The Commonwealth stunned investors and the clean energy sector this week with a decision to ban its “green bank”, the Clean Energy Finance Corporation, from investing in wind farms and small-scale solar.

The Abbott government has twice tried to abolish the taxpayer-funded $10 billion CEFC.

Being blocked from scrapping the clean energy body in the Senate means the Coalition has instead decided to refocus the CEFC on large-scale solar projects and new and emerging technologies, presumably including the still unproven carbon capture and storage that would aid coal producers.

Priorities

Last night, ARENA has announced five new priorities for investment and a new, streamlined funding program structure.

ARENA was established by the Gillard government in 2012 to make renewable energy solutions more affordable and increase the amount of renewable energy used in Australia.

While ARENA was created as part of the Clean Energy Future package together with the CEFC they are separate institutions.

ARENA CEO Ivor Frischknecht said the five new priorities are: integrating renewables and grids; renewables for use in industrial processes; off-grid areas; fringe of grid and constrained sections of the grid; and large scale solar photovoltaics.

Frischknecht also announced an updated general funding strategy and investment plan at a stakeholder event in Sydney yesterday evening.

“The five priorities represent current market imperatives or opportunities and are the main areas where ARENA investment can have the greatest impact at this point in time,” Frischknecht said.

“To date, ARENA has invested $1.1 billion in 230 renewable energy projects across the innovation chain, with each funding dollar leveraging close to two dollars of funding from other sources – these targeted priorities will allow us to build on our existing portfolio, creating the conditions that will accelerate change.

“While ARENA will be actively pursuing these priorities, we will also continue to fund high merit projects in a further 12 areas as outlined in the investment plan.”

Frischknecht said ARENA was streamlining its program structure, making it simpler to apply for funding and cutting red tape.

“From August 1 we will transition to two funding programs – the existing Research and Development Program and a new Advancing Renewables Program, which will replace all other existing programs,” Frischknecht said.

“We will continue to run R&D funding rounds and will also announce targeted funding rounds through the Advancing Renewables Program, which is open to high merit applications at any time.

“We are proposing a new large scale solar auction for about 200 megawatts worth of projects, with $80-100 million support from ARENA, and will be seeking feedback shortly with the intention to open the round in September 2015.”

Decisions will be made on the large-scale solar farms in about 12 months.

Changing landscape

While the government’s decision threatened the viability of two wind farm proposals, its ruling to the CEFC may not withstand a legal challenge.

The government has the power to put in place an investment mandate but it has to stick to the definitions under the Act, which is to provide incentives get as much investment in clean energy technologies as possible, and that includes all renewable technologies.

The CEFC has confirmed it is seeking advice about its position.

"The best thing that the Clean Energy Finance Corporation can do is invest in new and emerging technologies, the things that might not otherwise get finance," the prime minister said.

Abbott’s deal to pass reduced the Renewable Energy Target earlier this year included a promise to the cross-bench senators to reduce funding to windfarms, a pledge that has driven this week’s announcement.

The Australian Wind Alliance says private investors still need the CEFC in the wind and solar industries because they are still tentative to invest in marginal technologies.

As at June 30 last year, the CEFC had contracted investments of over $900 million in projects with a total value of over $3 billion.

The Abbott government has denied that donations from fossil fuel companies have influenced the Coalition's position on renewable energy, although some in the Coalition remain sceptical about the existence of climate change.