Clean Energy Finance Corporation

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Clean Energy Finance Corporation
IndustryClean Energy Investment
Headquarters
Headquartered in Sydney, with offices in Brisbane, Melbourne and Perth
,
Australia
Key people
CEO Ian Learmonth
Chair Steven Skala AO
OwnerCommonwealth of Australia
Websitewww.cefc.com.au

The Clean Energy Finance Corporation (CEFC) is an Australian Government-owned Green Bank that was established to facilitate increased flows of finance into the clean energy sector. In its 2018-19 Annual Report, the CEFC said it was operating with a "unique role as a catalyst for change. We invest to lead the market, putting our capital to work in new areas, building investor confidence and accelerating solutions to difficult problems."

The CEFC is responsible for investing $10 billion in clean energy projects on behalf of the Australian Government. Its mission is to help lower Australia's carbon emissions by investing in renewable energy, energy efficiency and low emissions technologies across the economy, via a range of finance options.[1] The CEFC also supports innovative start-up companies through the Clean Energy Innovation Fund.[2] Across its portfolio, the CEFC invests to deliver a positive return for taxpayers.

The CEFC is governed by an independent board[3] which has a statutory responsibility for decision-making, performance of the Corporation's functions and managing the CEFC's investments, and a Chief Executive Officer who is responsible for the day-to-day administration of the Corporation. A system of delegations exist to aid in the performance of these functions. The Board reports to Parliament through its Responsible Ministers.

The CEFC's investment objectives are to catalyse and leverage an increased flow of funds for the commercialisation and deployment of Australian-based renewable energy, energy efficiency and low-emissions technologies. The CEFC achieves its objectives through the prudent application of capital, in adherence with its risk management framework, its Investment Mandate and the investment policies[4] issued by the CEFC Board.

Objective and functions[edit]

The CEFC invests in accordance with its legislation, the Clean Energy Finance Corporation Act 2012 (CEFC Act) [5] and the prevailing Investment Mandate. The CEFC is a corporate Commonwealth entity under the Public Governance, Performance and Accountability Act 2013 (PGPA Act).[6] The CEFC has access to funding of $10 billion comprising annual appropriations to the CEFC Special Account of $2 billion every 1 July from 2013 to 2017 inclusive, in accordance with section 46 of the CEFC Act. The CEFC draws on this finance on an as needs basis, with non-committed funds remaining in the Special Account until required. The object of the CEFC is specified in section 3 of the CEFC Act as being 'to facilitate financial flows into the clean energy sector'. The main function of the CEFC is the 'investment function' (as specified in section 9 and subsection 58(1) of the CEFC Act), to invest, directly and indirectly, in renewable and low carbon technologies. Section 9 also specifies a number of support functions such as:

  • liaison with relevant individuals, businesses and agencies to facilitate the investment function
  • to perform any other functions conferred by the CEFC Act or any other Commonwealth law
  • to do anything incidental or conducive to the performance of the investment function or the other functions.

Decarbonisation strategy[edit]

The CEFC has stated that the pathway to lower emissions requires sustained investment and action across all areas of economic activity. It pursues investment opportunities around (1) low carbon electricity, (through the increased deployment of clean energy technologies, including storage and energy infrastructure that deliver clean, reliable and secure energy); (2) electrification and fuel switching (from fossil fuels to lower emissions alternatives in infrastructure and transport, including electrifying industrial processes, and adopting electric vehicles and switching to lower emissions fuel sources such as biofuels); (3) ambitious energy efficiency (delivered Australia-wide, to substantially lower energy intensity and improve energy productivity) and (4) bio-sequestration and non-energy emissions reduction (including through recycling and reducing the volume of waste going to landfill, along with adopting lower emissions practices across the economy).

Governance[edit]

Responsible ministers[edit]

Under section 4 of the CEFC Act, the Responsible Ministers are the Minister for Energy and Emissions Reduction and the Minister for Finance. The Nominated Minister is one of the Responsible Ministers who exercises additional powers and functions under the CEFC Act. Subsection 76(1) of the CEFC Act provides that the Responsible Ministers determine between them which is to be nominated.

CEFC Board operations[edit]

The CEFC Board Charter details the Board’s role and responsibilities and its relationship with Management. The Audit and Risk Committee and the People and Culture Committee arethe two standing Board Committees which assist the Board in its oversight role. The charters for the three Board Committee detail the leadership, composition and responsibilities of each Committee and how they exercise their authority.

The CEFC is a statutory authority established by the Australian Government under the Clean Energy Finance Corporation Act 2012. Under the Public Governance, Performance and Accountability Act (PGPA Act), the CEFC is known as a corporate Commonwealth entity. The CEFC Act:

  • Creates the CEFC Special Account, a Special Account under the PGPA Act which is credited with $2 billion each 1 July, for five years from 1 July 2013, to enable the CEFC to invest in the clean energy sector
  • Provides the CEFC Board with statutory responsibility for decision-making and managing the CEFC's investments. The Board operates and makes its investment decisions independently of government, based on rigorous commercial assessments
  • Provides for the appointment of the CEFC Chief Executive Officer, who is responsible for the day-to-day administration of the CEFC, subject to (and in accordance with the policies determined by) the Board
  • Requires investments by the CEFC to be "complying investments" as defined in Section 59 (2).

