As part of its push for renewable energy infrastructure development under the low-carbon development plan, the Australian government has announced plans to invest A$400 million to develop 150 MW of off-grid renewable energy projects in the rural areas of the country.
The funding for these projects will be provided by the Australian Renewable Energy Agency (ARENA). The agency was established as part of the Labour-Green government’s Carbon Pricing Mechanism (CPM). The agency gets funded from the carbon tax revenue gained from the carbon tax scheme that the government enforced last year. The government had made ARENA the corner stone of the strategy to achieve the Renewable Energy Target (RET) set for 2020.
The implementation of these projects is expected to be focused mainly in remote areas or mines. According to some estimates, about 2,000 MW of diesel-based generation capacity exists in remote and mining areas in Australia. It makes sense to replace this extremely dirty generation capacity with a cleaner and cheaper power system such as solar photovoltaic.
The agency will also promote emerging renewable energy technologies like hybrid power systems through special additional financial support. Such projects would be eligible to funding worth over A$20 million.
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Doubts Over Implementation
While the announcement is very promising and the agency expects the 150 MW capacity to be in place within the next five years, the future of the agency itself remains in doubt. There have been media reports suggesting that some of the bodies established under the CPM have stopped the disbursement of loans to low-carbon projects, as the Labor party is facing a seemingly impossible scenario of returning to power following elections scheduled for September this year.
The Liberal party, currently in the opposition, has clarified that it would dissolve one of the bodies, the Clean Energy Finance Corporation, if it wins the election. The Liberal party is yet to clarify its stand on the future of ARENA. To make matters worse for the agency, the government had to cut its budgetary allocation after the government reduced the expected carbon revenue generation over the next few years. The agency’s budget has been reduced by A$200 million to A$3 billion and spending of A$370 million has been deferred for a few years.
Since the Liberal party has a completely different approach to reduce carbon emissions and achieve Australia’s international commitments, there could be a change in the quantum of funding ARENA would be able to provide to renewable energy projects in the future.
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