Where The Sun Doesn’t Shine

By Ben Eltham

Solar Plant

Did Australia’s largest solar power project collapse because of government inaction? Details about government funding of low emissions technology projects are thin on the ground

This week saw the collapse of Solar Systems Pty Ltd, the company building what was to be Australia’s largest solar power station in Mildura in Victoria.

As Solar Systems’ website dolefully announces, “administrators are undertaking an immediate assessment of the operations and financial position of the companies with a view to continuing the operations on a reduced scale in order to restructure and sell the business as a going concern.”

That’s going to be hard, because Solar Systems is far from operational. Sadly, it’s not even built. The giant solar collecting tower that was going to generate 154MW of electricity in peak operation has yet to be constructed, and Solar Systems apparently needs hundreds of millions of further venture capital funding to build it. 950 jobs were expected to be created through the life of the project; more than 100 are reportedly now in jeopardy.

A year on from the fall of Lehman Brothers, the difficult state of global venture capital markets means the receivers have a tough task on their hands. According to administrator Stephen Longley, who The Australian‘s Lauren Wilson tracked down for comment earlier this week, Solar Systems had burned through their original $150 million in capital developing the technology for the solar plant, then realised they needed more cash to bring the project to market.

Seeking another $50-100 million in capital funding, Longley told Wilson that Solar Systems “landed in the US to do roadshows the week (investment bank) Lehman Brothers collapsed”.

It wasn’t always like this. Way back in 2006, the Mildura plant was launched to great fanfare by the Howard and Bracks governments with promises of $125 million in Commonwealth and state funding. Canberra promised $75 million to the plant through a Howard-era funding scheme known as the Low Emissions Technology Demonstrator Fund. There was plenty of positive publicity, especially for a government still highly skeptical of the Kyoto process and under fire for its fossil fuel sympathies.

But as has emerged this week, none of that $75 million of federal money ever arrived. In fact, only $500,000 of the promised $125 million in funding was ever paid to Solar Systems by the Victorian government — and neither state nor federal government officials will say why.

When I rang the office of Victorian Minister for Energy and Resources Peter Batchelor, and Federal Minister for Resources Energy and Tourism Martin Ferguson trying to find out, the responses were revealing.

According to a spokeswoman from Batchelor’s office, “The Victorian Government is disappointed that this promising solar technology start-up business has been unable to raise the additional capital needed for its ongoing development.

“Our Energy Technology Innovation funding is tied to the project, not the company. We are talking about taxpayer’s money and milestones had to be reached for that money to be given.

“The Government supports the demonstration of technology, but is not in the business of giving loans to private companies with taxpayer’s money.”

Victorian taxpayers might be surprised by this last statement, as it is exactly what the Brumby government has promised AquaSure, the consortium building the $3.5 billion Wonthaggi desalination plant, should it be unable to find enough money.

Martin Ferguson’s office was even terser, in keeping with the gruff style of their minister. A spokesman confirmed that none of the promised $75 million of federal money had been dispensed to Solar Systems, and added that “it’s too early to make any assessment of either the company or the project’s future; both of these are being worked out by the administrator in the coming months.”

That start-up technology firms occasionally go bust is not news. But what is news is that governments supposedly committed to seeing more renewable power connected to the Australian grid idled while $125 million in budgeted funding sat in state and federal coffers.

Neither the Victorian nor the federal Energy departments were prepared to tell me what the “milestones” were that Solar Systems hadn’t met. And, because of the murky conditions surrounding the award of hundreds of millions of dollars of government renewable energy funding, we may never know.

This is because many of the grants that our governments are giving to companies for their renewable energy projects are “commercial-in-confidence”, a classic cloaking technique that allows important public policy decisions to be veiled in contractual secrecy.

The Mildura solar plant, for instance, was one of five projects funded under the Howard government’s Low Emissions Technology Demonstrator Fund. The other four all went to big carbon projects, including Chevron and its partners for the $50 billion Gorgon gas development,and International Power, the company that operates Hazelwood power plant.

Little is publicly known about either the status or the progress of the grants awarded to these five projects, which add up to some $335 million. Neither Martin Ferguson’s office nor the Department of Energy were prepared to comment on the Fund. Indeed, the Department of Energy’s spokesman, Tom Firth, either could not or would not disclose whether the other four projects had met their milestones or received their promised funding.

Newmatilda.com has been able to ascertain that at least one project, the retrofitting of the Callide A coal-fired power plant in central Queensland with carbon capture and sequestration technologies, has received $50 million from Canberra, and is apparently progressing toward a possible demonstration in 2011.  As for the Gorgon development, we know that it has only just received federal approval from Peter Garrett’s Environment department — and that in any case the technical feasibility of carbon sequestration underneath Barrow Island is thus far unproven.

No-one connected to the other three projects funded by the Low Emissions Technology Demonstrator Fund — including Chevron’s representative for the Gorgon project — got back to us.

The result is that potentially hundreds of millions of dollars of taxpayers’ money sits in Treasury coffers, committed to projects that may never happen, on conditions that remain secret to the public. Australia’s 20 per cent by 2020 renewable energy target looks a long way away.

Did Martin Ferguson’s department fiddle while Solar Systems collapsed? We may never know — unless the Greens or other opposition parties ask some hard questions in the next round Senate estimates hearings. See post here.

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