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The end of ARENA

tsaiproject / flickr

Finance Minister Mathias Cormann confirmed yesterday that the Australian Renewable Energy Agency (ARENA) will be discontinued in the 2014-15 Budget. Although it is less than two years old, ARENA is the last in a line of short-lived renewable energy initiatives that span almost a decade. ARENA has attracted little attention in its short life. What exactly is its role?

What is ARENA?

The Australian Renewable Energy Agency is an independent agency designed to improve the competitiveness of renewable energy technologies in Australia, and to increase the supply of renewable energy.

The agency was launched on 1 July 2012 by the Gillard Government with $3.2 billion in funding, made up of $1.5 billion of new funding, and re-purposing approximately $1.7 billion from previous programs (see below) for investment in new renewable energy projects to 2020. (Some spending was deferred out to 2022 in last year’s budget, although these changes were never legislated). ARENA is established and funded through dedicated legislation, the Australian Renewable Energy Agency Act 2011. It currently has approximately 80 staff, mostly in Canberra.

What does ARENA do?

As of November 2013 ARENA was funding 181 projects across Australia to a total of $859 million. The majority of projects are early-stage research and development in a wide range of renewable energy forms, such as solar, wind, hydro, wave, geothermal and biogas. The majority of ARENA’s funding, however, is in a few large, near-commercial demonstration projects, such as AGL’s flagship solar project in Broken Hill. ARENA also supports 96 researchers through PhD scholarships, research fellowships and work experience programs.

ARENA incorporates the earlier Australian Centre for Renewable Energy, established in 2009, which itself incorporated legacy programs from earlier initiatives:

In addition, ARENA took over 65 projects managed by Australian Solar Institute and the following projects managed by the Department of Resources, Energy and Tourism:

Coalition reception of ARENA

The Coalition was skeptical of the need for ARENA, as well as the Clean Energy Regulator and the Clean Energy Finance Corporation, stating that “these new agencies are on top of existing outfits such as the Department of Climate Change and Energy Efficiency and the Climate Commission” and that they would require additional staff. The Climate Commission and Department of Climate Change and Energy Efficiency have been decommissioned, the former by the Abbott Government and the latter by the Rudd Government, and the second version of the Clean Energy Finance Corporation (Abolition) Bill 2013 is currently in the senate (after the first version was voted down late last year). ARENA is one of the few remaining dedicated government bodies that promotes and supports renewable energy development.

Last September the Government cut $434.9 million from ARENA to “achieve savings of $1.3 billion over four years by abolishing a range of initiatives associated with the carbon tax”, but these changes are part of the Clean Energy Legislation (Carbon Tax Repeal) Bill 2013, which was blocked by the Senate last March. The Coalition also made an election promise of allocating $40 million of existing ARENA funding directly to wave and geothermal power projects.

Fully abolishing and defunding ARENA will require legislation, but given the results of the Senate debates on the carbon price mechanism repeal legislation, it is unclear if or when such a bill would pass.

Administration of ARENA’s grants

The Government has reportedly indicated that existing funding agreements will be honoured, but $1.3 billion in unallocated funds will be returned to the budget. This means that existing projects, such as ARENA’s $166 million support of AGL’s two solar power stations in NSW, will proceed but the future is uncertain for other projects. The CEO of ARENA pointed this out to applicants in a letter on 2 April 2014:

Given the fiscal outlook and media speculation concerning the forthcoming Budget on 13 May 2014, the future of ARENA’s funding is unclear. You may wish to take this into consideration, particularly when developing your applications.

Funding for renewable projects in Australia has always been turbulent. Solar Oasis, which received a Renewable Energy Demonstration Program grant in 2009 to construct a solar concentrating plant at Whyalla, had their funding subsequently withdrawn due to failure to meet set milestones. Four of the seven grant recipients of the Geothermal Drilling Program were unable to raise the additional funds and lost all $7 million of promised government funding.

In ARENA’s absence a government authority will need to be responsible for administering funding. Administration of projects will most likely fall to the Department of Industry, which currently operates a number of energy efficiency programs, the Ethanol Production Grants program and the Smart Grid, Smart City program.