Analysis and Commentary

CEFC points the way to NRF effectiveness

Analysis and Commentary

By Peter Roberts

Those questioning the effectiveness of the federal government’s $15 billion National Reconstruction Fund need to look no further than the success of the Clean Energy Finance Corporation initiative.

But don’t expect rapid results – the CEFC took a decade to pick up steam and only now is showing the power of catalytic co-investment by government in carefully selected target areas of national priority.

The NRF is designed along the CEFC model and is led and managed by the same style of finance industry heavyweights as have steered the CEFC to invest in the gamut of green energy technologies from batteries to wind power and hydrogen.

The CEFC reported this week that it had made investment commitments of almost $510 million in the six months to 31 December 2023, including nine new transactions and 14 follow-on or increased investment commitments.

According to CEO, Ian Learmonth: “Our finance continues to draw the private sector to Australia’s clean energy transition, with every $1.00 of CEFC capital invested in the period attracting an additional $5.58 from co-investors.

“CEFC lifetime commitments, at $13.2 billion, are expected to drive more than $52 billion in critical investment in Australia’s net zero transition.”

It is hard to argue that the CEFC has not been at the centre of Australia’s energy transition during the nine years of denialist or at best ambivalent coalition government.

Founded in 2012 and surviving Coalition efforts to kill it off, the CEFC has seeded areas that finance was otherwise steering clear of based on $10 billion of initial capital, which was topped up in 2023 with an additional $20.5 billion.

The NRF starts with $15 billion (with more likely upon success) and will similarly invest and bring in co-investment in priority areas of resources, transport, medical science, defence capability, renewables and low emission technologies, agriculture, forestry and fisheries and enabling technologies.

That is an extremely wide remit and one could quibble that forestry and fisheries for example are hardly critical national priorities, while medical science is already well funded (we need investment in MedTech industries).

But there is every likelihood that over time – it will take decades also – investment will flow to areas that currently find themselves hamstrung by Australia’s capital markets.

And one thing the NRF is not is a substitute for is a national industry policy, nor even some effort at co-ordination of the multiple ministries and originations that fund industry in various forms.

We can wish, but there is no sign the government is interested in a whole of government industry policy.

Picture: National Reconstruction Fund

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