Australian Government, 2012‑13 Budget

Chapter 4: Innovation in clean technology and renewable energy

Innovation and investment in renewable energy and low-emissions technologies are essential to meet the environmental and economic challenges of competing in a low-pollution world. Australia is well placed to seize these opportunities, with a wealth of untapped clean and renewable energy sources, including some of the world's best wind resources and the highest average solar radiation per square metre of any continent.

The Government's 20 per cent Renewable Energy Target (RET) was always designed to complement the carbon price in supporting renewable energy investment in Australia. The combination of the RET and pricing carbon pollution will encourage a move away from traditional, emissions‑intensive, energy generation to alternative energy sources, such as hydro, solar, geothermal, wind and biomass energy, and to more efficient use of energy. While this will motivate industry to find ways of reducing pollution when energy is used or produced, the scale of the transformation required and the barriers to change are high.

As a central element of its plan for a clean energy future, the Government is encouraging innovation by significantly boosting funding and support for targeted early-stage investment in renewable energy, clean energy and other low-pollution technology innovation.

  • A new $10 billion Clean Energy Finance Corporation will invest in renewable energy, low emissions technologies and energy efficiency.
  • A new Australian Renewable Energy Agency will administer $3.2 billion in Government support for research and development, demonstration, commercialisation and deployment of renewable energy.
  • The $200 million Clean Technology Innovation Program will support business investment in research and development, proof of concept and early stage of commercialisation of clean technologies. The program will operate for five years from 2012‑13.

Together, these measures provide a robust framework to support new clean energy technologies and to build a critical mass of renewable energy, energy efficiency and low-pollution energy generation projects across Australia.


  • The Expert Review Panel, appointed to advise on the Clean Energy Finance Corporation's design, submitted their report and recommendations to Government in March 2012. The Government accepted all recommendations and released the report on 17 April 2012.
  • Sydney announced as the future location of the Clean Energy Finance Corporation on 7 March 2012.
  • Legislation enacted to establish the Australian Renewable Energy Agency.
  • The administration of the 20 percent Renewable Energy Target, legislated in 2009, was transferred to the Clean Energy Regulator on 2 April 2012.

Figure 4: Overview of innovation measures

Overview of innovation in renewable energy: $10 billion Clean Energy Finance Corporation; Australian Renewable Energy Agency; Clean Technology Innovation Program; Renewable Energy Target; Continuing existing support

Innovation and renewables programs and initiatives

Renewable Energy Target

The Renewable Energy Target is a key part of the Government's Clean Energy Future plan. In August 2009, the Government implemented the Renewable Energy Target (RET), designed to deliver on the Government's commitment to ensure that the equivalent of 20 per cent of Australia's electricity supply will come from renewable sources by 2020.

With a carbon price, the RET is expected to drive around $20 billion in private sector investment by 2020. The RET is supporting both large-scale renewable energy projects, such as wind farms and solar plants, and small-scale installations for households, small business and community groups. The RET brings forward significant renewable energy investment by both households and electricity generators, helping us prepare our economy for our targeted emissions reductions and diversify our energy mix.

The Clean Energy Regulator took over the administration of the RET from the Renewable Energy Regulator on 2 April 2012. In November 2011 RET regulations were amended to exclude biomass from native forests as an eligible renewable energy resource, as part of the plan for a clean energy future.

The RET is scheduled to be reviewed by the Climate Change Authority from July this year with a final report by 31 December 2012. The Renewable Energy (Electricity) Act 2000 sets out the framework for these reviews, including a requirement that any recommendations are not inconsistent with the objects of that legislation.

Clean Energy Finance Corporation

The Government will establish a $10 billion Clean Energy Finance Corporation (CEFC) to invest in clean energy, with $2 billion funding per year for five years starting in 2013‑14. These investments will deliver the financial capital needed to help our economy transition to cleaner energy sources.

In October 2011, the Government appointed Ms Jillian Broadbent AO, a member of the Reserve Bank Board, to chair an expert review to advise on the design of the CEFC. The Panel, whose other members are Mr David Paradice and Mr Ian Moore, has presented its report to the Government in March this year.

