Plans by Scott Morrison and Angus Taylor to deliver power plants across the nation are in disarray: the $1 billion Grid Reliability Fund has not materialised, green bank investment has shuddered to a halt and the $300 million fund at the heart of the National Hydrogen Strategy has vanished. This is Part III of an investigation into the Clean Energy Finance Corporation. Anthony Klan reports.
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The Federal Government’s plans to have the Clean Energy Finance Corporation deliver its national energy policy are in tatters. Serious question marks hang over deals worth $1.3 billion, including the fund at the centre of Australia’s National Hydrogen Strategy.
Both the $1bn Grid Reliability Fund announced in October – that the Coalition boasted was “the first new capital provided to the CEFC since its inception” – and the $300m Advancing Hydrogen Fund, announced weeks later, have failed to materialise.
We can also reveal the Federal Government quietly issued the $10bn green bank with a new investment mandate in the days before Christmas – but it contains not one mention about those two supposed mega-funds.
Our analysis of the CEFC’s quarterly investment reports shows the green investment giant’s rate of investments has fallen off a cliff, plunging by about 40 per cent in the six months to December.
In the first half of this financial year, the CEFC made investments totalling $578m, well down both on the $887m it made in the six months prior, and its investments over the past three years, which have averaged $960m each half.
The collapse in investments comes despite the pressing and well-publicised need for the CEFC to invest in “dispatchables”, such as pumped-hydro and battery storage, to underpin grid reliability to handle the influx of solar and wind farms – and the green bank supposedly spearheading the nation’s push to become a “world leader in hydrogen exports”.
Hydrogen hustle
At the heart of the problem is that the Coalition is heavily pressuring the CEFC to invest in fossil fuel technologies such as gas power plants, and hydrogen made from coal and gas (as opposed to “green” hydrogen produced from water and sunshine) – investments for which the green bank was never intended.
On November 23, days before the Council of Australian Governments (COAG) Energy Council was to vote on whether to adopt the new National Hydrogen Strategy, Energy and Emissions Minister Angus Taylor announced a new $300m Advancing Hydrogen Fund had been set up and it would be operated by the CEFC.
“Australia will become a world leader in hydrogen production and exports thanks to a new fund set up by the Government,” Taylor’s statement said.
But not only did the fund not exist then – or now, three months later – but the Advancing Hydrogen Fund was never actually approved or agreed to by the CEFC.
Further, the green bank has steadfastly refused to even acknowledge having anything to do with Taylor’s hydrogen fund when approached by this journalist.
A reading of the 2012 CEFC Act had sparked our interest.
Taylor’s November 23 announcement says the Federal Government would “reserve” the $300m from the CEFC’s “existing funding” to create the Advancing Hydrogen Fund.
But the CEFC has only ever been allocated funding of the initial $10bn – and under the Act the Federal Government is legally bound to provide this money to the CEFC whenever it requires it, provided the normal protocols are met.
The Coalition can’t “reserve” or hold back any of the CEFC’s $10bn funding.
Vanishing act
Further searches showed the CEFC has never made a single statement – or said a single word publicly – about the supposed Advancing Hydrogen Fund, despite Taylor, Finance Minister Mathias Cormann and Matt Canavan, then Resources Minister, announcing it as a done deal back in November.
Yet when we took all this to the CEFC (which has public disclosure obligations and has previously provided us with lengthy responses to questions posed during this investigation) the green bank outright refused to discuss the Coalition’s hydrogen fund at all, or even to confirm that the thing was legitimate.
“The minister is best placed to answer these questions, please contact his office,” CEFC spokeswoman Rebecca Rose responded by email.
When we pointed out we already had the government’s position (from all its public statements), and that we were simply seeking confirmation as to whether or not this deal actually existed, we were again fobbed off and told to contact Taylor’s office.
We asked Taylor’s office whether the CEFC had made any commitments whatsoever to be involved in the hydrogen fund – and if so what they were.
“The government is currently working with the CEFC on an amendment to the Investment Mandate to establish the $300 million Advancing Hydrogen Fund”, spokesman Liam O’Neil responded in a statement.
That statement confirms no fund has been created – and no commitments have been made.
![](https://theklaxon.com.au/wp-content/uploads/2020/02/Screen-Shot-2022-07-19-at-12.33.44-pm-1.jpg)
News reports about the $300m hydrogen fund that doesn’t exist and the CEFC won’t acknowledge
Silent mandate
On December 15 the Coalition issued a press release announcing a $100m Australian Recycling Fund had been set up, which would “support recycling or recycled content projects utilising clean energy technologies”.
That came a week after the government was attacked by the ALP, over its failure to have established the fund, a promise made before the May federal election.
Although it appears to have been largely overlooked by other media to date, the creation of that fund actually involved issuing the CEFC with an entirely new investment mandate, its sixth from the Coalition in just five years.
