Scott Morrison’s $1bn clean energy bet

The Clean Energy Finance ­Corporation gets a $1bn turbocharge for next-generation electricity.

Prime Minister Scott Morrison in Sydney on Monday. Picture: AAP

An extra $1bn will be pumped into the Clean Energy Finance ­Corporation to turbocharge development of next-generation electricity production and upgrade the transmission network to future-proof the grid and drive down prices.

The first new capital provided to the CEFC since it was established in 2012 will seek to unlock private sector investment by backing pumped hydro, battery and gas projects, and upgrades of storage and transmission infrastructure.

The Australian understands the funding boost, which cannot be used for new or upgraded coal-fired projects, was approved after the government identified a lack of investment in dispatchable generation and the need to combat ­future energy pressures.

Scott Morrison said he had an “eye to the future” in backing new energy infrastructure through the Grid Reliability Fund, which will not divert from the CEFC’s existing $10bn allocation for clean ­energy projects. The CEFC will administer the fund with an ­expectation that investments made under it will make a return.

We continue to be at the forefront of new investment across a range of activities to drive down #emissions Australia-wide. https://t.co/Reo2QI471v pic.twitter.com/Psxcvh0TRk

— CEFC (@CEFCAus) October 29, 2019

“This is yet another initiative by our government taking more action to bring power prices down and keep the lights on,” the Prime Minister said.

“We’re delivering immediate relief through our new price safety net and banning sneaky late payment fees but we’ve also got our eye to the future with the projects this new fund will back. Our work to date and this new initiative will help deliver an energy system that isn’t a roadblock to businesses growing and employing more people and that isn’t stinging ­family hip-pockets”.

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Energy Minister Angus Taylor said “sufficient reliable generation capacity” was critical in responding to high-demand periods, which are expected to put pressure on the Victorian and NSW grids as coal-fired power stations are phased out. “The Grid Reliability Fund builds on our strong action to stabilise the grid and get the ­energy generation balance right, to deliver affordable, 24/7 reliable power,” Mr Taylor said.

“It is no secret that the national electricity market is under ­pressure. This fund is designed to tackle that and is part of a suite of initiatives that the government is delivering to ensure when people flick the switch, the lights come on and stay on.”

Eligible investments include energy storage projects, incorporating pumped hydro and batteries, transmission and distribution infrastructure, grid-stabilising technologies and projects short-listed under the government’s Underwriting New Generation Investments program.

Minister for Energy and Emissions Reduction Angus Taylor listens as Prime Minister Scott Morrison speaks to media earlier this week. Picture: AAP

Of the 12 proposals, all but one are renewable pumped hydro and gas projects in Victoria, NSW, South Australia, Tasmania and Queensland. The sole coal project is an upgrade of Delta’s operations in Lake Macquarie, NSW.

CEFC chairman Steven Skala backed the government’s “significant initiative” to create the Grid Reliability Fund. Since the CEFC was established and began investing in 2013, its total commitments total $7.2bn across more than 140 projects.

“Investment in new generation, storage, transmission and infrastructure is critical to support the security and reliability of the grid,” Mr Skala said.

“Meeting these engineering and economic challenges is ­essential in managing Australia’s orderly transition to a clean ­energy future.”

Finance Minister Mathias Cormann said the government, which has a $70/MWh price target through its “A Fair Deal on Energy” policy, would update the CEFC enabling legislation to ensure the fund could “support suitable projects”.

Minister for Finance Matthias Cormann. Picture: AAP

The fund, which provides a concessional finance facility, will prioritise investments in states and territories where governments work with the commonwealth towards an agreed reliability goal and aim to relieve pressure on the national electricity market.

The Coalition’s $1bn funding boost comes as Anthony Albanese declares “Labor wants to lead a clean energy revolution”.

“In the century that’s before us, the nations that will transform into manufacturing powerhouses are those that can harness the cheapest renewable energy resources,” the Opposition Leader said on Tuesday. “Australia can be the land of cheap and endless ­energy, energy that could power generations of metal manufacturing and other energy-intensive manufacturing industries.”

On Monday, the government announced it would underwrite an upgrade of the Queensland-NSW interconnector in a joint $102m commitment with the Berejiklian government. The underwriting of the project, assisting TransGrid in fast-tracking early works ahead of final approval by the Australian Energy Regulator, is aimed at increasing competition between generators and driving down wholesale energy prices.

Keeping the lights on & keeping power prices down. That’s why together with the NSW Government we’ll jointly underwrite up to $102m of the NSW-Qld Interconnector upgrade to access more reliable power generation from Qld to ensure the security of electricity in NSW. pic.twitter.com/yJWxqd0Vv4

— Scott Morrison (@ScottMorrisonMP) October 28, 2019

In August, the Australian Energy Market Operator released its Electricity Statement of Opportunities report highlighting reliability challenges facing the national market. It said Victoria was not expected to meet the market’s reliability standard over summer, putting households and business at risk of blackouts.

Mr Taylor said the report showed that without the procurement of up to 560MW of emergency reserves, 1.3 million Victorian households might be without power for up to four hours.

The AEMO report noted there was an issue with new variable renewable energy projects not generating at full capacity during peak demand times, or being positioned in congested parts of the network.

It also warned of a risk to consumers following the 2023 closure of the Liddell coal-fired power ­station in the Hunter Valley.

Chief Executive Officer of the Minerals Council of Australia Tania Constable welcomed the move, telling The Australian she supported lower emissions power for business and households.

“Minerals such as iron ore, cobalt, copper, lithium, aluminium and rare earths are at the forefront of low emissions energy and Australians can look forward to strong growth in these industries for a power hungry world,” she said. “The government should advance all forms of power generation that reduce emissions.”