ARENA, CEFC, NRF should fund net zero R&D – report

Federal funding bodies supporting energy and industrial transformation should direct more funds towards early stage R&D to support innovation according to a new report from the Centre for Policy Development.

The report – Ideas to industries: How to get the most out of public money for industrial development – said most of the funds from the Clean Energy Finance Corporation (CEFC) and the Australian Renewable Energy Agency (ARENA) went to ‘commercial stage' proven technologies.

The National Reconstruction Fund is yet to make an investment, but is similarly focused on commercialising proven technologies.

The bodies, which together manage $50 billion in public funds for developing new industries, have the potential to unlock significant opportunities in pre-commercial industry development – especially as the world transitions to a net-zero economy.

CPD economic director Toby Phillips said the government had the biggest balance sheet in the country.

Phillips said: “With smart use of these resources, it can support vital new industries for long-term prosperity.

“Government capital should be focused more on boldly driving new industries and less on chasing commercial returns.”

The report found that while the CEFC has offered $100 million in loan concessionality over its lifetime – financing on more favourable-than-commercial terms – it could have given $3.6 billion in discounts under its mandate, presenting a significant opportunity to support more early-stage projects.

Discounted financing is crucial for enabling projects that are on the edge of viability, which might otherwise struggle to secure full funding from commercial banks.

The report recommends the government direct more funding to programmes suited for financing pre-commercial projects, such as ARENA and the Industry Growth Program.

It also highlights the importance of using safeguards like the National Interest Framework under Future Made in Australia to ensure investment decisions are rigorous and strategic.

Currently, Australia’s economy – largely reliant on fossil fuels and raw materials – ranks 93rd out of 133 countries in economic complexity, just behind Armenia and Uganda.

Phillips said: “Investing in new industries is a high-risk, high-reward game. If we want the rewards we have to be willing to take more risk with public capital.”

Image: Centre for Policy Development