Tony Abbott has dramatically escalated his war on wind power, creating a new cabinet split and provoking a warning he is putting international investment at risk.
Fairfax Media can reveal the government has ordered the $10 billion Clean Energy Finance Corporation not to make any new investments in wind power projects.
Treasurer Joe Hockey and Finance Minister Mathias Cormann have issued the so-called green bank with a directive to change its investment mandate, prohibiting new wind funding. It’s understood the directive was issued without the approval or knowledge of Environment Minister Greg Hunt, angering the minister.
The decision is another blow for the multibillion-dollar wind industry, which has just started to recover from the uncertainty created by the government’s Renewable Energy Target review. Analysts say $8.7 billion is expected to be invested in wind power in the next five years, while the corporation has invested about $300 million in wind projects to date.
And international investors are warning the government’s move sends a bad message about how safe it is to do business in Australia.
The directive is just the latest salvo in the government’s attacks on the wind industry.
Mr Hockey started the campaign when he told Sydney radio shock jock Alan Jones he found wind farms “utterly offensive”. Prime Minister Abbott reignited the debate last month, telling Jones he finds turbines “visually awful”. He said he wanted to reduce the growth rate of the sector as much as the Senate would allow.
Amending the corporation’s investment mandate does not require Senate approval.
Sources say Mr Hunt was angered at being left out of the decision. The disagreement adds to a number of cabinet splits in recent months, most spectacularly between Mr Abbott and six of his ministers over citizenship laws. Another split emerged this week when Mr Hunt approved the Shenhua mine in NSW, drawing a furious response from Agriculture Minister Barnaby Joyce.
But a spokesman for Mr Hunt offered only this comment on the decision: “The focus on solar which was agreed with the cross-benchers has been included. Any additional elements of the mandate are a matter for the responsible minister.”
The government did a deal with Labor last month to slash the RET, ending 18 months of uncertainty that all but paralysed renewable energy investment. During the negotiations, Mr Hunt promised cross-benchers he would appoint a new wind farm commissioner to handle complaints about turbine noise. In the same letter, he promised he would write to the CEFC to “ensure significantly increased uptake of large scale solar”.
But in their directive, delivered to the corporation late last month, Mr Hockey and Senator Cormann have gone much further.
The clean energy board now has time to respond to the decree. The government is required to consider that response before tabling the directive in parliament and making it legally binding. The government’s directive will not affect existing investments.
The decision will please anti-wind cross-bench senators such as David Leyonhjelm. But wind industry insiders, who declined to comment on the record, say the decision is a “big blow”. One said that while it will not sink the industry altogether, it will make things harder.
Head of Australia at Bloomberg New Energy Finance Kobad Bhavnagri said the decision would have a “significant” impact on the industry.
A major international renewable energy company told Fairfax Media the decision would add to perceptions Australia was not a safe place to do business.
“This adds to the negative message being sent to international investors,” a senior source at the company said. “Why would an international investor want to put their money into wind energy in Australia when you have both the prime minister and treasurer saying they’re ugly, a blight on the landscape? There are a lot of other countries where they can invest.”
Senator Cormann declined to comment. Mr Hockey is on leave and could not be reached.
The government has previously said it wants the corporation to focus on investing in innovative clean energy proposals and technologies rather than mature technologies that can be financed by mainstream lenders.
Senator Cormann and Mr Hockey amended the mandate for the first time earlier this year, directing the corporation to lift its targeted returns without lifting its risk profile.
The government has twice tried to abolish the corporation but has been blocked by the Senate. The bill to abolish the corporation is a potential double dissolution election trigger.
Set up by the Gillard government, the corporation seeks to mobilise capital investment in all sorts of renewable energy. It started investing two years ago, making contracted investments of $900 million in its first year.
Its investment mix is 33 per cent solar, 30 per cent energy efficiency, 21 per cent wind and 16 per cent other technologies.
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