A defiant and “very disappointed” ARENA hierarchy said the agency had a statutory obligation to continue its work, and would continue to assess more than 190 proposals worth more than $7.7 billion currently in its in-tray.
The position adopted by the ARENA board echoes that of the $10 billion Clean Energy Finance Corporation, which the Abbott government also wants to close, but has been unable to because it cannot get the numbers in the Senate.
ARENA appears guaranteed to continue its operations until at least the new Senate sits in early July because of support from Labor and the Greens. It is still possible that the new Senate, with the Palmer United Party controlling four votes, could support it, although that is impossibly hard to predict.
The decision to close ARENA, and repeal the act supporting it, was announced by Treasurer Joe Hockey last night, despite support for ARENA being bipartisan policy. Ministers repeatedly declared their support for the institution throughout last year’s election campaign, although some funding cuts were flagged.
“We are very disappointed that they going to repeal the ARENA act, and fold its functions back into department,” ARENA chairman Greg Bourne told RenewEconomy.
“Until such time as it has gone through parliament, the board has to act according to the ARENA legislation, and we will continue to do that …. we will follow the letter of the law, which means we won’t accelerate or decelerate our investments, and we will maintain the rigour of the investments.”
It promises to be an interesting situation, and potentially tricky, despite the letter of the law. The terms of the current board also end in early July. If not extended, the board will then comprise only a single director, Glenys Beauchamp, secretary of the Department of Industry, who will have to balance the political wishes of her immediate boss, Industry Minister Ian Macfarlane, and a legislative requirement to keep ARENA going.
CEO Ivor Frischknecht said the agency had a legislative requirement to continue “business as usual” until parliament ruled otherwise.
The agency has around $160 million of funding that has been allocated, but not yet announced, which includes board commitments to several projects under its $400 million off-grid hybrid energy scheme, which is designed to bring renewable energy sources such as solar PV and solar thermal into remote operations to reduce the amount of expensive diesel.
ARENA received almost 72 applications for its off-grid program, around half from mining firms – although some backed off when ARENA made it clear in April that its funding was in doubt, and others would not have qualified anyway.
The first of these projects, a 5MW solar plant to be installed by First Solar, is to be announced soon. Other announcements will follow when financing is complete, as will other larger solar projects that have also been agreed to but not yet finalised. The fate of aspirational projects such as the Port Augusta solar thermal proposal, to replace the existing coal fired generators, appear doomed.
Frischknecht said the agency would continue to apply its normal rigour to other proposals, although it is unlikely the board can simply shovel the money out the door – any allocation of more than $50 million requires the minister’s approval.
He said the scale of the proposals indicated the level of “potential disappointment” and the “scale of investment that is unlikely to go ahead” because of the proposed closure.
The next round of funding for the Australia Solar Institute – which has supported world leading research in many areas of the solar arena – will also be completed before the year’s end.
Other work has been, and is being directed towards smaller projects helping to integrate renewables such as rooftop solar into the grid.
“We have been helping to make integration of rooftop solar into networks a much more positive thing. Rooftop solar will continue no matter what happens to policies out there. People will still put solar on their roofs,” Frischknecht said.
One interesting aspect is what will happen to funds that were allocated to projects such as a wave energy project in Victoria, and two geothermal projects. These funds are not spent, but are part of the $1 billion that will be retained by the agency. If the projects are further delayed, or miss milestones, it is not clear whether those funds will return to treasury coffers or have the ability to be re-allocated.
Bourne noted that if this decision on ARENA, as well as the proposed repeal of the carbon price, the dismantling of the Clean Energy Finance Corp, and a reduction in the renewable energy target were to pass through parliament, then the new government would have effectively “cleared the decks” regarding clean energy.
“From there, the question is what you build,” he said. “The government is leaving behind a set of options that would allow it to accelerate the deployment of clean energy, and they may well need those options in the future. We are trying to build the infrastructure of the 21st century in terms of energy.”
Giles Parkinson is a journalist of 30 years experience, a former Business Editor and Deputy Editor of the Financial Review, a columnist for The Bulletin magazine and The Australian, and the former editor of Climate Spectator.