Submission to Public Consultation Paper on Underwriting New Generation Investments

PIAC lodged a submission to the Commonwealth Government’s consultation paper on its proposed program to underwrite new generation investments. Recommendation 4 of the ACCC report into electricity supply, which serves as the basis for this program, intended to facilitate economic investment in new generation, by enabling better access to long-term finance through longer-term generation contracts.

PIAC notes that there is already evidence that private investors and state Governments are stepping in to provide long-term contracting support for many new generation investments. We question whether a specific, additional Commonwealth mechanism is necessary. However, if this program proceeds, PIAC recommends the following principles for the scope and operation of this program, reflecting the intent of the ACCC’s original recommendation:

• It must only be eligible for new generation – not for refurbishment or extension of existing generation assets
• It must only be eligible for projects that are already economic – it must not provide additional revenue streams to make an otherwise uneconomic project viable
• It must be limited to assisting economic projects to receive sustainable, long-term funding by facilitating access to longer-term contracting arrangements.
• It must only be eligible for projects which will enhance market competition by encouraging new or smaller entrants into the wholesale market – it must not further entrench existing market concentration
• It must not seek to indemnify the generator from future risk that may have a material economic impact, such as a possible future carbon price
• The scheme should be managed by the Clean Energy Finance Corporation (CEFC), as suggested by the ACCC.