A Promising Government Program Launches Down Under

The Advanced Research Projects Agency-Energy (ARPA-E) is the subject of numerous ITIF blog posts – including a series on the Energy Innovation Summit hosted by the agency this year – and a report, A Model for Innovation: ARPA-E Merits Full Funding. It has been consistently held up as a clean energy policy success due to its focus on transformational energy technology research and development; “Pound for pound, dollar for dollar,” FedEx chairman and CEO Fred Smith has remarked, “it’s hard to find a more effective thing the government has done than ARPA–E.” But the agency now has company with the launching of the Australian Renewable Energy Agency (ARENA).

“ARENA’s mission,” the chairman of its board, Greg Bourne, notes, “is to drive innovation in renewable energy technologies and thereby improve the competitiveness of renewable energy in Australia and increase its role in our energy mix.” The agency was created last year through the consolidation of multiple government clean energy initiatives, a move that received support from across the political spectrum. It began operations in July of this year and is overseen by a board that includes investment, business, and energy experts – much like ARPA-E.

ARENA is also like its American counterpart in other ways, particularly in its support for new, high-risk, high-reward-type energy technology projects across multiple areas. Projects funded under prior programs now incorporated within the agency have tied up $1.5 billion AUD ($1.58 billion USD), but an additional $1.7 billion AUD ($1.79 billion USD) has been allocated to ARENA to use as it sees fit. It’s clear from the agency’s draft funding strategy that much thought has been given to how ARENA will fit into the energy innovation cycle, as the document discusses both “supporting the development of emerging technologies by funding research and development” and “assisting mature technologies to bridge the commercialization gap.” Furthermore, future award applicants will be required to meet specific criteria, such as evidence that their project “addresses a market barrier of strategic importance to the renewable energy industry” and “delivers an innovation (either technological or business model related) that is in Australia’s national interest.” And just like ARPA-E, funding may be cut off “when projects are unable to meet agreed milestones.”

Where ARENA differs from ARPA-E is in the nature of its funding, which is not only more robust, but also guaranteed in legislation through 2020. The Australian energy industry can consequently rely on relatively long-term policy certainty when it comes to ARENA. In comparison, the American agency must rely on the roller coaster of the year-to-year congressional budget process for funding. (The Fiscal Year 2013 Energy and Water Appropriations Bill recently passed by the House, for example, cuts ARPA-E’s budget by $75,000,000 relative to fiscal year 2012 and by $150,000,000 relative to the Obama administration’s request).

To be sure, ARENA is still in its infancy, but its ARPA-E-like model is a promising indication of its potential to foster energy innovation in Australia. In creating ARENA, Bournes observes, “The [Australian] government recognized that a range of assistance was needed to drive and support innovation in clean energy.” Hopefully, governments the world over will continue to come to that realization.