One of the arguments that has been thrown forward against the proposed Clean Energy Finance Corporation — and will no doubt continue to be so in the coming months — is that it will be good money thrown after bad, and the $10 billion planned injection by the federal government is out of all proportion to the task at hand.
And, it is argued, it is not necessary in the light of a carbon price. Or it should be restricted to R&D. The opposition — taking its cues from the energy debate in the US and Canada — as it has done on climate change policies — has vowed to repeal it.
There is a general assumption, as there was in the carbon debate, that Australia is doing something that no one else has contemplated, and that it is recklessly and needlessly leading the world. But as in the carbon pricing debate, this is not so.
The experience of the Solar Flagships, and other grants-based programs for that matter, highlight the need and the opportunity for the CEFC. Institutional investors, noting the $100 billion that will be required in renewable energy investments at a minimum over the next two decades, insist that such an independent financial institutions will play a critical role in stimulating the transition to a clean economy.
Recent surveys suggest that this is the approach of all the countries that are currently playing a leading role in clean energy investment — Germany, China, the US and Brazil — and each have state-owned development banks, or their equivalent, underwriting the majority of clean-tech investment.
An analysis conducted by Bloomberg New Energy Finance found that possibly the most influential player in the global energy market in the past year has been the German state-owned development bank, known as KfW, which in 2011 alone committed €22.8 billion ($29 billion) to climate and environment projects — mostly through lending at discounted rates and providing loan guarantees. The funding was split among energy efficiency investments (€10.1 billion), renewable energy (€9.4 billion) and waste management (€3.3 billion). KfW accounted for nearly half of all German clean-tech investment.
The bank plans to increase its allocation in 2012, as part of a five-year €100 billion investment spend out to 2015, to support the government’s pus to a 35% renewable energy target by 2035. Its portfolio includes solar farms, low-interest lending programs for building efficiency, regional power-grid growth, rooftop solar, energy-storage projects and it is expected to play a critical role in the deployment of large, capital intensive, offshore wind farms. Germany’s own investment requirement to meet its goals are estimated at €250 billion by the end of the decade.
The BNEF survey found that the global leader in the number of large-scale solar deals completed in 2011 was the US Federal Financing Bank, which played a critical role in the loan guarantees handed out by the US Department of Energy. Despite the politics over the failure of one investment, the start-up solar module developer Solyndra, more than 98% of the estimated $45 billion of loans made by the DoE since the GFC, including 15 large-scale solar projects, have been sound. These include loan guarantees to huge projects such as the BrightSource 392MW Ivanpah solar thermal portfolio and the 290MW Agua Caliente PV plant. It has also extended its reach to battery, energy efficiency and wind technologies.
BNEF notes that Chinese (and other) state-owned banks have also been active in the past year, but the sums of money involved is difficult to track because of the lack of transparency on these deals, but other estimates suggest that the China Development Bank provided $45 billion in cheap line of credits to solar and wind investments. BNEF also notes that Brazil’s development bank, Banco Nacional de Desenvolvimento Economico e Social, or BNDES, has been a significant lender to Brazilian biofuels and wind projects, and ranked second in identified clean energy deals across the globe in 2011.
The European Investment Bank is also playing a critical role, deploying at least $6 billion in 2011, and other country-based development banks, including in Denmark, have provided cheaper loans to support their technologies, including for the $800 million Macarthur Wind Farm in Victoria, which is using Danish Vestas turbines and that will be the largest in the southern hemisphere when it is complete.
Given this, the $10 billion to be invested in the CEFC appears relatively modest. But it could, given the experience play a key role in unlocking money from superannuation funds and other institutional funds as a co-investor, in much the same way as the DoE has forged a path for the likes of Warren Buffett, Bill Gates, Google and others to follow in their footsteps.
*This article was first published at RenewEconomy
The recent debate about the Reserve Bank decision to maintain interest rates at their current level should give us cause to reflect on the imperative of all our economic institution to attend to the challenges of GHG emissions.
