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Environment and Communications Legislation Committee
18/02/2019
Estimates
ENVIRONMENT AND ENERGY PORTFOLIO
Australian Renewable Energy Agency

Australian Renewable Energy Agency

[18:04]

CHAIR: Welcome, Mr Miller and colleagues. Mr Miller, do you have an opening statement?

Mr Miller : No. I don't.

CHAIR: Excellent. We'll go straight to questions.

Senator URQUHART: Are you aware of the government's Underwriting New Generation Investments program?

Mr Miller : Yes.

Senator URQUHART: Have you been consulted on the design of this program?

Mr Miller : No.

Senator URQUHART: Have you been advised that support through this program for new investment is expected to be delivered through ARENA?

Mr Miller : No.

Senator URQUHART: Under the act for ARENA, is it possible for the minister to direct ARENA to make specific investments in projects, including the size and conditions of grants provided?

Mr Miller : No.

Senator URQUHART: So in order to be part of the implementation of the government's underwriting program, does that mean that there needs to be a change in the ARENA act?

Mr Miller : I couldn't comment as to what would be required to change for ARENA to be directed to participate in that program.

Senator URQUHART: But it would be necessary to change the act?

Mr Miller : I presume so, yes. Under the current act, we wouldn't be doing that.

Senator URQUHART: Is ARENA aware of any work being undertaken to amend the act for that purpose?

Mr Miller : No. I'm not aware of anything.

Senator URQUHART: That's all I have.

Senator HANSON-YOUNG: Mr Miller, just to be clear, how much uncommitted money do you have left?

Mr Miller : We have $378.6 million of funds available as at 31 January.

Senator HANSON-YOUNG: ARENA was originally created with $3.2 billion. The Gillard government pushed back $370 million to 2022. The Abbott government cut your funding by $435 million in 2014. The Turnbull government, with Labor's support, cut a further half a billion dollars at the beginning of this parliament. So in total your budget was around $2 billion.

Mr Miller : I think the number is $2.1 billion.

Senator HANSON-YOUNG: It is $2.1 billion?

Mr Miller : Correct.

Senator HANSON-YOUNG: When you do expect all of your remaining money—that is, what you've just given to us from 31 January—to be committed?

Mr Miller : There is a range of possibilities depending on how fast projects come to us and what the qualities of the projects is like. Our internal thinking is that we'll be fully committed within the next, say, 12 to 18 months, or in that range of time.

Senator HANSON-YOUNG: Is it fair to say that you've run out of funding two years ahead of schedule because of those cuts?

Mr Miller : No. That wouldn't be accurate. What is missed in that analysis is that the time we commit funding to a project to the time that funds are actually expended can often be two years, on average. So we made the judgement and did our projections based on being fully committed at least two years ahead of our final date, which is, as you know, 30 June 2022. So business necessity dictates that we phase our commitments versus the actual funds expenditure in a way that allows us to deliver on those commitments.

Senator HANSON-YOUNG: Are you still banking at any point on the $370 million that the Gillard government had pushed out to 2022?

Mr Miller : I'm not familiar with the specifics of the movements of funds over the 6½ years of ARENA's life. Suffice it to say that the act specifically indicates what our budget is in any year. To the extent that we don't spend the budget, it carries over to the following year. We currently have a carryover in that we haven't spent our cumulative budget number yet. But all indications are that we will commit all of those funds, as I said, within the next 12 to 18 months.

Senator HANSON-YOUNG: The alternative government's policy is for you to redirect $100 million to hydrogen development. How are you able to do that within the current budget?

Mr Miller : Without turning my mind or commenting on politics or speculating, what I can say is that we have in our current priority set a desire and a market indication that hydrogen research and development and deployment will be part of what we do. In fact, we have spent a fair amount of money on hydrogen. We do have hydrogen projects in our pipeline. As to whether they would ultimately add to up $100 million from here to our final date, I couldn't speculate. It's too early to tell.

Senator HANSON-YOUNG: Thank you, Mr Miller. Just to confirm, after that 12- to 18-month period down the track that you've referred to—I just want to be clear—does that mean you would not be able to make any more commitments?

Mr Miller : In general, that's a true statement. There may be occasions where projects we've committed to don't go ahead or where funds that we've committed and paid come back to us through a recoupable grant mechanism, in which case we would have additional funds. There may be a small number of projects that we would likely commit to in that remaining two years, but they would be quite small and they would be short-time-frame projects just given the limitations of needing to spend the cash on the projects before June 2022.

Senator HANSON-YOUNG: One of your roles is to bring down clean energy prices. With large-scale solar, ARENA has invested about half a billion dollars to create a price competitive industry. Would you agree with that as a statement?