The CEFC will seek to co-finance clean energy projects with the private sector, working with the market to build industry capacity. The CEFC will use a commercial filter to invest in renewable energy, low-emissions and energy efficiency projects and will focus on the later stages of development. It will also invest in manufacturing businesses that produce the required later stage inputs.

The CEFC will aim to invest its capital in two streams: 50 per cent or more will be invested in the renewable energy stream and up to 50 per cent will be allocated to the low-emissions and energy efficiency stream.

The CEFC will use the disciplines of a commercial organisation in assessing investments while operating to achieve a public policy outcome. Where appropriate, the CEFC can tailor a financial package using a variety of financial products and structures, including providing funds, changing the allocation of risk, lengthening available tenor for loans and concessional cost of funds. To ensure that the CEFC has ongoing and stable funding, capital returned from its investments will be reinvested. The fund, once mature, is expected to be self-sufficient. Financial self-sufficiency provides the capacity for the CEFC to operate without requiring ongoing Government budgetary assistance beyond the announced support for the Corporation's establishment and operating costs.

The CEFC will be independent of Government and be run by a board of up to seven members, including the Chair. The Government will articulate its broad expectations on how the CEFC invests and is managed by the Board through an investment mandate. The Board will have overall responsibility to make investment decisions. The Board should comprise of members with skills and experience in banking, investment management, venture capital and private equity, clean energy sector technologies, engineering and/or the environmental sector.

Recommendations from the Expert Review Panel will inform the legislation establishing the CEFC. This legislation will be introduced into Parliament in the 2012 Winter sitting period to allow the CEFC to commence lending operations from 1 July 2013.

On 7 March 2012, the Prime Minister announced that Sydney would be home to the CEFC. Sydney was selected for its strong clean energy sector and network of financial, legal and professional services that support the CEFC's establishment and operation.

Australian Renewable Energy Agency

The Government provides substantial grant-based support for renewable energy across multiple programs. The creation of a new independent statutory body, the Australian Renewable Energy Agency (ARENA), will reform the management of these initiatives by providing more independent, efficient and streamlined administration of existing funding.

ARENA will administer $3.2 billion in Government funding previously administered through the Australian Centre for Renewable Energy (ACRE), the Australian Solar Institute (ASI) and the Department of Resources, Energy and Tourism.

ARENA will commence operations on 1 July 2012, with the objectives of improving the competitiveness of renewable energy technologies and increasing the supply of renewable energy.

ARENA will have an independent decision making board consisting of the Secretary of the Department of Resources, Energy and Tourism and six members appointed by the Minister for Resources and Energy. Members of the Board will have skills in renewable energy technology, commercialisation, business investment and corporate governance.

ARENA will also have an independent CEO appointed by the Minister for Resources and Energy on the recommendation of the Board.

Around $1.7 billion in uncommitted funding from the range of consolidated programs will be available to ARENA to invest in accordance with a funding strategy to be developed by the Board.

ARENA's funding is guaranteed in legislation to 2020 and can be supplemented by future dividends from the CEFC providing improved long-term funding and policy certainty for industry.

Clean Technology Innovation Program

The Government is providing $200 million over five years from 2012‑13 through the Clean Technology Innovation Program (CTINNP) to support targeted business investment in research and development, proof of concept and early stage commercialisation activities. Businesses will be assisted to develop new products, processes and services in the areas of clean energy, low-emissions technology and other energy-efficient technologies. In this way, the CTINNP will support innovative solutions to the challenges associated with the transition to a low carbon economy.

CTINNP is part of the $1.2 billion Clean Technology Program (discussed in Chapter 3), which also includes the Clean Technology Investment Program and the Clean Technology Food and Foundries Investment Program.

CTINNP will offer competitive grants of between $50,000 and $5 million, contributing one dollar for every one dollar contributed by grantees (a Government contribution rate of up to 50 per cent of eligible expenditure). Companies will continue to have access to the broader R&D Tax incentives.

Successful program applicants will need to demonstrate the extent of their project's contribution to a reduction in carbon emissions or energy consumption, and to the sustainability of a business or industry. Projects involving collaboration will also be encouraged.

CTINNP will be administered and delivered by AusIndustry, with the support of Innovation Australia. Engagement with the public and key stakeholders on the design of the Program commenced in late 2011 and consultation on themes arising from this consultation is ongoing. The Program will open to applications in mid July 2012.

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