Australian Super has instituted an appraisal of their investment policies that takes into account the target investment company’s climate change exposure to risk. This is to be applauded and should be a template for all out banks, investment houses and corporates.
Some reports reflect on the possibility of up to $20 trillion dollars being identified as both assets on balance sheets and possibly being ‘stranded assets’ in our major fossil fuel mining companies
Economists are concerned that these ‘stranded assets’ represent a major systemic risk to many nations, including our own, financial stability.
It is time our major lending bodies and financial institutions such as banks do set lending policies to avoid this risk by identifying these risks in their lending policies.
Mr Mervyn King, head of the UK Reserve Bank has agreed that these risks should be identified and taken into consideration by our project and corporate financiers.
As we see the Rineharts and Palmers advance their personal fortunes by expanding their coal tenements to a production basis on the back of overseas financiers, it is time for our Investment review board and other government regulators to include in their approval criteria an element of ethics and risk aversion that the challenge of emissions abatement of harmful gases and products presents.
Whilst our government puts in place regulations and incentives, and our scientists identify the problem and technological resolutions, we all, together, have to attend to the challenges that Climate Change creates for our living standards and the next generation.
The ‘Top end of Town’ has their part to play in this problem too.
Reading Parkinson, you’d hardly recognise the world as it is now. Parkinson clings to an indulgent fantasy, half-believable in the debt-boom years before the GFCs: that corporate capitalism would pour endless billions into ‘renewable energy’ technologies.
What really happened? (i) Basic R and D in renewables got peanuts (ii) Premature and failed technologies were subsidised heavily- a wave of rorts swept the globe. Billions were wasted on wind, geothermal and solar. Not to mention absurdities like the $50 billion Severn Tidal scheme (killed off by the GFC). Geothermal alone has swallowed hundreds of billions in Australia- for zero results. Flannery spruiked Geodynamics P/L in his 2008 tract- just look at it now, a penniless mendicant. Why did it take the Grattan report to force the obvious on shills like Parkinson? Analysts reports on geothermal companies have been around for years- I’ve mentioned them here several times.
Parkinson’s fantasy projects far into the future. He quotes the Grattan report:
“It is possible that none of the technologies can produce power at a scale and at costs similar to today’s electricity,” the report states, rather controversially. “Wind and solar PV may well become commercial if carbon prices rise to foreseeable levels over the next 20 to 30 years. ”
This assumes that the anthropogenic global warming hypothesis survives. It is by no means discredited yet, but the war-room in the University of East Bumcrack is sweaty and desperate. They are busy constructing defensive hypotheses to explain the plateauing of global temps. Failure for them means exactly the same fate they have meted out to all dissenters: ridicule, ostracism and career implosion.
Already, the postponement of Armageddon is having political effects, though no one wants to talk about it. The spectacular collapse of Flannery’s “no more rain” predictions is a case in point. Voters are wary now of extreme predictions.
But the dumbest assumption of the Parkinson/Grattan worldview is that carbon prices will rise steeply in the next few decades. US gas prices have collapsed- due to glut. Shale oil is coming. No one knows what energy efficiences will appear in the near future. But you can be sure the entrenched fossil fuel producers will keep their huge comparative advantage over the pathetic competition- seriously expensive wind turbines which fail to deliver, miniscule and even more expensive solar, etc. All Parkinson can do is to hope that solar PV costs will dramatically fall- but the Grattan report is right- current renewables will never be more than a fat parasite on the back of baseload fossil fuel. Until there’s a game changer.
