasing of solar systems.

While defying government calls to wind up its activities, the CEFC’s chair, Jillian Broadbent, and chief executive, Oliver Yates, have on a number of occasions tried to extend an olive branch to the government. In particular, they have suggested the organisation could assist the government in rolling out its Direct Action Emissions Reduction Fund by providing a dedicated source of financing for the types of projects that will deliver low cost greenhouse gas abatement.

Carbon and energy market analysts have suggested that the Coalition's budget allocation for its Emissions Reduction Fund is woefully inadequate for the government to achieve it 5 per cent emissions reduction target. However, the CEFC could also bring to bear several billion dollars in finance that could act to leverage government budget funds dedicated to the Emissions Reduction Fund, allowing the government to get closer to its emissions target.

In addition, Hunt was hoping to use the Million Solar Roofs rebate program to encourage uptake of solar systems in low-income households, but this program was cut in the May budget. The availability of no-money-down, solar systems via CEFC-supported leasing products could enable Hunt to achieve this objective via alternative means.

Hunt’s comments are the first sign of a pragmatic recognition by the government that the Palmer United Party’s Al Gore moment means the Coalition will not have a free hand to lay waste to climate change policies and institutions. The balance of senators’ votes means that, in spite of government opposition the CEFC, ARENA and the Renewable Energy Target will continue to create an awful lot of opportunities for ribbon-cutting ceremonies. It would take an incredible act of ideological integrity for a politician to deny itself the opportunity to cut such ribbons when renewable energy is so popular amongst the electorate.

Nonetheless on the Renewable Energy Target, Hunt’s message seemed to suggest the government still feels it holds some powerful negotiating cards in spite of Palmer’s opposition to any reduction in the RET.  He told the audience that his intention, and that of Industry Minister Ian Macfarlane, with the current review was to settle the format of the scheme once and for all, with no further reviews of the scheme. This seems to suggest the government hasn’t given up on the possibility of making significant changes to the scheme. 

In essence Hunt seemed to be dangling a carrot in front of the renewable energy industry – if you play nice and compromise on the level of the RET, then Macfarlane and I can take away the regulatory uncertainty that leaves your projects unfinanceable.  

His message could also in some respects be interpreted as a threat – if you don’t compromise, sure, we might not be able to change the legislation in this term of parliament but we’ll undermine investment confidence by leaving open the prospect of changes in a future term.

Interestingly this seems to be the interpretation the Australian Solar Council has reached. In an email to their members they said:

Although the government remains committed to abolishing or winding back the RET, it appears unlikely to succeed in the Senate.  We are now concerned the government will run ‘dead’ on the issue, prolonging investment uncertainty by simply doing nothing. If they do, they will effectively close down large-scale solar projects because of the ‘locked in’ policy uncertainty between now and 2016-17.

One industry representative at the conference dinner last night laughingly suggested that Clive Palmer’s Al Gore moment was the best thing that ever happened to Minister Hunt. Hunt had appeared isolated and unsupported by his colleagues in his attempts to honour the government’s election promises, but Palmer is now inadvertently providing him with a strengthened hand.

Nonetheless, Palmer still seems unable to rid the large-scale renewable energy industry of the regulatory uncertainty that leaves it in investment limbo land.