Clean energy takes centre stage in federal budget, industry reactions

The Albanese Labor government has delivered its 2023 – 2024 budget, placing energy front and centre. The budget takes the government’s total spend on making Australia a renewable superpower to $40 billion (USD 27 billion). While many in the industry have applauded the budget, there are some glaring contradictions.

Prime Minister Anthony Albanese (right) and Energy Minister Chris Bowen.

Image: Anthony Albanese / Twitter

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Described as a foundation, “building blocks” for Australia’s renewable pathway, the Albanese Labor government’s federal budget has been met warmly by advocates for renewables, for the most part. There are, of course, calls for the federal government to go further in its support, but the primary criticism revolves around the failure to demand more from polluters and cease fossil fuel subsidies.

Nonetheless, the change in rhetoric from the last federal budget, delivered by Scott Morrison’s previous Coalition government, is seismic. In total, the budget allocates an additional $4 billion towards Australia’s superpower vision, expanding on what was allocated in October’s budget and from previously announced programs. Half of this, $2 billion, is going specifically towards hydrogen.

Pv magazine Australia looks at what’s new in terms of funding, what’s been omitted and industry reactions.

Building government capacity

As unsexy as it sounds, building the government’s internal capacity to do things like ensure emissions are correctly measured, green hydrogen is in fact green, carbon credits represent actual abatement and new buildings won’t leach energy are undeniably important for the energy transition.

The 2023 budget delivers funding for all these things – something Climate Energy Finance lead finance and energy analyst, Tim Buckley, describes as “sensible.”

To that end, the budget has allocated $46.5 million to the Australian Energy Regulator to regulate energy markets. The Regulator will also oversee Australia’s hydrogen ‘Guarantee of Origin’ scheme, which seeks to quantify the carbon intensity of hydrogen products, and has been awarded $38.2 million. This scheme, while generally welcomed, has been critiqued for not seeking to guarantee ‘time-matched’ renewable energy is being used for green hydrogen projects – something being demanded by the US and Europe. 

There is also $5.6 million for the Department of Climate Change, Energy, the Environment and Water to conduct analysis to ensure Australia keeps its competitive edge, skilled workforce and secure supply chains for renewable energy ventures.

On the topic of workforce, the clean energy skills and training sector will benefit from an additional $3.7 billion for the National Skills Agreement over the next five years, taking the total spend to $12.8 billion.

The government has also allocated $4.2 million for the Australian Securities and Investments Commission, better known as ASIC, to enforce actions against greenwashing.

A further $18 million will go towards reforming the Australian Carbon Credit Unit (ACCU) scheme, which has been plagued by scandals over the last years.

Renewables support

Budget support for the renewables sector came in many different flavours – though is seemingly less direct than the support being offered to hydrogen and households.

Around $90 million will go towards progressing Australia’s new Capacity Investment Scheme which basically sets out to underwrite storage projects across Australia and firm renewable generation via an auction process. The scheme is aiming to “unlock” $10 billion in new investment.

To support Australian businesses manufacturing, commercialising and adopting renewable technologies, $14.8 million has been allocated as part of the Powering Australia Industry Growth Centre.

Critical minerals used to make renewable technologies also featured in the budget, with the government investing $57.1 million to develop Critical Minerals International Partnerships – building on $2 billion for the Critical Minerals Facility and another $1 billion targeted to value‑adding in resources, under the National Reconstruction Fund. The previously announced National Reconstruction Fund has up to $3 billion allocated for investment in low emissions technologies including green metals.

The federal government has leveraged $12 billion of its $20 billion investment in Rewiring the Nation to what it describes as “transformational transmission projects,” including:

  • $1 billion in Tasmania’s Battery of the Nation projects
  • $1.5 billion towards Renewable Energy Zones and offshore wind in Victoria
  • $4.7 billion to unlock critical transmission in New South Wales.

Hydrogen support

Hydrogen has to be one of the budget’s biggest winners, attracting $2 billion for production incentives. The move seems to be in response to the growing upset around Australia’s hydrogen potential being undercut by the US Inflation Reduction Act, which heavily subsidises hydrogen.

Of the hydrogen funding, John Grimes, Chief Executive of the Smart Energy Council said: “Reverse auction tendering with a gigawatt scale hydrogen capacity to be delivered by the end of this decade – with funding for First Nations people to engage with Australia’s renewable hydrogen industry – that is a great shift forward.” The First Nations engagement part of the policy has been awarded $2 million.

The Clean Energy Council said the hydrogen funding would help leverage billions in private investment, describing it is a “substantial downpayment on Australia’s response to the United States Inflation Reduction Act.”

A number of hydrogen companies in Australia have also voiced support. “These will help bridge the commercial gap for early projects and put Australia on course for up to a gigawatt of electrolyser capacity by 2030 through two to three flagship projects,” WA-based hydrogen company Provaris said. The company also applauded the $38 million in funding for the Guarantee of Origin or GOO scheme, noting “credible certification has been a consistent discussion point” in its negotiations.

Households

On top of $3 billion in rebates to directly reduce energy bills for over 5 million households, the budget has set up a Household Energy Upgrades Fund.

The total $1.3 billion fund will provide $1 billion to the Clean Energy Finance Corporation (CEFC) to finance home energy upgrades, like installing solar or energy efficiency appliances, for around 110,000 households.

The government has also delivered on a previous promise to co-fund a $600 million to upgrade social housing, for which it has allocated $300 million.

There is also $36.7 million to expand and upgrade the Nationwide House Energy Rating Scheme  (NatHERS) to apply to existing homes, which will give households better information for decisions on energy upgrades and renting or buying homes.

Small businesses

Like households, small businesses are also being encouraged to upgrade their energy systems. The government’s Small Business Energy Incentive will provide $310 million in tax relief to support small businesses to make investments like electrifying heating and cooling.

This particular policy was met cooly by the managing director of solar company Smart Commercial Solar, Huon Hoogesteger. “Forgive my scepticism of vote-grabbing headlines, but 95% of small businesses are not the ones that have the spare cash to be spending on non-core business items,” Hoogesteger said. “This cash won’t stimulate new markets and it’s a relatively small amount of money when you consider there are 2.4 million small businesses in Australia…that equates to less than $130 each.”

‘Not enough’

Perhaps the most defining two words of the energy transition, ‘not enough,’ have also been lobbed at the 2023 budget – which, having delivered Australia’s first surplus in years, clearly had more money to spend.

“$4 billion in new funding to make Australia a renewable energy superpower, taking total funding to $40 billion including the previously announced programs,” Climate Energy Finance (CEF) lead finance and energy analyst, Tim Buckley, said. “But this is well below the cumulative $100 billion of public capital Climate Energy Finance considers is required to crowd-in $200-300 billion of private capital investment to position Australia as a global leader in energy transition and ensure our energy security and independence.”

Flops

Aside from fiscal conservatism, the Albanese government has also been criticised for its refusal to stop subsidising fossil fuel industries, and for failing to demand more money from polluters.

“Labor’s still spending $41.4 billion on fossil fuel subsidies, more than the $29.5 billion climate spend,” Greens leader Adam Bandt said. 

Alongside the continuing subsidies for oil and gas, Buckley described the government’s failure to move on demanding proper corporate tax as “disappointing.” 

“We call on the government to refocus attention on multinational corporates operating in Australia to ensure they pay at least some corporate tax here, particularly those fossil fuel global giants who have paid nothing over the last decade, even as they use our finite public resources for private foreign gain. It is disappointing to see not even a reference to this in the 2023 budget,” Buckley said.

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