Zero-debt fetish flushes away infrastructure efficiency savings: Clean Energy Finance Corporation


A desire by councils and local government leaders to look financially conservative and debt free is holding back investment infrastructure renewal and sacrificing big savings that can be made from clean energy upgrades and projects, says the Clean Energy Finance Corporation (CEFC).

The federally backed green financier says an apparent reluctance to take-on specifically earmarked low cost debt aimed directly at local governments is resulting in higher than necessary infrastructure running costs at a time when investments in solar, energy efficiency and so called micro-grids ought to be driving costs down.

According to a newly released Market Report by the CEFC, Clean energy opportunities for local government, Mayors and General Managers need to “urgently consider tailored debt finance to improve their energy performance and reduce emissions from old and poorly maintained assets.”

“By restricting investment to what can be paid for from current-year or retained income, councils face an accumulation of inefficient, out-of-date or sub-optimal infrastructure on their balance sheets,” CEFC Local Government sector lead Melanie Madders said.

“Much of this aging infrastructure is energy inefficient, meaning councils have higher operating costs and a higher carbon footprint than necessary. Some councils also have zero-debt policies, which are putting the cost burden of inefficient long-life assets onto current ratepayers, rather than sharing these costs with future ratepayers who will also share in the benefits.”

The environmental lender, which sources capital from private markets, wants local governments and their state government masters to shake the traditional aversion to debt, particularly zero-debt policies, to put infrastructure balance sheets to work to drive down costs.

In particular the CEFC wants cities and municipalities to start using accredited energy efficiency consultants to start auditing council building and facilities to investigate what kind of real savings – that typically quickly outweigh capital costs – can be made to drive down expenses… as opposed to trying to make political and public relations capital out giving themselves a debt free rubber stamp.

“Depending on a council’s energy consumption patterns and energy upgrade opportunities, the savings from clean energy investments can offset the loan repayments, improving council operating budgets while meeting environmental goals,” Ms Madders said.

“This kind of sustainable borrowing is integral to prudent long-term asset management, which is especially important given the significant infrastructure challenge that councils face. Importantly, the cost savings and emissions reductions from clean energy projects continue after the debt is repaid.”

A major advantage many councils have, especially in remote or regional areas, is the potential to run what are known as microgrids which allow power to be distributed between council owned buildings and facilities, bypassing the traditional power network.

Because regulations about bypassing traditional electricity utility poles and wires are usually behind new technology (this Radio National panel talk sets out the issues nicely) councils are ahead of the curve compared to everyday consumers because they can distribute power they generate between their own facilities and buildings ‘off-grid’.

“Local grids or ‘microgrids’ allow local renewable generation and energy storage systems to be shared across buildings to maximise the efficient use of resources. For example, power from rooftop PV installed on a building with spare roof space could be shared with a neighbouring building with less roof space; or batteries could be installed in a nearby building with free basement space so that locally-generated electricity could be stored to better match demand,” the CEFC report says.

“Microgrids can improve energy efficiency, reduce total energy consumption, reduce the environmental impact of electricity generation and improve the reliability of supply.”

There are also simpler measures at hand to reduce lights-on costs at councils according to the CEFC. While LED lights are now a mainstream technology, the report argues there’s still some way to go.

“There are an estimated 2.3 million streetlights in Australia, and the annual cost of supplying and maintaining public lighting exceeds $250 million,” the CEFC report says.

“While several councils have adopted LED streetlights, there are barriers to making the change and a significant switchover task remains – by one estimate, only 11 per cent of streetlights have been converted to LEDs.”

Those savings should be illuminating, to say the least.


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