In brief 5 min read
In the recently released Technology Investment Roadmap Discussion Paper, the Federal Government puts forward a proposed framework to govern the investment of public funds in the development of new technologies designed to lower emissions. This is not really anything new – the Government has a track record of deploying public funds into clean energy technologies and sectors via the Clean Energy Finance Corporation and the Australian Renewable Energy Agency. However, the Discussion Paper provides clarity regarding the Government's thinking on process and priorities going forward, and is interesting reading for investors in green technology and projects.
On 21 May 2020, the Federal Government invited submissions relating to its development of a national Technology Investment Roadmap, which would set a strategy for capitalising on key low emissions technology opportunities over the next three decades. The Government also released the Technology Investment Roadmap Discussion Paper (the Discussion Paper), which explores key factors for consideration in shaping that strategy, by focusing on areas of comparative advantage and surveying new and emerging technologies.
The Discussion Paper contemplates a process resulting in the Government's publication of an annual Low Emissions Technology Statement, which sets out its investment priorities. This process is anticipated to culminate in the issue of a technology-focused Long Term Emissions Reduction Strategy before COP26. In this way, the Government is continuing its current position that emissions reductions should not be mandated (ie by a new scheme to replace the Renewable Energy Target or by a price on carbon) but should occur on a voluntary basis and in line with market forces.
The rationale behind the injection of public funds into emissions reductions technologies and projects has always been to address the gap in funding projects that are seen as involving unacceptably high risk from a private capital or debt perspective.
The development of Australia's large-scale solar industry is an excellent example of this approach, and is specifically called out in the Discussion Paper.1 A decade ago, large-scale solar was an emerging technology and not considered commercially viable. In 2017, the Australian Renewable Energy Agency (ARENA) committed $92 million in funding to 12 large-scale solar farms, with the Clean Energy Finance Corporation (the CEFC) committing $320 million in debt finance to eight of those farms.2 The influx of funding from ARENA and the CEFC assisted in driving down the costs associated with establishing large-scale solar projects and innovation in related technology; and, in the six years between 2012 and 2018, Australia moved from generating under 10MW of large-scale solar energy to 3,000MW. Australian-developed solar panel technology (particularly PERC solar panel technology) is now used in the majority of commercial solar cells worldwide.3 Its work in terms of large-scale solar 'being done', ARENA and CEFC funding has since moved on into new areas, such as hydrogen and firming.
By virtue of the framework set out in the Discussion Paper, the Government appears keen to replicate this success story across other emissions reduction technologies and projects.
The Discussion Paper makes it clear that the Commonwealth's existing funding agencies, ARENA and the CEFC, will be front and centre in disbursing public funds for the technologies to be supported under the Low Emissions Technology Statements and in assisting with identifying investment priorities. ARENA will assist in identifying those priorities through working closely with the Ministerial Reference Panel, headed by Australia's Chief Scientist, Dr Alan Finkel, and the working knowledge of technology development it brings through its knowledge-sharing programs for its funded projects. Of course, an important distinction between the two sources of funding is that funds advanced by ARENA are grants that are not required to be repaid in the ordinary course, whereas funds disbursed by the CEFC are loans that are subject to repayment.
This will require a pivot in ARENA's and the CEFC's funding strategies. This is nothing new for either agency, with both proving adept in the past decade at moving from maturing technologies as they commercialise and are able to stand on their own (such as large-scale solar) to developing technologies requiring initial public support (such as new network firming technology). Both agencies have proven themselves to be agile in responding to industry developments as they arise, as demonstrated by their early move in supporting the development of hydrogen and waste management technology well before the Discussion Paper. In our experience, within their investment mandates, both agencies have shown a willingness and flexibility to support applicants able to demonstrate investment proposals that have a high impact on their mandates to promote the development and competitiveness of clean energy technologies.
We have found that applicants to the Commonwealth funding agencies will maximise their prospects of securing funding by:
- presenting a clear business case that demonstrates a proposal that will have maximum impact in promoting the agency's objectives, being:
- in the case of ARENA:
- improving the competitiveness of renewable energy technologies; and
- increasing the supply of renewable energy in Australia; and
- in the case of CEFC, supporting investments in:
- renewable energy technologies;
- energy efficiency technologies; and
- low emissions technologies;
- in the case of ARENA:
- supporting the business case with evidence of the impact their proposal will have, market demand and the comparative advantage of their technology relative to other competing technologies (mature and developing) through independent expert review;
- (in the case of ARENA) demonstrating that the proposal is not commercially viable without grant funding support;
- (in the case of CEFC) demonstrating the viability of the proposal to service CEFC's debt; and
- presenting a proposal that is as 'shovel-ready' as possible in the circumstances. (Generally, we find the 'chicken and egg' aspect of this is well recognised – ie that project proponents will be reluctant to invest all amounts required to proceed with the project without an indication that funding will be available). Normally, the agencies will be flexible in supporting approved projects by approving the funding, subject to satisfaction of conditions to advancing the funds that are consistent with the applicant's business case.
The Discussion Paper is an interesting outline of the way in which the Commonwealth plans to tackle the promotion of emissions reductions over the next period. For developers of, and investors in, green technology and projects, it will be important to understand the process that the Government intends to follow and how funding can be accessed. In the short term, submissions on the Discussion Paper are due by 21 June 2020.
Discussion Paper, page 7.
Discussion Paper, page 23.
Discussion Paper, page 26.