CEFC In Australia Banned From Investing In Small-Scale Solar Rooftops

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On Saturday, reports emerged from Australia that the government had issued a directive changing the mandate of Clean Energy Finance Corporation (CEFC) to prevent it from investing new funds into wind power. CEFC is a government-created institution set up to invest in renewable energy sectors.

Given that wind power is potentially worth billions of dollars, this did not go down well with the industry and its supporters.

However, the cyberspace really erupted when it was also learnt that the government’s ban extends to household and small-scale rooftop solar (less than 100 kW).rooftop solar massachusetts

A letter to the CEFC, with a directive to change its investment mandate, calls for exclusion of direct investments in household and small-scale solar from the $10 billion green fund.

The draft investment mandate calls for “mature and established clean energy technologies” to be excluded from the corporation’s activities — this includes wind power and household and small-scale solar.

Let alone the environmental impact, this could put thousands of Australian jobs and billions of dollars in investment into a shaky future.

In fact, the Australian government has bigger plans. Prime Minister Abbott was quoted by The Guardian saying:

“It is our policy to abolish the Clean Energy Finance Corporation because we think that if the projects stack up economically, there’s no reason why they can’t be supported in the usual way”, to which he added “But while the CEFC exists, what we believe it should be doing is investing in new and emerging technologies – certainly not existing wind farms.”

Opposition Leader Bill Shorten took a dig at the current events and said that “the only thing the CEFC could invest in is flying saucers.”

As per Australian Environment Minister, Mr Greg Hunt, the mandate change was part of the complicated deal in June on the renewable energy target, which reduced the target for the share of electricity that must be sourced from renewable energy by 2020.

Despite the lower target, the renewable sector backed that deal because it gave some certainty that the targets would not be scrapped entirely, as the Abbott government had initially proposed. The rooftop solar sector was not affected by the reduction in the target.

With its efforts to abolish the corporation being blocked in the Senate (not once, but twice), the government’s plan now seems to have changed to inflicting a death by thousand cuts.

And it is not that CEFC has not been delivering financially.

Until recently, the corporation was mandated to achieve the equivalent of the 5-year bond rate – 3.4% – which it was able to surpass in its latest year with estimated returns of 6.5%.

However, in March 2015, the Abbott government issued a mandate raising the required rate of return for CEFC investments astronomically, and at the same time reduced the risk it could take in individual projects. Now it is expected to deliver at a new benchmark of 5-year bond rate plus 4–5% (effectively 8.4%).

Fortunately, large-scale solar has been left untouched. However, it is unclear if this would be for very long.

Treasurer Joe Hockey and Prime Minister Abbott have ridiculed the wind sector by taking turns to call it “utterly offensive” and “visually awful” (respectively, in case you need to know). Mr. Abott went on to say that he wanted to reduce the growth rate of the wind sector as much as the Senate would allow.

The clean energy board now has time to respond to the mandate, which the government is required to consider before the directive is tabled in the parliament and goes on to become legally binding. Thankfully, this directive will not affect existing investments.

Before the turn of events, CEFC was reported to be busy assessing $500 million in finance for solar projects valued at more than $1 billion. According to its 2014 annual report, the corporation’s investment mix stands at 33% solar, 30% energy efficiency, 21% wind, and a remaining 16% in other technologies.

One-third of the current funding of the CEFC goes to solar projects, the majority of which are small-scale projects.

There are 1.3 million rooftop solar systems in Australia and one in seven Australian households currently benefit from solar energy. As per CEFC’s previous projections, by 2030, about 5 million commercial and residential solar systems were expected to be installed.

Most households receive publicly backed rebates to install these systems, but CEFC has made it its priority to help low-income families, renters, small businesses, and community groups to invest in solar. With no alternative in sight, these groups will bear the brunt of the new mandate.

“This is a government which supports renewables, but obviously we want to support renewables at the same time as reducing the upward pressure on power prices,” the prime minister said. “We want to keep power prices as low as possible, consistent with a strong renewables sector.”

John Grimes, the head of the Australian Solar Council believes in light of the current events, the opposite could rather emerge. “To say this is about lowering the costs of power is cynical in the extreme,” Grimes said. “What they’re doing with this is the precise opposite.”

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Anand Upadhyay

is a Fellow with The Energy and Resources Institute (TERI, New Delhi). He tweets at @indiasolarpost. Views and opinion if any, are his own.

Anand Upadhyay has 95 posts and counting. See all posts by Anand Upadhyay