NSW will soon have a $1bn energy fund. Will it succeed?

This week I led the Opposition’s contribution on the NSW Energy Security Corporation (ESC) which was announced by NSW Labor more than 15 months ago and finally brought to the NSW Parliament.

During the 2023 state election, Labor announced this taxpayer-backed fund to solve for a lack of renewable energy investment. Setting aside the fact that the more pressing issue holding up the energy transition in NSW is the delays in planning, permitting, regulatory reform and the roll-out of transmission infrastructure, the NSW Coalition welcomes this investment vehicle (if done right).

Here are my concerns and contributions to the Government, based on stakeholder feedback:

• Despite pushing it through the Parliament, the Labor Government has not made public the investment mandate for its $1 billion taxpayer funded state energy corporation.?The intent is for the NSW Minister for Energy and the NSW Treasurer to issue the ESC's first investment mandate at some point prior to the board being appointed.

The importance of getting the investment mandate right is heightened by the fact that the proposed NSW fund will join a crowded field of government-backed renewable energy investment funds including the Federal Clean Energy Finance Corporation and its sub-funds the $1b Household Energy Upgrades Fund, $500m Powering Australia Technology Fund, $300m Advancing Hydrogen Fund and $200m Clean Energy Innovation Fund.?

?Because the investment mandate has not been made public, the areas of investment focus are unclear. We also have no idea as to what the average rate of return expected from the fund will be.? It may be likely that the fund mirrors the CEFC where the Board must target an average return of at least the 5-year Australian Government bond rate + 2 per cent to + 3 per cent per annum over the medium to long term as the benchmark return.

NSW Labor are mandating that a member of the Board of this $1 billion corporation be appointed by Unions NSW.? This was a last-minute addition to the legislation and not contained in the original documents. If this entity is meant to be independent then let it be totally independent. ?

• The little we do know about the investment mandate is that it will include matters of risk and return, guidance on technology, areas of investment focus, and other investment parameters and limits for the ESC's investments.

We also know that the fund will be able to provide concessional debt financing, make equity investments, invest both directly in projects and indirectly through other investment vehicles and use a range of financial instruments to fill what the NSW Labor Government claims are investment gaps in private funding.

• Last year the NSW Labor Government received the recommendations of their own energy reliability check-up. They have only managed to ‘consider’ many of the recommendations, not implement them. Given the challenges facing the NSW Energy Roadmap, highlighted by a report in February identifying that planning approvals in NSW take 2-3 times longer than in other states, the Minns Government continues to sit on their final planning approval framework which has been in draft since January 2024. They must resolve this as a matter of urgency as there is no point funding projects if they can’t secure planning approval.
• There is a huge opportunity for commercial and industrial solar and consumer energy resources like community batteries in NSW. Frustratingly, home battery installations have ground to a halt following the announcement of a subsidy which is not due to start until November.

Whilst it is the planning issues that are fundamentally plaguing the renewable energy transition in NSW, the NSW fund does have an opportunity for some success if it can facilitate household, commercial and industrial electrification as well as an increased uptake of consumer energy resources, like community and household batteries.

If the investment mandate of this fund is technology neutral and focused on areas of market need such as storage, small grid enhancements and ready-to-go Hydro power, then that is a good thing.

• Minns and his Government claim that they have considered the legality of using a NSW based subsidiary of the CEFC to manage the fund on behalf of the NSW Government, which would be quicker to set up, however they say this is not practical. I note their own Energy Check Up said that as with other Roadmap bodies, the ESC could be progressed within an existing body. This would mean the $1 billion would be available to the market sooner and overcome the challenges and inevitable delays of recruiting staff.

Legislating an election commitment that was announced more than 15 months ago, is slow but welcome, it will not on its own solve the issues the NSW energy system is currently facing.

Several renewable energy investors and proponents put to me that there are already many Government investment schemes, State and Federal, targeted at clean energy such as the CEFC, ARENA, NRF, NSW manufacturing scheme and LTESA. Unless the latest entrant from NSW is somehow addressing a different need, or is much more streamlined and efficient than any of the above, then it will struggle to accelerate efforts to provide clean, reliable and cheap energy for NSW.

The reality is that there is significant private capital available for serious renewable energy projects, and it must be encouraged. What industry and communities are seeking is the streamlining of the planning approvals process, clarity around planning decision and deep engagement from the NSW Government that gives investors confidence to risk their own capital.?

A huge thank you to the many energy investors, stakeholders and experts who provided input into the Opposition position on this fund. Your on-ground experience is invaluable.

James Griffin MP the Shadow Minister for Energy in NSW, Member for Manly and former Environment Minister.