Technology innovation is the key to cleaning up our energy supply. At a conference in Melbourne recently, Bryan Hannegan from America’s Electric Power Research Institute said that every dollar invested in new clean energy technology today will pay off 40 or 50 times in the decades to come. If we have the technology at a cost-effective price then much of the current debate becomes irrelevant.
In Australia, the federal government is proposing that a $10 billion Clean Energy Finance Corporation (CEFC) will be the circuit breaker to unleash home grown innovation in power generation, as well as a smarter and cleaner electricity grid. Viewed as part of the big picture, this investment is an insurance policy with no regrets. But it has already generated a healthy political debate and press releases at 20 paces. Its critics accuse the CEFC of being a magnet for shonks before it is even up and running. Which is a shame, because it is a game-changing idea that hasn’t yet been designed in any detail.
The CEFC will use carbon price revenue collected from the country’s biggest polluters and invest it back into clean energy. The CEFC will operate like a bank, run by an independent board of finance professionals. This independence is critical, as it keeps it at arm’s length from the political decisions of the day.
The UK’s conservative government is in the process of implementing a similar scheme, and countries like Germany and France have already introduced state-backed green investment banks of their own. This isn’t so much a case of test piloting a new multi-billion dollar concept to see if it flies, but building on the experience of other countries which have been there before us.
But the clean energy sector believes this new institution must be very carefully designed. The Coalition’s suspicion is not unreasonable. Taxpayers don’t want a series of publicly funded “white elephants” that seemed like a good idea at the time. They don’t want a waste of funding, or hand-outs to fly-by-nighters. What we are aiming for is an effective institution that will position Australia as an innovation leader and speed us towards a low-carbon economy.
In some ways, the CEFC taps in to the direct action approach of the Coalition. Direct action, by definition, means public money will be used to fund specific initiatives, whether it's a million solar panels on rooftops, carbon soil sequestration or investment in innovation. The difference is that the CEFC will loan the money and, if it gets it right, make a handy profit when the technology proves to be a runaway success. And whether the Coalition’s future energy policy is designed to promote renewable energy, carbon capture and storage or another new technology, they all face a tough time getting to market.
Investing in any new technology is risky. The risk needs to be spread across a portfolio of investments, and safeguards provided to help to unlock other sources of capital. You also must find a safe pair of hands to catch the ball and, in this case, those hands belong to Reserve Bank board member Jillian Broadbent. Broadbent has been announced as the Chair of an advisory committee that will help to design the way the CEFC works. She has also served on the boards of Woolworths, Woodside Petroleum and Qantas.
Over the coming months we need a mature debate with innovative thinkers from all sides of politics to ensure that the Clean Energy Finance Corporation does what it says on the label.
If it is designed poorly, waste is inevitable. Designed well, the future is at our fingertips.
Kane Thornton is director of strategy and operations at the Clean Energy Council