On 23 March 2016, the Turnbull Government announced the
establishment of a $1 billion Clean Energy Innovation Fund (CEIF)
to provide debt and equity funding for clean energy
HOW WILL THE CEIF BE ESTABLISHED?
The CEIF will be established from a reallocation of the Clean
Energy Finance Corporation's (CEFC) $10 billion allocation and
jointly managed by the Australian Renewable Energy Agency (ARENA)
and the CEFC. The Government's announced changes on clean
energy also signal a refocussing of the mandates of ARENA and the
ARENA will continue to manage its existing portfolio of grants
and deliver on its $100 million large-scale solar photovoltaics
round (for which 22 "high merit projects" have recently
been shortlisted). ARENA's focus will also expand beyond
renewable energy to encompass a broader spectrum of energy
efficiency and low emissions technologies.
Significantly, once the $100 million large-scale photovoltaics
solar round is complete, ARENA will move from grant funding to
predominantly investing on a debt and equity basis under the CEIF.
The Government has stated a clear intention to retain ARENA and
expand its mandate.
WHAT ARE THE CURRENT PRIORITIES FOR ARENA GRANT FUNDING?
Currently, ARENA invests in renewables projects by providing
grant funding. This funding is focussed on early stage research and
development through to pre-commercial deployment activities.
It is also targeted towards advancing renewable energy
technologies that fit with ARENA's investment focus areas under
its General Funding Strategy and Investment Plan.
The priorities for ARENA investment under its current mandate
large scale solar photovoltaics
integrating renewables and grids
renewables for industrial processes
fringe-of-grid and network-constrained areas
Under its existing funding agreements, ARENA's policy
position is that applicants demonstrate funding and co-investment
from debt and equity sources that will at least match ARENA grant
contributions to a project.
Issues regarding priority of any security interests and
tripartite arrangements can arise in relation to the requirements
for matched funding and the relationship of ARENA grant funding to
other debt funding.
As projects advance through to commercial deployment, ARENA
funding has often been complemented (post the pre-commercial
deployment phase) by debt financing either from the CEFC or
WHAT IS THE FUTURE FOR ARENA UNDER THE CEIF?
ARENA has stated that the proposed changes under the CEIF will
shift its balance from a primarily grant based role to investing
more on a debt and equity basis.
While little detail is available at this stage on the refocussed
mandates of the agencies, it appears ARENA's ability to
continue to provide some grant-based funding to new renewable
technologies projects will not be excluded. This is subject to any
legislative change to its functions under section 8 of the
Australian Renewable Energy Agency Act 2011 (Cth).
As a result of the balance shift from grant-based funding to a
debt and equity basis, ARENA's capacity to make grants going
forward will be under scrutiny.
Diminishment of ARENA's grant based funding function has
already been raised as a particular concern by some commentators.
They have noted both the significance of grant funding at the early
pre-commercial stage of the innovation chain and the need for
retaining an option to use grant-based funding to advance
There have also been questions raised about the nature of the
projects for which any ARENA grant funding would be advanced. For
example, will any grant funding activity that ARENA retains be
focussed predominantly on knowledge sharing or more speculative
innovations? Or will it be restricted to the very early stage of
the innovation chain?
KEY TAKEAWAYS TO CONSIDER
The CEIF is due to commence on 1 July 2016. In the meantime, it
appears ARENA will continue to accept funding applications. Those
innovators who are close to seeking ARENA grant funding should
consider getting their applications in now, rather than waiting for
the new CEIF.
It is likely some applications will be recommended by ARENA for
reallocation to debt or equity funding under the CEIF.
The agencies will liaise to determine where an application can
best be dealt with, but until the detail of the CEIF and the
refocussed mandates are made public, renewables innovators at the
pre-commercial end of the innovation chain can still look to
progress their clean energy funding requirements.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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