Energy

The Australian Government is committed to the provision of adequate, reliable and affordable energy to meet future energy consumption needs and to underpin strong economic growth, consistent with the principles of environmental responsibility and sustainable development.

6.2: Clean energy policy framework

6.2.1 Clean energy deployment
6.2.2 Clean energy innovation
6.2.3 Enabling activities

Policy objectives

The objectives of the clean energy policy framework are to:

support the efficient long-term transformation of the Australian energy system to a clean energy future, consistent with Australia’s national economic, social and environmental objectives and greenhouse gas emissions reduction targets
ensure that Australian energy markets have timely commercial access to the broadest range of proven and effective clean energy technologies
capture the economic and social benefits of clean energy through the creation of new jobs, innovative capabilities, skills and industry capacities, and the promotion of the sustainable export of Australian clean energy goods and services.

Principles

Australia’s energy technology and fuel mix should be determined by the market, guided by clear policy objectives and supporting market frameworks that internalise and reflect relevant energy and environmental costs.
Government support for clean energy technology development should be prioritised against national energy objectives, be appropriate to market conditions, and interact efficiently with the Australian Government’s broader innovation policy framework.
Government support mechanisms should reflect the long-term nature and complexity of clean energy technology development.
Government assistance to support households and industry in the transformation to a clean energy future should be provided in a way that maintains incentives to reduce carbon pollution.
Clean energy measures should interface effectively and efficiently with other aspects of energy policy (particularly energy market design and operation) and should be complementary to carbon pricing.

Framework elements

The core elements that underpin Australia’s clean energy transformation are:

efficient deployment based on market price signals
clean energy innovation at an early phase
enabling measures that address potential non-price market barriers along the development chain.

6.2.1 Clean energy deployment

Market-based price signals will drive the least-cost deployment of clean energy technologies in Australia’s overall energy mix.

The Australian Government has legislated two key market measures to support the deployment of clean energy technologies: a price on carbon and the Renewable Energy Target. The carbon pricing mechanism (in concert with energy prices) will provide the primary long-term price signal to drive clean energy investment, while the Renewable Energy Target complements it by providing additional support for renewable energy investment and industry development in the transition period to more mature carbon prices and technology costs.

As visible signals, these measures also provide a powerful ‘pull through’ incentive for technology development. This generates a longer-term transparent price signal to guide long-lived investment decisions. A third form of deployment driver offered by some states and territories in Australia is feed-in tariffs, which provide an agreed buyback rate for power sold into the market from distributed generators (including co- or tri-generation systems).

6.2.2 Clean energy innovation

From early-stage research through to early-stage commercialisation, there are a range of well-recognised market failures and non-price barriers that, if not addressed, will result in national underinvestment in clean energy innovation (Garnaut 2011, IEA 2012b).

The Australian Government has committed substantial resources across the innovation system to support clean energy technology development. Current commitments total more than $17 billion.²

This includes the establishment of the commercially oriented Clean Energy Finance Corporation with funding of $10 billion to invest in renewable energy, low-emissions and energy-efficiency projects and technologies, as well as in manufacturing businesses that supply inputs to those technologies. The government has also established the Australian Renewable Energy Agency (ARENA) as an independent statutory body managing $3.2 billion in funding to support renewable energy R&D, demonstration, commercialisation and deployment (see Box 6.2). In addition, the government has provided $1.2 billion in the Clean Technology Program to support the development and early-stage commercialisation of clean technologies across industry.

The government is also providing around $2 billion in support for the research, development and demonstration of CCS technology, including the CCS Flagships program.

Support for innovation extends beyond technology development. The government has established world-class innovation facilities and capabilities through the CSIRO and through its support for university-level research. The government also provides support and services for clean energy technology companies to commercialise new ideas and find new markets. This includes Enterprise Connect’s services through the Clean Technology Innovation Centre, the Clean Technology Supplier Advocate and Austrade’s Inward Investment Strategy.

