Coalition still counting Abbott-era 'savings', but renewable grants roll on

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In his clean energy announcement Malcolm Turnbull continues to claim $1.3bn in energy grant savings that have not been passed by parliament

Wind turbines at the Infigen Energy wind farm located on the hills surrounding Lake George, near Canberra.
Wind turbines at the Infigen Energy wind farm located on the hills surrounding Lake George, near Canberra. The government has announced it will keep the Australian Renewable Energy Agency but has cut $1.3bn from its budget. Photograph: David Gray/Reuters

The Turnbull government is continuing to claim $1.3bn in Abbott-era savings from renewable energy grants even though the cuts have not been and may not be legislated, and in the meantime the agency responsible for them is required to continue spending the money.

The clean energy industry has largely welcomed an announcement by the prime minister this week that he would keep the Clean Energy Finance Corporation – which the Abbott government had sought to close – and retain in name but change the role of the Australian Renewable Energy Agency (Arena).

The Abbott government had also sought to abolish Arena and cut $1.3bn from its spending – a “saving” it counted in the budget bottom line even though the legislation implementing those decisions did not pass the Senate. The Turnbull announcement retained that saving, giving Arena a new role as administrator of a subsidiary loans program for earlier stage clean energy projects, using some of the borrowed funds of the Cefc.

But the Arena chief executive, Ivor Frischknecht, told Australia that Arena’s legislation specifies its funding and its tasks and until it is amended or repealed Arena is required to continue considering and making clean energy grants with that money.

“It is a big step forward that the government recognises renewable energy and Arena as part of its agenda ... that is tremendously positive,” Frischknecht said.

“But any change to our funding is subject to parliament, the $1.3bn remains in our act and subject to board decisions. The legislation obliges us to carry out the functions of Arena and one of those is to provide financial assistance, so we would have to continue to do that to some level,” he said.

“Whether we will lose the $1.3bn will be up to the parliament, and just as with any other legislation, groups can try to influence the parliament one way or another about whether those cuts are passed.”

The chief executive of the Solar Council, John Grimes, said Arena had received legal advice confirming that it was obliged to continue considering and awarding grants until such time as the legislation was amended or repealed.

At the moment Arena has only one board member – the secretary of the environment department – with the government expected to appoint new board members in coming weeks.

Greg Bourne, the former oil industry executive who was chairman of Arena until January, said the new board would be in the same position as his board had been after the Abbott government made the policy decision to abolish the organisation and cut the funding, but had been unable to get it through the parliament.

“We had to work within the Arena act, which meant we had to continue to consider project ideas and fund them. The directors will have to continue to follow the purpose of the act and weigh up projects and fund those they consider worthy. To crystallise those savings the government needs the legislation to pass.”

Under the Turnbull government’s new policy Arena will co-manage a new Clean Energy Investment Fund set up underneath the CEFC, with a mandate to lend to earlier stage and slightly riskier projects, and generate a slightly lower rate of return.

It provides some certainty to both organisations which had been on “death row” for years, but means no grant funding will be available for very early stage projects that do not yet generate a return.

Bourne said he believed renewable energy development needed “grants, debts and equity”.

The government has said Arena will continue to manage its existing projects and will finalise the $100m in large-scale solar grants.

Turnbull said on Wednesday the decision to shift to debt and equity-based funding was a deliberate shift.

“This reflects a very big change in the way the government ... is now approaching this type of investment,” he said. “Historically ... the federal government has been very much like an ATM, it’s been making grants ... without, frankly, a lot of follow-up as to whether it’s effective.

“We believe ... the government should seek to be a partner and investor, seek to get a return. It doesn’t have to get the same high return that a private venture capital firm or a private bank would seek to get. It can get a very long-term return but, in doing that, by ensuring that you take a more economic approach, you will ensure that you have a much more rigorous analysis and that you will get a better quality of investment and a better quality of project.”

The $1.3bn in “savings” remains available – despite Arena continuing to dole out grants in the two years since the Abbott government original tried to take the money back – because Arena also cancelled some earlier grants.