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Australia

Australia

Green bank raises faint hopes for wind energy investors

AUSTRALIA: Clean Energy Finance Corporation will be capitalised with A$10 billion dollars to aid projects unable to secure private finance.

A wind farm in Victoria, Australia
A wind farm in Victoria, Australia

Wind is set to benefit from a new A$10 billion ($10.6 billion) green bank to be introduced by the Australian government as part of a long-awaited carbon-pricing package. The measures have been hailed as a watershed moment in Australia’s fraught history of tackling climate change.

The Clean Energy Finance Corporation (CEFC) will be run by a government-appointed chair and a board comprising experts in banking, investment management and renewable energy. It will make loans or take equity shares in projects that cannot source investment from private lenders. The corporation, operating independently from government, will aim to work with business to maximise investment in the sector with any returns being reinvested.

The A$10 billion will be split into two streams, the first focusing on renewable-energy projects such as wind, solar and geothermal. The second stream will be shared between the renewable-energy, energy-efficiency and low-emissions technology sectors and their supply chains, including manufacturers of wind turbines and solar panels.

At the insistence of the Green Party, on whose support the minority Labor government relies, carbon capture and storage technology was excluded from the corporation. Kane Thornton, director of strategy at the Clean Energy Council, an Australian not-for-profit renewables association, called the CEFC a critical reform to address decades of underinvestment in clean energy. He said its independent status would help insulate it from the political cycles of the day and keep it focused on providing maximum value for investment dollars to the clean-energy sector.

The key element of the clean-energy package was a highly controversial carbon-pricing scheme. Carbon will be priced at A$23/tonne from 1 July 2012 and will rise by 2.5% each year until 1 July 2015 when an emissions trading scheme will be introduced, with the price determined by the market. Around 500 companies will be required to pay for their carbon emissions under the mechanism and revenue collected will be used to support employment growth as well as investment in clean energy.

Lane Crockett, general manager of Australian wind and hydropower developer Pacific Hydro, welcomed the certainty the carbon tax would provide to investors. He said the A$23/tonne carbon price was fine as a starting point but would need to be increased as the mechanism matured if it was to make a real difference. But Siegfried Angerer, director of research, innovation and education development at the Australian Wind Energy Institute, said the carbon-tax package was a "drop in the ocean" when compared with the deep structural problems facing Australia’s wind industry and renewable-energy sector in general.Key issues such as a massive skills shortage in renewable energy as well as the need to upgrade the electricity grid — which could cost as much as A$45 billion — would continue to act as significant investment hurdles, he said.

"The Australian renewable-energy problem is not simply solved with a limited tax on 500 polluters, nor is it solved with a scaled-back mining-tax compromise," he added. Without political consensus both at the federal level and across all states and territories, Australia would fail to deliver a coherent national renewable-energy policy, he said.

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