Resources Minister Martin Ferguson has suffered a defeat at the hands of the Greens in the Multi-Party Climate Change Committee process and will lose control of $3.2 billion worth of renewable energy programs to the new, independent Australian Renewable Energy Agency (ARENA) as part of the carbon pricing package to be announced on Sunday.

ARENA will operate under the Commonwealth Authorities and Companies Act and be headed by an independent statutory board to be appointed by cabinet. But unusually for a statutory agency, it will report directly to cabinet — CAC bodies normally report to cabinet and Parliament via their portfolio minister. This further limits any role for Ferguson in the administration of renewables programs. The new body is likely to be staffed by existing Department of Resources, Energy and Tourism staff.

The board will be responsible for allocating $3.2 billion in existing funding, just under half of which is already committed; it is understood existing allocations will be honoured by the new board. However, the agency will also receive an additional, as yet unspecified amount of new funding to be announced Sunday.

The existing RET programs to be rolled into the new agency will be:

  • Solar Flagships Program
  • Australian Solar Institute
  • Low Emissions Technology Development Fund (solar)
  • Renewable Energy Demonstration Program
  • ACRE Solar Projects
  • Renewable Energy Venture Capital Fund
  • Australian Biofuels Research Institute
  • Emerging Renewables Program
  • Second Generation Biofuels Research  and Development Program
  • Uncommitted funding from the Connecting Renewables Initiative.

Ferguson’s lack of enthusiasm for renewables and vocal support for nuclear power has long made him a particular target of the Greens, who regard him as the friend at court of the fossil fuel and nuclear industries. But they have been particularly concerned that the Rudd and Gillard governments’ investments in renewables have been plagued by delays, cuts, re-announcements and continuing uncertainty for the renewables industries.

The intention of ARENA is to provide a greater strategic focus to what is currently a disparate range of programs and provide greater long-term certainty for an industry highly dependent developmental and regulatory assistance until a carbon price closes the gap between renewables and cheaper emissions-intensive energy.

That gap may be some time in closing. While under a sufficiently high carbon price, renewables programs should be unnecessary, the likely $23 a tonne starting carbon price and assistance for the electricity industry means a long transition time in the energy sector.

Shifting the allocation of government funding in renewables to an independent board — which will include appointees from business with backgrounds in energy, finance and business — charged with taking a more strategic approach to support for the industry is likely to provide better direction than officials and ministers administering discrete programs.