We’re not even half way through the year yet but 2014 is already shaping up to go down in history as one of the most tumultuous years in Australia’s renewable energy space.
So far this year, the Commonwealth Government has:
- released its new ‘direct action’ policy to replace the existing carbon scheme (including a White Paper and draft legislation);
- received and acted upon the First Report of the National Commission of Audit (a new body with the function of reviewing and reporting upon the performance, policies and role of the Commonwealth Government). This First Report recommended the abolition of the Clean Energy Finance Corporation (“CEFC”) and other sector specific grants such as those provided by the Australian Renewable Energy Agency (“ARENA”)
- attempted, unsuccessfully, to pass legislation to repeal the existing carbon scheme (first attempt was blocked by the Senate in March – we expect the next attempt to be on 14 July which is the first Senate sitting date after the new Senators commence). This legislative package also attempted to abolish the CEFC;
- commissioned a review of the Renewable Energy Target with a report and recommendations due to be released within the next few months. It is widely anticipated that this review will result in significant changes to the scheme; and
- released a budget which formalised the policy of abolishing ARENA altogether and rolling its functions into the Department of Industry.
These policy decisions have already and are likely to continue to impact on investment in the Australian renewable energy sector.
With so much change already having taken place and with more to come, we have summarised the key issues and uncertainties in the table below.
Click here to view table
Abolition of ARENA and CEFC - implications for industry
The government has made various representations, including in the Budget papers, which suggest that it intends honouring existing contractual obligations to committed investments.
There have been reports in the media that ARENA and CEFC funding agreements have extensive Government ‘walk-away’ rights and limited compensation regimes. While this might be true in respect of some projects, the risk that the Commonwealth Government will simply tear up all existing agreements is low. It is far more likely that the Government will take a pragmatic view and will not walk-away from committed projects simply because it can – acting in this way would raise Australia’s sovereign risk profile to unprecedented levels.
If your project is still in the pipeline and will be reliant on funding from ARENA and/or CEFC, then your goal should be to have committed funding before legislation abolishing ARENA and CEFC is passed. Now is the time to hit the accelerator with the July deadline in sight.