Investments and other subsidies
Australia’s clean energy sector is currently experiencing significant change in the wake of the Australian government’s introduction of the Securing a Clean Energy Future Climate Change Plan (the Plan). The Plan has initiatives in four key areas – carbon pricing, renewable energy, energy efficiency and land management. The government has released numerous federal funding initiatives within the Plan, many of which are applicable to renewable energy. There are also a number of policies, programs and incentives outside of the Plan, with key initiatives specifically related to renewable energy that are described below.
Carbon Price Mechanism (CPM)
Central to the Plan is the introduction of a CPM. Revenue generated from the CPM will be invested to alleviate the impact of price increases, support more jobs and encourage innovations addressing climate change. Enhanced support for renewable energy is expected to drive innovation and investment into clean technologies and clean energy R&D, demonstration, deployment and uptake.
The carbon price is being introduced in a two-step process, starting with a fixed price period that runs from 1 July 2012 to 30 June 2015 before transitioning to an emissions trading scheme. In the fixed price stage the carbon price will start at Australian dollar (AUD) 23 per tonne and rise by 2.5 percent a year in real terms. From 1 July 2015 onwards, the price will be set by the market, with the number of permits issued by the government each year to be capped. The carbon price was passed by parliament on 8 November 2011 and commenced on 1 July 2012.
Australian Renewable Energy Agency (ARENA)
ARENA is tasked with managing AUD3.2 billion of financial assistance for renewable energy projects and initiatives promoting the R&D, demonstration, commercialization and deployment of renewable energy projects. The availability of this funding is expected to improve the sector’s long-term competitiveness and drive down its costs in an Australian context. Approximately AUD2.2 billion of ARENA’s funding is currently uncommitted and will be available to support future projects in the renewable energy sector.
ARENA incorporates and has responsibility for overseeing renewable energy initiatives previously administered separately through a range of bodies including the Australian Centre for Renewable Energy (ACRE), Solar Flagships Program, Australian Solar Institute (ASI), Low Emissions Technology Demonstration Fund, Renewable Energy Demonstration Program, Renewable Energy Venture Capital Fund, Australian Biofuels Research Institute, Geothermal Drilling Program and the Second Generation Biofuels Research and Development Program. ARENA also has accountability for administering unallocated funding.
Listed below are initiatives which are currently open or in planning phases where additional funding is expected to be announced.
Emerging Renewables Program (ERP)
The ERP is focused on supporting renewable energy technology at the development, demonstration and supported commercial stages of the innovation chain. Ultimately the aim is to lower the cost of energy produced by renewable energy technologies to a point where they are better able to compete with traditional fossil-fuel technologies. Funding totalling AUD126 million is available under two categories:
- Projects – Offers funding for renewable energy and enabling technologies and products as they move through the technology innovation chain. The application process is undertaken in two phases, with funding allocations expected to fall within the range of AUD2 million to 30 million.
- Measures – Offers funding for initiatives that involve a renewable energy industry capacity building activity, skills development activity or a preparatory activity for an ACRE Project. The application process is undertaken in one phase and is expected to fund up to AUD2 million, with a maximum funding pool of AUD10 million.
Of the total funding pool of AUD126 million:
- At least AUD40 million will be allocated to assist the development of renewable energy and enabling technologies with the potential to contribute to the generation of large-scale base load power such as wave, geothermal and enabling technologies.
- A further AUD26.6 million will be allocated specifically to assist the geothermal energy sector.
Regional Australia’s Renewables (RAR)
ARENA has also launched a new strategic initiative, the RAR program, which aims to demonstrate the viability of renewable energy in regional and remote locations. It will support the deployment of commercially prospective renewable energy technologies, both generation and enabling, in off-grid and edge-of-grid situations. The RAR program has sought community consultation and is expected to be formally launched in the first half of 2013, with funding running for two to three years.
Renewable Energy Venture Capital Fund
The Southern Cross Renewable Energy Fund is a 13-year, AUD200 million venture capital fund, operated by Southern Cross Venture Partners. The fund was established under the Australian government’s AUD100 million Renewable Energy Venture Capital Fund (REVC). The government’s contribution has been matched by an additional AUD100 million contributed by Softbank China Venture Capital.
With offices and staff located in Sydney, Palo Alto and Shanghai, the fund makes selected investments in Australian renewable energy companies, providing capital and assisting with the management skills they need to commercialize their technologies and succeed in domestic and overseas markets.
Opportunities previously funded by the ASI
ARENA has committed support for programs previously administered by the ASI, including the United States- Australia Solar Energy Collaboration Strategic Research Initiative as well as solar Ph.D. scholars and postdoctoral fellows following the success of ASI’s Skills Development Program.
Clean Energy Finance Corporation (CEFC)
The government has established the CEFC through a financial commitment of AUD10 billion to overcome capital market barriers that hinder the financing, commercialization and deployment of renewable energy, energy efficiency and low emissions technologies. The CEFC will be responsible for investing in firms and projects that utilize these technologies as well as manufacturing businesses that focus on producing the inputs required.
The CEFC began operations on 1 July 2013 and offers complementary financing alongside private sector financing for renewable energy and clean energy enabling technologies. Funding will be allocated over a period of five years, with AUD5 billion for renewable energy and technology including geothermal, wave energy and large scale solar power generation. The remaining AUD5 billion will be allocated to the general clean energy stream which may also include renewable energy.
The CEFC is intended to be commercially oriented and make a positive return on its investment. In its early stages the CEFC will be offer loans on concessional commercial terms, with each agreement being considered individually. As the fund matures, the CEFC may choose to offer alternate funding arrangements, including mezzanine finance and other equitybased funding arrangements.
Ethanol Production Grants (EPG)
The EPG program will support the production and deployment of ethanol as a sustainable alternative transport fuel in Australia. The program provides support via a full excise reimbursement, at a rate of 38.143 cents per litre, to ethanol producers for ethanol produced and supplied for transport use in Australia from locally derived feedstocks. The program and grants are administered by the Department of Resources, Energy and Tourism.
R&D Tax Incentive
The major mechanism and program for fostering innovation is a tax-based scheme rewarding expenditure on R&D activities. The R&D Tax Incentive scheme is a broad-based program accessible to all industry sectors. The R&D scheme has recently undergone a significant change, transitioning from the R&D Tax concession to the R&D Tax Incentive. In many instances, activities conducted as a part of renewable energy development may be eligible for the R&D tax incentive. The program offers two tiers of incentive based on the turnover of the company in question:
- A 45 percent refundable tax offset (equivalent to a 150 percent deduction) for eligible entities with a grouped turnover of less than AUD20 million per annum.
- A non-refundable 40 percent tax offset (equivalent to 133 percent deduction) for all other eligible entities. Unused non-refundable offset amounts may be able to be carried forward to future income years.
The R&D Tax Incentive is an entitlement based, self-assessment program. Registration of activities, via the R&D application, is required within 10 months of the relevant financial year end.
There are no national based feed-in tariffs. However, a number of state based initiatives exist for small-scale generation. The Australian Capital Territory (ACT) has a Large Scale Feed-in Tariff Scheme (the Scheme) which provides the ACT government with power to grant feed-in tariff entitlements up to 210 MW of generation capacity. The first tranche of capacity released under the ACT provided industry with an opportunity to compete for the establishment of up to 40 MW of solar generation (minimum 2 MW generating system capacity). Applications for the 40 MW tranche are closed, but further tranches are expected.
20 percent by 2020.
In addition to the funding initiatives described above, the government also has a number of policy levers and numerous other programs.