The Underwriting New Generation Investments (UNGI) program is the brainchild of the Federal Minister for Energy and Emissions Reduction, Angus Taylor. The UNGI was born from the federal Coalition’s decision to allow the Clean Energy Finance Corp (CEFC) to fund coal and gas-powered plants via a “Grid Reliability Fund.”
The fund is intended to be a “trusted counter-party to investments, allowing the CEFC to support private sector involvement,” as Taylor told parliament when the fund was set up in 2018. But critics have said it risks hindering the ongoing private-sector shift toward more efficient renewable energy generation and grid-scale battery storage.
The UNGI’s first “investment” was $8.7 million for the upgrade of turbines on the Vales Point coal power plant, the kind of cap-ex plant owners account for as part of normal operations. A subsequent investment “shortlist,” arrived at in December 2019, included underwriting construction of four gas plants and four pumped hydro power storage plants.
There have been no decision-making criteria published as to how these decisions were made. Moreover, because the UNGI has no founding legislative mandate, it is not clear how much funding could be simply “allocated” to it through the federal budget. As The Australia Institute has pointed out, the constitutionality of this approach is dubious. Just last month, the National Audit Office ruled that government funding for a feasibility study into a coal-fired plant at Collinsville was awarded through an improper, incomplete tender.
With no news of these eight potentially forthcoming project commitments since, the UNGI is bringing needless uncertainty to energy market investors, which is precisely not what is needed during an energy transition. According to former Australian Minister for Trade and Competitiveness, Dr Craig Emerson, “with ongoing threats of government intervention that could at any time undermine the business case for investment, private sector reticence is continuing.”
Worsening the picture is a vague threat to build a gas-fired power plant at Kurri Kurri in the Hunter Valley. This has led to established players like AGL stalling in their considerations of whether to do similarly or invest in grid-scale battery storage to meet peak demand.
“The federal government’s plan…is a negative read-through for AGL, which is trying to make a final investment decision,” said energy analyst Tom Allen. “It remains a very challenging policy landscape for AGL.”
Chief of the Australian Energy Market Operator, Kerry Schott, has said that plentiful renewable energy is rapidly making coal generation unprofitable. She expects only NSW’s Mt Piper plant to be operating by the mid-2030s.
The UNGI appears to be Taylor’s instrument to either slow that demise, or at least hand out a few more taxpayer millions before it happens.
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