Australian Renewable Energy Agency

Catalysing change

The Australian Renewable Energy Agency (ARENA) is an independent authority, supporting innovations that improve the competitiveness of renewable energy technologies and increase the supply of renewable energy in Australia.

ARENA started operating on 1 July 2012 as an independent authority to make renewable energy solutions more affordable and increase the amount of renewable energy used in Australia. They do this by investing along the innovation chain in a range of renewable energy technologies, from research in the laboratory to large-scale technology projects, as well as activities to capture and share knowledge to help the renewable energy sector to innovate, grow and expand.

Currently, ARENA manages almost AU$1 billion in projects, including the recently announced $167 million of funding for AGL to deploy solar on the largest scale Australia has seen. This $450 million project will provide many industry players invaluable experience and knowledge in an Australian context. It also builds investor confidence, paving the way for more solar energy projects by reducing the cost of finance, which is typically the single largest cost component of a utility-scale renewable energy project.

ARENA has provided funding for two projects fulfilled by international company BlueScope Steel, providing approximately $2.3 million for the development of low-cost building integrated photovoltaics (BIPV) and BIPV-thermal systems for mass deployment on Australian residential, commercial and industrial rooftops; and $477,320 towards expanding the value proposition for BIPV. Part of the development saw Bluescope’s PV thermal roof used on the ‘Team UOW Australia Illawarra Flame House’, which won an international competition challenging university students to build the most energy efficient house.

To ensure Australia can make the most of its renewable energy know-how, ARENA’s staff are highly qualified and experienced people overseen by a Board that is commercially and technically savvy. The Board decides which renewable energy projects will be financially supported according to ARENA’s General Funding Strategy and Investment Plan; the second iteration was released in July this year.

The major challenge is making renewable energy technologies cost competitive. This is why it is one of ARENA’s two central objectives, the other being to increase supply.  A big hurdle for large-scale renewable energy projects in Australia is securing power purchase agreements for the electricity produced by the plants. That is where ARENA comes in; ARENA can bridge the risk-adjusted cost gap of pre-commercial projects by way of a grant to get a financial model back in the black.

With AGL, ARENA negotiated a funding arrangement that reduces the risk of the 155MW solar photovoltaic project by covering the gap between the expected market revenue and the development costs. If the power plants generate more revenue than expected, ARENA is able to recoup its investment. These returned funds can then be repurposed to fund other renewable energy projects in Australia.

ARENA initiatives

ARENA has around $2 billion available to invest in projects that make renewable energy solutions more affordable and increase the amount of renewable energy used in Australia.

With more than $600 million currently available in programs, ARENA provides opportunities for a range of new renewable energy projects. This includes the Regional Australia’s Renewables Industry program, which aims to harness the growing demand for energy in regional and remote locations and increase the use of renewable energy in industries in these areas, especially where it is close to being cost competitive.

While on grid electricity demand is falling across Australia, mines and other remote users continue to have growing off-gird electricity demand. Demand from the mining sector off the main electricity grids represents one of the fastest growing energy uses in Australia. Traditionally, electricity in these locations across Australia has been supplied by fossil fuels, in particular, diesel and natural gas.

The growing electricity demand in off-grid areas, coupled with the high cost of liquid fuels in remote locations, presents a timely opportunity to increase the uptake of renewable energy in these locations, and takes ARENA closer to a cleaner energy future. That’s why ARENA has established the Regional Australia’s Renewables initiative, which aims to demonstrate a portfolio of renewable solutions, including hybrid systems, in remote and regional areas. Expressions of interest close on the 31st of December this year.

The related Community and Regional Renewable Energy program will work with regional electricity distributors to develop a portfolio of projects at a community or regional level in locations that aren’t supplied by the major grids. The program aims to demonstrate high levels of renewable energy through, storage systems, for example.

ARENA has also expanded the successful Emerging Renewables Program, which supports the development, demonstration and early-stage deployment of renewable energy technologies, as well as activities that remove or reduce roadblocks to the delivery of ARENA’s strategic initiatives and activities that fill critical knowledge gaps within the industry.

Emerging initiatives

ARENA is also developing a number of new initiatives in consultation with industry, including a Commercial Readiness Index for each renewable energy technology that will help identify how ARENA and other government agencies can best provide support to help each technology progress.

To ensure that Australia can keep increasing the penetration of renewables whilst maintaining power quality, ARENA is also developing an initiative to investigate how to integrate an increasing amount of renewables into the grid. This initiative will focus on demonstration projects including storage and forecasting systems and reflects a trend towards distributed renewable energy.  Australia now has more than 1 million households with solar panels on the roofs. Although feed-in tariffs in most states have been reduced, there is still demand for solar panels so photovoltaic ownership will continue to grow.

An ARENA-commissioned study by Parsons Brinckerhoff is also well underway to examine the potential for widespread integration of renewable energy into existing power stations in Australia. ARENA sees hybrid projects as a low-cost way to develop new renewable energy solutions by using established infrastructure, both hard and soft. Existing fossil fuel sites offer many benefits for renewable energy projects, including an existing community to provide energy workers, reduced costs due to availability of existing grid connections and transmission infrastructure, lows risks around environmental permitting, and the possibility of re-use of stream turbines. The expectation is this study will inform the design of a new program in 2013/14 to encourage the broader deployment of utility-scale, grid-connected renewable energy in existing power stations.

Transitioning towards clean energy solutions

Unlike other agencies, ARENA was established as an independent agency to make renewable energy technologies more affordable and increase their supply in Australia. It applies a rigorous, commercial mindset to project evaluation and seeks to invest along the innovation chain – from research in the laboratory to large-scale technology projects, as well as in activities to capture and share renewable energy knowledge to help the renewable energy sector to innovate, grow and expand.

ARENA’s ambition is to invest in projects that will ultimately catalyse new renewable energy projects at lower cost. They do this by providing support to develop invaluable experience and share knowledge in an Australian context, maximising positive spill over effects from their projects to the rest of the renewable energy community and the economy at large.

Together with the Renewable Energy Target, ARENA is incrementally transitioning to a renewable energy future.

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