The CEFC publishes quarterly reports on its website regarding investment commitments.[7]

Investments[edit]

Investment mandate[edit]

An Investment Mandate direction [1] is the means by which the Government of the day provides instruction as to how the Corporation can make investments, providing it:

  • does not have a purpose of directing the Corporation to require the corporation to make or not make a particular investment and
  • is not inconsistent with the Act, (including the object of the Act).

Under the CEFC Act, the CEFC Board must be consulted on the draft of a proposed new mandate, and any submission made by the Board must be tabled in the Parliament. [2]

Investment performance[edit]

In an update on performance highlights since it began investing to June 30 2019, the CEFC noted:

  • Deployment of more than $5 billion to investments and projects around Australia since it began investing, including $1.3 billion in 2018-19.
  • $718 million in CEFC capital repaid or returned since inception, including a record $321 million in 2018-19, underscoring the CEFC’s ability to earn a positive return on our investments and reinvest on behalf of taxpayers.
  • Since inception, CEFC investments had helped drive more than $24 billion in additional private sector investment commitments Australia-wide, including $6.3 billion in 2018-19.
  • Lifetime CEFC commitments at 30 June 2019 stood at $6.2 billion (excluding revocable commitments, repayments and cancellations on total commitments of almost $7.2 billion since inception)
  • The CEFC had delivered nearly $1.1 billion in finance for more than 11,300 smaller-scale projects since inception, including $400 million in 2018-19, with an average investment of $95,000.
  • Each dollar of CEFC finance committed in 2018-19 was matched by more than $3 from the private sector, and $2:$1 over the CEFC’s lifetime.
  • CEFC investments were aiming to reduce Australia’s greenhouse gas emissions by an estimated 260 million tonnes of CO2-e over their lifetime.

Clean Energy Innovation Fund[edit]

The Clean Energy Innovation Fund is a specialist financier, with access to $200 million in capital to invest in early stage innovative clean energy companies. It focuses on technologies and businesses that have passed beyond the research and development stage and which can benefit from early stage seed or growth capital to help them progress to the next stage of their development. To 30 June 2019.[8], the CEFC reported that the Innovation Fund had made investments commitments of more than $69 million. with new CEFC commitments in the 2018-19 achieving leverage of $8 for each $1 of CEFC finance committed. Operating with the assistance of ARENA, the Innovation Fund made six investments in 2018-19, adding two companies to its portfolio (Omni Tanker and Morse Micro) and extending its commitment to four existing portfolio companies (Relectrify, Redback Technologies, Carbon Revolution and Zen Ecosystems). The CEFC said the investments demonstrate the potential of Australian innovators to lead Australia's transition to a low carbon economy, helping to lower carbon emissions and to deliver on the benefits of clean energy. They also demonstrated the potential for innovative companies to capitalise on the new business opportunities emerging from Australia's clean energy transition.

History[edit]

The CEFC was established under the Clean Energy Finance Corporation Act 2012, passed by the Parliament of Australia on 22 July 2012.[9] It was established on 3 August 2012[10] and commenced making investment commitments from 1 July 2013.

In December 2018, an independent statutory review of the CEFC Act found that the CEFC had facilitated the flows of finance into the clean energy sector, with CEFC’s investments successfully enabling projects that would not have otherwise proceeded, attracting substantial private co-investment to projects. The statutory review[11] was conducted by Deloitte and tabled in Parliament on 14 December 2018. The CEFC submission to the Statutory Review of the Corporation is also publicly available.[12]

On 5 August 2013 the federal Coalition Opposition led by Tony Abbott wrote to the CEFC asking it to stop making new loans and to cease assessing new projects.[13] After the 2013 federal election, on 5 December 2013, then CEFC Chair Jillian Broadbent said on ABC Radio National that the government should "break an election promise" and keep the CEFC in operation, citing a 7% profit. Coalition Senator Arthur Sinodinos said that if it's making a profit, it should survive without the government and essentially confirmed the government would shut the corporation down.[14] Legislation to abolish the CEFC and transfer the CEFC's existing assets and liabilities to the Commonwealth was put before Parliament but blocked by non-government senators in the Senate. In July 2015, Abbott announced he would ban the CEFC from investing in wind power[15] and rooftop solar.[16] On 13 July 2015, the CEFC said it was taking advice in relation to the draft Mandate.[17]

In December 2015, Fairfax media reported that Prime Minister Malcolm Turnbull had lifted the ban on CEFC investment in wind power, in his first major break from the former regime's environmental policy.[18] The Guardian reported on 24 December 2015 that the CEFC had been directed to focus on innovative and emerging technologies, reversing a mandate by the former prime minister Tony Abbott that would have specifically blocked funding for windfarms and small-scale solar projects.[19]

Then CEFC Chair Jillian Broadbent AO canvassed the CEFC's role in the energy sector in a March 2017 discussion on "Australia's Energy Future: Achieving the goals of energy security, sustainability and affordability." In her comments, Broadbent said: "Australia's energy mix can incorporate higher levels of clean energy with strengthened transmission, better demand management systems and increased storage capacity. These need to be planned and co-ordinated."

