The 2025-26 Federal Budget reveals $1.3 billion (USD 940 million) has been cut from the Battery Breakthrough Initiative, Solar Sunshot and Hydrogen Headstart programs. More than $600 million additional cuts fall on various other clean energy and climate solutions programs.
In handing down the latest Budget, federal Treasurer Jim Chalmers confirmed the government is pulling millions out of the Solar Sunshot policy that was first announced in March 2024, promising $1 billion in production subsidies and grants to build a solar supply chain on Australian soil.
Unallocated funding will also be withdrawn from the Battery Breakthrough Initiative, launched in August 2025 with $500 million in capital grants and production incentives designed to boost domestic manufacturing capacity.
Budget papers show also that the Hydrogen Headstart program, that offers tax credits for projects producing hydrogen from renewable energy, is facing changes with funding available for Round 2 of the initiative reduced to $1 billion, a move government said “largely” reflects “lower-than-expected production forecasts from the renewable hydrogen industry.”
Government forecasts show the changes will save $1.3 billion across the three renewables programs over the next 10 years.
There are also savings from uncommitted funding in other grants schemes, including $93.8 million over two years from reducing uncommitted funding under the Powering the Regions Fund and $78.6 million over four years from reprioritising uncontracted funding under the Regional Hydrogen Hubs program.
The cuts have been tempered by support for other renewable energy initiatives, including the Cheaper Home Batteries program, with funding of $7.2 billion over the forward estimates. The program has already helped more than 390,000 households install battery energy storage and added more than 10 GW of renewable energy capacity to the grid in just 11 months.
The government has also allocated $97.2 million over five years to continue implementing the National Consumer Energy Resources Roadmap, including $71.8 million in this budget to establish a National Technical Regulator. The new regulator will be responsible for setting technical standards to support the integration of consumer energy resources including solar, batteries and electric vehicles (EVs) into the National Electricity Market, helping ensure these technologies can connect, interact and operate reliably across the system.
Support for EV uptake continues with the Electric Car Discount (fringe benefit tax exemption) to be maintained in full until April 2027. From that date, the tax exemption will still apply to electric vehicles costing less than $75,000, but those above that threshold will only get a 25% discount on the fringe benefits tax
The government has also announced tax breaks for companies undertaking research and development (R&D) will be overhauled with the maximum expenditure threshold lifted from $150 million to $200 million, and the minimum expenditure threshold raised from $20,000 to $50,000.
The Smart Energy Council (SEC) described the 2025-26 Federal Budget as “cautiously positive for renewables,” adding that cuts to the Battery Breakthrough and Solar Sunshot programs are a “disappointing signal for investments in local manufacturing and critical energy infrastructure.”
The Investor Group on Climate Change (IGCC), which represents local and global superannuation and retail investment funds with more than $4.5 trillion under local management, said the Budget is full of mixed messages.
“The Budget misses the moment to send clear policy signals to supercharge clean energy and industry, risking the flight of investment elsewhere,” it said, adding that “overall, this budget is a big step backwards for clean energy, climate solutions, energy security and Australia’s readiness for a changing climate.”
“There are some minor measures to boost investment in early-stage climate tech and the home battery program has survived, but overall the budget puts the brakes on new clean energy supply and will therefore harm Australian households and businesses.”
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