The Coalition’s statement made no reference to a new mandate being issued, or to the CEFC Act at all.
Meanwhile the CEFC only announced the recycling fund on its website two days later, and in a statement whose heading and blurb made zero reference to a new investment mandate – unlike the statements it has made each of the other six times it’s been issued with a new mandate. This new mandate was easy to miss.
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The CEFC’s announcement about its new mandate: different from the rest. Source: CEFC
Also missing was any reference to the $1 billion Grid Reliability Fund the Coalition announced four months ago, on October 31.
The Coalition said that new fund, to be part of the CEFC, would be used by the green bank to deliver the government’s Underwriting New Generation Investments (UNGI) program – its plan to deliver a string of new power plants, stating with a “short-listed” 12.
Despite the deal heralded as the first new funding for the CEFC since it was created under the ALP in 2012, not one cent of the promised $1bn has materialised.
Both the CEFC and Taylor’s office refused to comment when asked about the Grid Reliability Fund.
Mystery tour
The plan to use this new fund to marry the green bank to the UNGI program was on the nose from the outset.
The short-list is comprised of six pumped-hydro stations, but also five gas plants and a coal power station upgrade.
While the Department of Energy, shortly after the announcement was made, moved to quickly rule out the CEFC from being involved with the delivery of the coal-plant upgrade, having the CEFC deliver gas-power stations was also highly questionable.
Natural gas, despite its friendly moniker, is a fossil fuel.
Although it emits about 50 per cent to 60 per cent of the carbon of coal plants, gas plants are almost as environmentally damaging as coal plants.
This is because the main component of gas is methane, and when methane is released into the atmosphere without being burned, which happens to some degree during extraction and transportation (it’s the smell when you leave the stove on) it is about 20 times more harmful than carbon.
The problems facing the attempts by Taylor and the Coalition’s to have the CEFC deliver fossil fuel projects could be foreseen by a simple reading of the CEFC Act – in fact they have run into most of the same hurdles before, under leaders Tony Abbott and Malcolm Turnbull.
Homework
Under the Act, the CEFC is specifically prohibited from investing in nuclear or carbon capture and storage technologies.
It must invest in either “renewable technologies” (such as wind, solar and pumped-hydro), “energy efficiency technologies” (such as growing the market for low-emissions vehicles) or “low-emission technologies”.
Low-emission technologies is the only category where new power plants would be considered, the CEFC Board said in a detailed March 2018 submission it made to a senate inquiry amid the Coalition’s failed attempts to lift the CEFC’s carbon capture and storage ban.
The CEFC determines what constitutes a “low-emission technology”, and since it was created, it has defined that, when referring to power plants and electricity production, as a technology that delivers electricity while producing less than 50 per cent of the emissions of electricity already in the grid.
This rules out coal plants
Even with carbon capture and storage technology (which is banned under the Act regardless), they still produce substantially more than 50 per cent of the average emissions of existing technologies – an average which is constantly falling as more renewables come on line.
Stand-alone gas plants are also out, given their emissions are not far off coal plants (the 50 per cent threshold refers to carbon “or equivalents”, capturing the dangerous effects of methane).
It’s possible a small gas facility could be attached to a much bigger renewables project, but this is not what the government is proposing regarding the five gas plants on its short-list, starting with the proposed Dandenong and Gatton, Queensland plants which it said before Christmas would be the first on its short-list of 12 plants to go ahead.
Frydenberg flops
In 2017, Josh Frydenberg, then Environment Minister, announced the Coalition was considering changing the CEFC’s rules to allow it to fund new coal power plants.
He told the ABC he planned to do this by issuing the CEFC with a new mandate, which would require it to change its 50 per cent emissions threshold.
The rationale was that the CEFC Act states the CEFC board, when setting its guides for low-emissions technologies, those guidelines must not be inconsistent with the CEFC’s investment mandate.
But our close reading of the Act suggests that move failed, because the law refers to what the CEFC board must do when setting the guidelines.
The CEFC had already set the guidelines – in 2012 – and it apparently had no intention of changing them, or of giving in to the Coalition’s latest attacks.
With the exit of CEFC chief executive Oliver Yates, and most of the CEFC board, months later, concerns were raised that the new management, appointed by the Coalition, would buckle to its fossil fuels agenda.
However there is no evidence this has occurred, or, so far at least, any evidence to suggest that it’s about to.
In October last year Finance Minister Mathias Cormann indicated the Coalition planned to have another go at changing the CEFC Act, vaguely stating the CEFC’s “enabling legislation” would be updated.
Those chances were very slim to begin with – it’s tried and failed four times before – but after the summer of devastating bushfires, experts say the Coalition’s chances of watering down the CEFC legislation are now almost non-existent.
No guarantees
Beyond the emissions guidelines, the Act also makes clear that having the CEFC deliver the UNGI program was broken from the outset: a reading of the CEFC Act (as opposed to just the guidelines summary on the CEFC’s site) shows Canberra is expressly prohibited from directing the CEFC to make any specific individual investments whatsoever.