Mr Miller : As a general statement, that's probably about the order of magnitude, all the way back from the solar flagships programs all the way through to the solar PV research we've funded as well as the large-scale solar round that we funded in 2016 or 2017. So roughly those numbers are right—half a billion dollars.

Senator HANSON-YOUNG: Have you been able to do any analysis as to what the economy-wide benefits have been in relation to your funding those projects and obviously bringing down the price of clean power?

Mr Miller : We haven't done a full economy-wide analysis, no.

Senator HANSON-YOUNG: Do you know anyone who has?

Mr Miller : No. Not off the top of my head, no.

Senator HANSON-YOUNG: How much do you require to be able to replicate the same thing with domestic and grid-scale storage? You've put a significant amount of effort into the solar projects. That's done a great deal to bring down power prices. I guess I'm wondering what we would need to fund in order to do the same with grid-scale storage and domestic storage.

Mr Miller : I'm not sure we have a fully costed out considered answer on that. My feeling would be that storage in particular—being batteries and pumped hydro—would probably be less than that. Certainly pumped hydro is a relatively well-known technology. It is about now finding the right sites, doing the studies and actually building some projects. So I wouldn't see a long-term role for ARENA in pumped hydro. Batteries are newer technology and need more support and need more help from ARENA to help figure out how to integrate and control and have those devices participate in the grid. I can't give you a specific number on what the total would be, but my feeling would be less than half a billion dollars from here.

Senator HANSON-YOUNG: I'm happy for you to take that on notice if you need to. If that were the case and you've got $378 million left in the kitty, and you've already committed to a number of projects, do we need more money in order to drive the storage revolution?

Mr Miller : Are you talking specifically about ARENA—

Senator HANSON-YOUNG: Yes.

Mr Miller : or across the economy? Well, I think it's hard to tell at this point in time. We're still developing our portfolio of battery and pumped hydro projects in particular. But I would like that our mandate is broader than just battery storage for the grid. We're interested in investigating and working right throughout the economy in renewable technologies.

Senator HANSON-YOUNG: Were you here when I was asking the CEFC whether they would be able to tip money into ARENA?

Mr Miller : I was catching bits of it in the other room.

Senator Birmingham: It caught your interest.

Mr Miller : Finely tuned, yes.

Senator HANSON-YOUNG: Have there been any conversations within ARENA about whether the CEFC could top up the fund considering we still need to do quite a bit to get storage at a grid scale and domestically in particular?

Mr Miller : We have had some informal discussions and nothing formal where we've decided to press the issue and investigate it in any depth. We are aware that part of our act and their act provides for that possibility. But we've not progressed a view on that or taken it very far at all.

Senator HANSON-YOUNG: You mentioned before that you were doing some work in relation to hydrogen. I'm interested to know whether you think ARENA is better placed to develop hydrogen export industry opportunities or whether the CEFC should run that type of project.

Mr Miller : I think there's a role for both the CEFC and ARENA in developing the hydrogen opportunities. As you know, ARENA fits into earlier stage research to the pre-commercialisation part of the spectrum and CEFC takes it from there and develops the funding initiatives. So what we see with hydrogen in particular is that the innovation and the development of that industry is right throughout the train from research and development all the way through to actually building large kits of electrolysers and industrial plants. There's the domestic side. There's the export opportunity. It's multifaceted. Our view is that it's going to require effort and funding from both parties.

Senator HANSON-YOUNG: Obviously ARENA's role in that, then, would be very early on in the development?

Mr Miller : Yes. And often we'll cross over with the CEFC on a particular first-of-a-kind infrastructure project. So where there is an existing technology but it's hundreds of millions of dollars to develop a plant, we would take a very small piece of that project to give the investment community confidence. They may take a larger piece. Clearly, in the earlier stage—in the research and early stage deployment—that would be a role typically just for ARENA, not the CEFC.

Senator HANSON-YOUNG: But we would have to make sure you were appropriately funded to do that. Thank you, Chair.

CHAIR: Thank you very much. That concludes us with ARENA tonight. The proposal at this stage is that we break now until about 7.20 pm. We'll return with program 1.1 and officers from the ANAO.

Mr Pratt : I can confirm that all energy and climate agency colleagues can depart?

CHAIR: They are free.

Senator HANSON-YOUNG: I've still got some questions on notice that I will give.

CHAIR: You are free tonight.

Mr Pratt : And are there any questions for the Director of National Parks?

CHAIR: Yes. We do have questions, so we will require the Director of National Parks. Our commiserations to them.

Mr Pratt : Thank you.

Proceedings suspended from 18 : 18 to 19 : 25