These matters were explored further in the CEFC's submission to the Independent Review into the Future Security of the National Electricity Market - commonly referred to as the Finkel Review. The CEFC said the March 2017 submission drew on its experience as a specialist clean energy investor to frame out a number of areas that would benefit from reform, including: Market design to support security and reliability; technology to transform the electricity sector and barriers to investment.

Under section 81 of the CEFC Act, an independent statutory review of the operation of the Act was required to have been arranged to occur as soon as practicable after 1 July 2016. This Review was conducted by Deloitte. The resulting report was tabled in Parliament on 14 December 2018.

Notably, the Review found that, since inception in 2012, the CEFC has been effective in facilitating increased flows of finance into a range of clean energy projects across a number of sectors, using different financial products, and consistent with its legislated objective. It also found there is evidence to support a finding that in the absence of the CEFC, a range of projects the Corporation supported may not have proceeded and that the CEFC plays a leading role in developing debt and equity markets for clean energy investments in Australia.

Mr Ian Learmonth was appointed CEO in March 2017 [20] In August 2017 Mr Steven Skala AO was appointed CEO Chair. [21] Mr Skala described the CEFC’s performance in its first six years reflected its ability to independently implement Australian Government directions, supported by its pillars of good governance, responsible client selection and considered risk management.[22]

In August 2019, Australian Prime Minister Scott Morrison was reported in The Australian newspaper[23] as saying that: “The fact Australia leads the world in per capita investment in clean energy, we have the world’s most successful green bank in the Clean Energy Finance Corporation and that we’re on track to have around a quarter of our electricity needs met by renewables by 2020, all underscores the work underway to reduce our global emissions.”

See also[edit]

References[edit]

  1. ^ "Where we invest - Clean Energy Finance Corporation (CEFC)". www.cefc.com.au. Retrieved 2 July 2018.
  2. ^ "Innovation Fund - Clean Energy Finance Corporation (CEFC)". www.cefc.com.au. Retrieved 2 July 2018.
  3. ^ https://www.cefc.com.au/about-us/our-board/
  4. ^ https://www.cefc.com.au/about-us/investment-policies/
  5. ^ http://www6.austlii.edu.au/cgi-bin/viewdb/au/legis/cth/num_act/cefca2012297/
  6. ^ https://www.legislation.gov.au/Details/C2017C00269
  7. ^ https://www.cefchttps://www.cefc.com.au/market-insights/statutory-reports/quarterly-reports/
  8. ^ https://annualreport2019.cefc.com.au/performance/cleantech-innovation/
  9. ^ "Clean Energy Finance Corporation Bill 2012". Parliament of Australia. Commonwealth of Australia. 16 August 2012. Retrieved 19 May 2013.
  10. ^ "The CEFC and Government - Enabling legislation". Cleanenergyfinancecorp.com.au. Retrieved 30 July 2016.
  11. ^ https://www.cefc.com.au/media/402001/cefc-statutory-review-deloitte-october-2018.pdf
  12. ^ https://www.cefc.com.au/media/files/cefc-welcomes-publication-of-the-independent-statutory-review-of-its-operations/
  13. ^ Abbott, Tony. "Coalition Leader's Letter to CEFC 5 Aug 2013" (PDF). Leader of the Opposition. Retrieved 6 August 2013.
  14. ^ Bourne, James. "CEFC fights for its life". Australian Broadcasting Corporation. Retrieved 7 December 2013.
  15. ^ Adam Gartell (11 July 2015). "Tony Abbott has escalated his war on wind power". Sydney Morning Herald.
  16. ^ "Government pulls the plug on household solar". Sydney Morning Herald. 13 July 2015.
  17. ^ "Statement from the CEFC". Cleanenergyfinancecorp.com.au. 13 July 2015. Retrieved 30 July 2016.
  18. ^ Federal Politics (13 December 2015). "Malcolm Turnbull has lifted Tony Abbott's wind power investment ban". Theage.com.au. Retrieved 30 July 2016.
  19. ^ The Guardian, 24 December 2015: New clean energy investment mandate a shift from policy proposed by Abbott
  20. ^ https://www.cefc.com.au/media/files/cefc-board-appoints-ian-learmonth-as-new-chief-executive-officer-replacing-oliver-yates.aspx
  21. ^ https://www.cefc.com.au/media/296276/minister-cormann-minister-frydenberg-media-release-cefc-appointments.pdf
  22. ^ "From our Chair - CEFC Annual Report 2019". annualreport2019.cefc.com.au. Retrieved 24 October 2019.
  23. ^ https://www.theaustralian.com.au/nation/politics/morrison-to-give-500m-in-climate-change-funds-to-pacific/news-story/9624cd0d62301bc2c8b4a0f68bfd7492?btr=51b498c820d4e084dd7c7bcc6fd3622d

External links[edit]