Innovation will be stifled right across the clean energy sector if the Australian Parliament supports legislation to remove future grant funding available from the Australian Renewable Energy Agency (ARENA), according to a briefing paper released today by the Clean Energy Council.

Clean Energy Council CEO Kane Thornton said ARENA had funded hundreds of projects that would not otherwise have gone ahead, bridging major knowledge gaps across the renewable energy industry, reducing technology costs and supporting home-grown Australian research and development activities.

“Legislation to be introduced to Parliament this week is expected to include a $1 billion cut to ARENA’s grants funding, and puts the future of innovation in clean energy at risk,” Thornton said.

“While we understand the government is looking for savings, slashing grant funding for renewable energy massively undermines the industry’s efforts to meet our national emissions reduction targets, as well as the 2020 Renewable Energy Target (RET) and beyond.

“ARENA is an investment by Australia in Australian technology, and it is helping us to catch up in the global race toward clean energy.”

The Clean Energy Council paper The Impact of Defunding ARENA: Plunging into the Clean Energy Valley of Death says ARENA is helping to overcome the capital-intensive and lengthy process of developing exciting new energy technologies. Every energy technology ever developed – including coal, gas, hydro and nuclear – has benefited from a substantial government funding commitment, it says.

Thornton said ARENA’s use of capital grant funding had a strong track record of success, and was able to deliver results that would not have been possible using debt or equity – the tools available to the Clean Energy Finance Corporation and the government’s Clean Energy Innovation Fund.
“The cost reductions we have seen already in Australia, in large-scale solar for example, have been remarkable. Every dollar spent by ARENA has helped to leverage private sector finance, and will deliver greater value for the energy sector in years to come.
“The renewable energy industry urges the major parties to retain ARENA’s future funding as a crucial investment in our energy future.”

Impacts of cutting ARENA’s funding includes:

• The cost reductions seen in exciting near-commercial technologies will stall as the capital grant funding necessary to cross the so-called “valley of death” disappears. Major technology and project developers will leave Australia and these opportunities will be lost.
• Investment in Australia’s first-class renewable energy R&D will wither and die. Innovation in all its forms benefits the national interest and positions Australia for future prosperity in a rapidly changing global economy.
• It will be more challenging and/or more expensive to meet more ambitious renewable energy targets in the future, and Australia’s ability to deliver our Paris climate change commitments will be undermined.
• The level of investment (domestic and foreign) in early-stage clean energy R&D and demonstration projects will fall away as private sector investors take their capital and intellectual property elsewhere.
• International investors in Australia’s renewable energy sector will again impact the level of confidence in the long-term policy settings that underpin long-term investments.
• The local supply chain, manufacturing sectors and skills base developed by ARENA-supported projects over the past years will stall and be lost to Australia.
• The challenges in integrating renewable energy into Australia’s traditional energy system would remain, slowing the transition to a smarter and cleaner 21st century energy system.

Australia would miss the opportunity to adopt a diverse set of exciting renewable energy technologies and solutions in the future, and instead remain reliant only on the current suite of technologies available.