Section 65 of the Act says the government must not give the CEFC a direction “that has the purpose, or has or is likely to have the effect, or directly or indirectly requiring the Board to, or not to, make a specific direction”.
The legislators of the Act clearly foresaw the current scenario.
The Act also says open-ended guarantees – the heart of Taylor’s proposal for the gas plants under the UNGI program, are out of the question.
The Energy Minister’s plan is to have taxpayers agree to buy electricity from the new plants – “underwrite” them – regardless of how far electricity prices fell in the future due to more and more cheap renewables entering the grid.
The Act says any guarantees must be “limited and quantifiable”, and the CEFC’s investment mandate says guarantees pose a “particular risk to the Commonwealth’s balance sheet” and it “should seek to avoid their use wherever possible”.
In an ironic twist, the high returns benchmark the Coalition set for the CEFC in its attempts to kill it also means that gas plants component of the UNGI proposal is out.
Unlike many solar and wind farms, new coal and gas plants aren’t commercially viable.
The private sector won’t go near them – which is in part why the Coalition is trying to get taxpayers to underwrite them.
But the CEFC must still target returns of 3 per cent to 4 per cent above the government bond rate, a target the Coalition has stubbornly left unchanged since 2015, despite all the new mandates it has issued since.
H-bombs
While the CEFC has expressed interest, at least at some stage, in investing in “green” hydrogen – a wonder energy that can be easily transported and produces no by-products other than water, the Coalition is trying to force the CEFC use the supposed $300m Advancing Hydrogen Fund to instead invest in hydrogen produced using gas and coal – “blue” and “brown” hydrogen.
Proponents of hydrogen produced from fossil-fuels say emissions can be substantially reduced using carbon capture and storage technology – technology the CEFC is banned from investing in under the Act.
Green hydrogen is currently substantially more expensive to produce than fossil-fuels-based hydrogen, although experts predict prices will fall, and global body the Hydrogen Council recently published a report predicting they could halve by 2030.
Fossil fuels proponents including, Taylor and others in the Coalition, argue the fossil-fuels route is cheaper and can be started as soon as possible.
However experts argue that while Australia is well positioned to create a major, and very valuable, hydrogen exports industry, given its abundance of sunshine and wind, it risks squandering the opportunity by locking in the fossil fuels path.
They say that as the push for lower emissions continues, other countries will simply buy their hydrogen from other sources which are truly green.
Though either way, the CEFC must make investments that deliver a return – and that is far from certain under any type of hydrogen project, at least until the technology becomes more established and cheaper.
It appears Prime Minister Scott Morrison may have come to realise that his fossil fuel dreams for the CEFC are just that.
A man date
Three weeks ago, on January 31, the PM and NSW Premier Gladys Berejiklian announced Canberra and NSW entered into a “landmark agreement” in a “more than $2 billion deal” to “lower power prices for consumers, reduce emissions and strengthen grid reliability”.
And this time Taylor was nowhere to be seen.
Like other energy announcements from the Coalition, this too was extremely light on details.
The Federal Government would “utilise $960 million in federal funding” to support unspecified “NSW-based emissions reduction initiatives”.
In return this would be “matched by $1.01bn in direct funding from NSW” and NSW would agree to a “target” of producing “an additional 70 Petajoules of gas per year into the east coast market”.It just so happens that major Coalition donor Santos has a controversial gas project it’s been trying to get across the line in NSW for many years that if approved, can deliver large amounts of additional gas every year – 70 Petajoules a year to be precise.
Though, tellingly, despite all the Coalition’s recent cheerleading, nowhere in the entire January 31 statement is the CEFC mentioned once.
In fact, the final point raised it raises is the the “$2 billion” deal would also include “supporting new generation projects in NSW through the Federal Government’s $1bn Underwriting New Generation Investment program” – the UNGI program supposedly being rolled-out by the CEFC.
And on January 31 Morrison made clear he was now romancing the states, hard.
The deal represented the first of a “series of investments that the Commonwealth and the states are making together”.
Love, actually?
Unlike the very specific guidelines and rules governing CEFC investments, there is no set definition as to what constitutes a “NSW-based emissions reductions initiative”.
Neither are there any legislative restrictions around where the $1.01bn of taxpayer funds that NSW is kicking in under the latest proposal is actually spent.
It appears the Coalition has decided that without a compliant CEFC board, or any real chance of watering down the CEFC legislation, it will instead ramp up its plans to go it alone with the states in pursuit of its fossil fuels agenda.
Morrison’s January 31 outing with Berejiklian may well be remembered in the months and years to come as the day his CEFC love affair was sent to the gallows.
The marriage over before it began.
And just two weeks before Valentine’s Day.
This article first appeared at Michael West Media and is reproduced here with permission.
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