With the announcement of the Clean Energy Innovation Fund (CEIF), Malcom Turnbull has killed several birds with a single stone. He has
- warmed the cockles of the hearts of the renewable rent-seekers who are such a valuable source of campaign finance
- conned all the ABC/Fairfax/Guardian journalists into thinking he has actually increased government spending when actually, “The $1 billion Clean Energy Innovation Fund will be established from within the CEFC’s $10 billion allocation”. Though at Reneweconomy Giles Parkinson has twigged
- Retained the subsidised $10 billion Clean Energy Finance Corporation (CEFC) and the Australian Renewable Energy Agency (ARENA) about $200 million a year but previously budgeted to more than halve; this is on top of the renewable energy subsidy for up to 33,000 gigawatt hours a year of (mainly) wind energy, plus about 12,000 GWh of rooftop solar, meaning an annual subsidy of about $3.5 billion.
- Locked in his personal commitment to spending ever greater resources on overriding the energy market and replacing all those ever so twentieth century coal plants with twenty first century renewable energy that cannot be made reliable and cost three times as much.
But, sadly, it is not all smoke and mirrors. Malcolm, being a merchant banker, has learned from the Goldman Sachs hymn book about how to leverage equity investments with loans. Banking on a rock solid government guarantee to an investment, lenders will roll up to offer finance to the Clean Energy Innovation Fund. That way the CEIF can attract loan funds of maybe four times the value of its $100 million a year in government capital.
And so we have created our very own version of sub-prime securities that, even with the renewable subsidies, could not justify loans from prudent bankers. With the government offering a subsidy through the renewable program which trebles the price that commercial energy obtains plus a subsidy to the investment capital through CEFC and CEIF what could go wrong?
Perhaps the sheer power of government controlling the energy market as well as its preferred source of energy will mean the negative value-adding renewable investments are secure. But we are placing a large chunk of the nation’s investment resources into venues that are unproductive. At the very least this is a dilution of the capital productivity so essential to the better paying jobs we all seek. Add to this the penalty that businesses have to pay for the dearer energy being mandated and we will need a whole lot of Malcolm’s much vaunted high tech revolution that he announced in his Innovation Statement a few months ago.