Very relevant article from Climate Spectator:Bridging...

Very relevant article from Climate Spectator:

Bridging Australia's valley of death
Published 7:08 AM, 6 Apr 2011

Giles Parkinson
The Australian Centre for Renewable Energy is making an important if subtle call for increased and more flexible funding to help Australia?s emerging energy technologies reach across the so-called ?Valley of Death?.

This valley is deep enough at the best of times, but in Australia it has the proportions of the Grand Canyon: not only does the country struggle for private funding for venture or early-stage capital, but Australian government efforts to get involved in supporting new energy technologies have proved ponderous and unable to respond to market needs.

That may not have been such an issue in the past, but it is dawning on the federal government that, as it looks to its future energy needs beyond the 2020 renewable energy target that will largely be met by wind, biomass, and hydro, Australia and the world will need step changes in technology. Necessity and opportunity are starting to produce some creative thinking about how these demands can be met, and what role government should play in their development.

ACRE is an organisation that was created last year ? after much delay ? by the minister for energy Martin Ferguson, to administer funds allocated for pilot and demonstration plants in technologies such as geothermal, solar, and ocean energy, along with storage and hybrids, and to recommend how these sectors should be better supported in the future.

The major recommendation of its Strategic Directions paper that was released by Ferguson on Tuesday was to sweep up all the unallocated funds that remain and add them to the $40 million promised by the government in the recent election campaign. Ignoring for the moment that this $40 million was an election promise that was supposed to have been allocated by June 30 and will likely be recycled into a new funding announcement, the proposal would likely create a $100 million plus emerging renewables fund.

This would be separate to its $100 million renewable energy venture capital fund, which will focus on start-up R&D projects, but it would be used to fund pilot and demonstration programs in those technologies that currently find themselves without the means to progress, at least in Australia.

Australia is currently faced with a funding riddle: It knows it has the best renewable resources in the world ? be it wind, earth, sun or water ? and some of the best brains, but it has so far been at a loss on how to exploit them. Some of the most promising technologies have gone overseas, and others are set to follow. Developments in key areas such as geothermal are not progressing at the speed required to meet what will inevitably become increasingly ambitious clean energy targets. A circuit breaker is needed.

?Australia is so well placed ? particularly in wave, solar and geothermal ? to capitalise on the insatiable global demand for reliable, cost effective low-carbon power technologies,? says Michael Ottaviano, the head of Carnegie Wave Energy. ?This is an enormous export opportunity that we simply aren?t capitalising upon and jobs are already being exported today to countries that are years ahead of us in developing and implementing clean technologies.?

Professor Ross Garnaut argued in his recent paper on innovation that the country should be spending between $2 billion and $3 billion a year on nurturing new technologies, because these would deliver the cost savings in the future. And better to take the opportunity to develop the technologies here and export the know-how. Garnaut also argued that bureaucrats and politicians are not best placed to be picking winners in technology, and wants mechanisms that allow the market to decide which is most likely to succeed.

ACRE chief Mary O?Kane is not going quite that far, at least in this Strategic Directions paper, but she is suggesting that ACRE needs to be more flexible and more able to respond to market demands.

One of the big criticisms of government funding for emerging clean technologies has been that it is slow and cumbersome, and often ultimately pointless, because the money is never spent. A report by the Grattan Institute has been critical of the grants-based mechanisms, and will analyse the funding in a detailed report to be released on Thursday.

O?Kane has taken on board the input from industry groups, and private companies, and promises that the Emerging Renewables program will be more flexible than previous programs. ?We will really be about trying to bridge that valley of death ?and to get money where there is none.? This means not picking technology winners, but focusing on those that might deliver energy at close to commercial prices, and getting projects to pilot and demonstration stage.

And O?Kane adds, intriguingly: ?We might not be quite as granty.? ACRE intends to investigate a range of financing mechanisms and, while it is willing to help struggling but worthy projects get the financing required, it is also ready to drop those that do not look like they will deliver.

ACRE has a special role to play in these technologies. While the larger programs within the government?s $5 billion clean energy funding program, such as solar flagships, will mostly import overseas technologies, the programs administered by ACRE are mostly, although not exclusively, about nurturing home-grown expertise and ideas.

This is where Australia?s future competitive advantage in the energy sector is to be found ? and for that reason ACRE?s strategic priorities are important. It sees these as geothermal and ocean technologies (where at least $40 million is promised) as well as bio-energy, ?enabling? technologies that will help storage and connection of solar and win, and hybrid projects that will allow renewable energy projects to piggy back on existing facilities, such as coal and gas.

ACRE hopes to call for its first expressions of interest for its emerging renewables fund mid year. Announcements on the renewable energy venture capital fund are also expected soon. Next year, if a carbon pricing scheme is in place, and the government takes on board some of the Garnaut recommendations on innovation funding, the budget may be several times bigger. Given the status of its $5 billion clean energy budget, which is largely unspent, the government will have to learn quickly how to spend the money rather than just announce it.