And why is the crisis of debt capitalism ignored? Do you think Europe, the home of climate millenarianism, will be in any condition to indulge renewables in the future? Everywhere you look, the rollback is on: subsidies removed (eg Spain), policies reversed (Canada), banal Gillard boasting that “coal has a fantastic future’; Vestas (biggest wind turbine co) crumbling…
The massive waste of capital on ‘renewables’ seen in Germany, Spain etc depended entirely on the spurious prosperity of debt capitalism. The systematic lying about the efficacy of wind and solar is unravelling, and climate millenarianism is in sharp decline. People also now realise the class bias and indulgence which drives this phony “investment” (“job-rich”? Rubbish. Current renewables invariably cause net job loss, economy-wide). Anti-capitalist anger is patently growing. Renewables are a political gesture of the urban middle class- paid for by others. Their shit is about to hit your fan.
I would posit that the crisis of debt-capitalism is being ignored because the powers that be have so much at stake in how the current system is set up.
Change is hard.
It’s hard in finance, hard in energy production.
I’ll readily agree that over-hyped doomsaying is not helping public perception of a climate problem, or lack of one.
But that’s the Public for you: attention-span measured in days or maybe years, as opposed to the timespan of decades or centuries. AGW has not been conclusively proven to be taking place, but by the time it has been proven or disproven, it will be well beyond our control!
That point may have already been reached.
I do not consider this an argument to abandon renewable-energy R&D or its deployment.
That the R&D was chronically underfunded in the past, or that over-subsidised and premature deployment of renewable energy infrastructure occurred, does not for me equate to a requirement to stop putting effort into that field.
To me, not enough is made of the inherent advantages of renewables (at least in theory):
1. they don’t run out
2. they present an opportunity for independance from cartels like OPEC
3. properly designed infrastructure can last an extremely long time (one reason solar thermal seems a better long-term bet than PV, as one example)
The baseload generation problem seems pretty solve-able to me, theres plenty of ways to do it. What’s missing is the capital and development investment.
I’m more pessimistic than Mr Parkinson about that, mostly because societies seem content to let their way of life be dictated to them by organisations with nothing but a profit motive.
Brisbane Jim: “I do not consider this an argument to abandon renewable-energy R&D or its deployment.”
Two separate arguments. Renewables R and D has been neglected for decades.
Deployment of bogus or inefficient technologies is the last thing we need: (i) it misdirects scarce capital away from R and D. (ii) undermines political support for renewables R and D – because renewables are tainted by their current manifestations which are too expensive, over-hyped, class-discriminatory etc. (iii) The stench of rorts, corruption and systematic lying (“this windfarm will power 100,000 houses”) hangs over the entire phony “industry”.
Brissie Jim & Frank;
Whilst a good dose of sceptism is a healthy part of our lives I have failed over many years to find a credible paper that debunks the threat of GHG impacts on the planets climate systems. In fact phycisists have identified the problems of our over emissions of CO2 prior to the First World War.
Innumerable Uni studies have confirmed the prognosis over the last fifty years. In fact a report on Nuclear Electricity Production presented to Eisenhower on his assumption of the US Presidency actually informed and recommended he invest in R & D in Photo Voltaics.
The mounting evidence of the rapid retreat of artic ice and changes in weather events are manifestations of what most of the studies have projected.
The contrarian and sceptical views are never supported by careful debunking of facts. Those that have had some genuine sceptism such as Bjorg and Mueller have radically retreated from their previously stated positions.
Monkton and Plimer have only a self interested Rineharted funded megaphone. Neither have any scientific credibility.
The Canada sceptics are driven by the tar sands industry whilst the US debate is funded and driven by the Fossil Fuel industries like the Koch Bros.
Given that the past 200 years of industrial and social development has been built on a cheap enegy source such as coal and oil it is natural to assume there will be added expenses in maintaining our lifestyles if we are to remedy the problems that our reliance on fossil fuels present. The realty, that by using the hydrogen locked in fossil fuel and releasing without account the carbon, is proving to be false and misguided economics. It may have taken two hundred years to accumulate the imbalances in GHGs but they are a fact and their manifestations are what our scientists are warning us about.
If we accept, as human beings, and the responsibility of being the senior predator, that we do owe the next generation the right to enjoy the developments we enjoy, then we should attend to the problem as our best science informs us.