“In the midst of a global race to attract investment and jobs in renewable energy, Australia has just thrown another weight in its own saddle bag,” said Kane Thornton, chief executive of the Clean Energy Council.
This week the Clean Energy Finance Corporation (CEFC) received directives from the current Government to restrict renewable energy investment. With Australia on track to becoming one of the modernised world’s largest polluters thanks to constant investment into coal mines and restriction to renewable energy projects. This most recent intervention by the current Government severely reduces Australia’s renewable energy credentials.
The Clean Energy Finance Corporation has been instructed to cease funding to investments relating to wind farms and small-scale solar systems by Treasurer Joe Hockey and Finance Minister Mathias Cormann. Sizes of small-scale systems haven’t been specified as of yet. This all comes about after a revised RET was reached with the Senate crossbench last month. Instead of the previous 41,000GWh by 2020, it has been reduced to 33,000GWh to maintain a 20% renewable energy target. Currently, the CEFC’s portfolio states that wind energy claims 21% of their total investments while solar sits well above it at 33%. The restriction relates to funding new wind farm projects as the federal government believe that wind farms are outdated, ‘utterly offensive, noisy and visually awful to look at.’ Liberal Trade minister Andrew Robb said “…money is to be spent on new and emerging technology, not mature technology.” This acclamation is made by a government supporting ‘aesthetically pleasing’ open-cut coal mines…
As the RET has been reduced by 8,000GWh. Australia still has an additional 18,000GWh to produce to reach 33,000GWh by 2020. Slashing funding to new wind farms and small-scale projects is a destructive move by the Federal government jeopardising the RET as a whole.
The letter outlines new and revolutionary technologies should be on the agenda of the CEFC; a similar objective to the already established, government funded organisation Australian Renewable Energy Agency (ARENA). Both corporations haven’t been abolished yet after multiple attempts. Why completely cut funding to two relevant and profitable sectors of renewable energy?
One of the key challenges within the renewable energy sector is finance and funding for these energy efficient projects. CEFC have been proactive in establishing relationships with financial lending facilities such as NAB and Commonwealth Bank to help aid progression. The bank’s low, blended interest rates are extremely enticing for small businesses to invest in small-scale solar systems when applying for Energy Efficient Loans from the lending facilities. The blended interest rates CEFC and the banks offer end users work very well to their benefit, ultimately improving their return on investment, and the overall amount of interest paid on the loan used to finance the renewable energy system. Instead of the financial institution carrying the complete risk of the loan, it’s split with CEFC and an interest rate is established which is conclusively lower than any other institutional loan facility. It would cost in excess of $50mil to build wind farms while small-scale solar systems are literally a ‘drop in the ocean,’ totalling only a few thousand dollars. The attack on small-scale solar all of a sudden seems unjustified and unnecessary.
The same rules apply when approaching financial institutions for government money under approval for a specific purpose. The banks must go through stringent credit check processes and must assess financial statements (residential or business customer), current leverage, burn rates, turnovers, existing assets and liquidity of these assets. This process must be approved by both the CEFC and the lending facility.
Due to these partnerships, small-scale solar systems haven’t had the same accessibility as other renewable energy forms. The immediate impacts will be minimal but progressively detrimental to the industry. An example of this is the success in the US of SolarCity’s Power Purchase Agreement (PPA) with residents and businesses, a partner company of Elon Musk’s Tesla. A PPA is the installation of a solar panel system on a property with the approval of the owner. The facilitating company will then sell electricity to the tenants at an equal or cheaper rate in comparison with energy retailers. After an agreed period of time, ownership of the solar system can then be bought by the property owner, or have the lease extended or completely owned by the property owner and SolarCity will no longer be charging them for electricity.
This new directive forced upon CEFC will cut funding to small-scale solar immediately, meaning all funding previously approved will not be affected whatsoever. This is a perfect example of the new changes causing minimal problems at the moment but these issues will impact the future of small-scale solar over the coming years.
Independent Senator Nick Xenophon, who is on the select Senate committee into wind turbines, has made the appropriate conclusion that as long as the government restricts funding to wind energy, investment should then be forced into large-scale solar systems. While this is still a fairly appropriate argument from Mr. Xenophon, the government seems to completely disregard the employment trend sure to occur.
If investment towards wind farms completely ceases, jobs in this particular sector will no longer increase. As evident in the table above collated by the Australian Bureau of Statistics, the employment trend has been on an upward increase and all of a sudden, has jumped in 2013-2014 with an extra 1,170 being employed when compared to the previous period. Additionally, investment into Australia’s wind farm and renewable energy industry as a whole will be deemed far too risky and uncertain. Industry insiders claim that it will not sink the industry completely but will definitely ‘make things even harder.’ Farmers rely on the profit made by these wind farms and to suddenly eliminate funding is dangerous. One landowner who was interviewed by Property Observer said “With a bit of money to put turbines on my property – that won’t devalue my property – we’ll be able to run less animals and put less pressure on the land and look after it a whole lot better… That’s a good outcome for me!”
A study conducted by the Clean Energy Council relating to property prices concluded that land with wind turbines increases the price of the property by an average of 10.9%, as evident in Western Victoria which contains one of Australia’s largest wind farms, Waubra. Research from Origin Energy and realestate.com.au state that 85% of Australians believe their solar panel systems add value to their property. This is fantastic news for property investors who need to gain additional interest in their property and attract tenants.
Currently, solar makes up a massive portion of the investment portfolio that CEFC currently possesses. John Grimes from the Australian Solar Council, in an interview with the ABC, said that “For many Australians, buying is still out of reach and something not many can afford. For people on low incomes, community groups, nursing homes, small businesses, they’re relying on the program provided by the Clean Energy Finance Corporation to be able to get into solar in the first place.” Initially, funding and finance is one of the main restrictions households and small businesses face while trying to reduce their energy consumption bills.”
CEFC’s response is yet to be heard but will definitely spark much debate within the renewable energy sector. This is a disappointing, backwards step in such a hard fought progression to begin with.
- 14 Jul, 2015
- Camille Gerges
- 0 Comments