Box 6.2: The Australian Renewable Energy Agency

The Australian Renewable Energy Agency (ARENA), which commenced operation on 1 July 2012, is integral to the government’s plan to move to a clean energy future.

Under the direction of an independent board and with $3.2 billion of funding, ARENA will invest in a portfolio of renewable energy assets with the aim of achieving diversity across several dimensions—technologies, funding sources and business models. ARENA will draw on the lessons learned from previous renewable energy support programs to design and implement funding mechanisms that deliver the right type and quantum of assistance at different stages of the innovation cycle.

Some of the ways in which ARENA will help to improve the competitiveness of renewable energy technologies and contribute to increasing the supply of renewable energy in Australia include supporting:

demonstration projects that enable learning by doing and help move renewable energy technologies and systems closer to commercialisation
the growth in renewables in regional areas where there is a growing demand for energy and distributed generation, which would help reduce greenhouse gas emissions and/or potentially avoid or defer infrastructure upgrades and associated costs
enabling initiatives such as pre-competitive data acquisition and resource mapping
strategic knowledge generation and sharing of knowledge and information from the projects it funds
initiatives that provide system-wide solutions to renewable energy output variability
the creation of critical mass in renewable energy technology development
initiatives that assist with finance sector risk reduction
the development of skills in the renewable energy industry.

6.2.3 Enabling activities

Enabling activities attempt to address non-price barriers to the take-up of clean energy to remove roadblocks in the innovation cycle and provide a foundation for deployment and innovation.

Fostering collaboration and building the knowledge base

Building the knowledge base in the clean energy sector domestically and internationally will require collaboration between government and industry to ensure that the lessons from technology deployment are absorbed.

The Australian Government supports these efforts through continued engagement in a range of international energy and clean development forums, such as the International Energy Agency, the International Renewable Energy Agency and the Clean Energy Ministerial Forum, and through bilateral engagements with key trading partners.

Skills and training

The Australian Government is providing significant support for skills and training in clean energy industries. For example, the government is providing funding of up to $32 million over four years through the Clean Energy and Other Skills Package to address clean energy skills gaps in professional and trades training and to support training in clean energy for current workers. In addition, the Australian Solar Institute (which will be part of ARENA from 1 January 2013) is supporting researchers through its Skills Development Program. Skills and workforce development issues are discussed further in Chapter 12: Sustainability, workforce and Indigenous opportunities.

Regulatory frameworks

Nationally consistent approaches to the regulation of new technologies on matters such as siting, planning and managing environmental impacts are important for building investor confidence and community acceptance.

Australian jurisdictions are currently developing regulatory regimes for CCS, geothermal energy and ocean energy. There is potential for those regimes to develop along different paths, meaning that developers may face different regulatory requirements in different jurisdictions. Through the Standing Council on Energy and Resources, Australian governments are working towards harmonised or consistent regimes for CCS and geothermal technologies.

The Standing Council on Energy and Resources and Australia’s key energy market organisations have been considering Australia’s energy market arrangements to ensure that they do not include any unintended barriers to the connection, integration and efficient use of new clean energy technologies, and to ensure that the benefits of demand-side response and distributed generation are optimised.³

Improving financial and technical awareness

Many emerging clean energy technologies have yet to establish themselves in commercial markets. One consequence of this is that investors (including finance providers) have limited experience and understanding of the technologies and how they may operate in energy markets. Combined with the high capital costs of clean energy projects, their longer timeframes for deployment and the perceived technological risks, this can increase the costs of debt and equity finance for such projects.

One objective of the government’s clean energy innovation and technology programs is to improve market understanding and experience in financing and operating clean energy technologies in order to significantly ‘de-risk’ clean energy technologies and resource developments. This includes professional assessments of technology potential and the size and intermittency of clean energy resources around the country.

The government has established the Clean Energy Finance Corporation to overcome capital market barriers that hinder the financing, commercialisation and deployment of renewable energy, energy efficiency and low-emissions technologies. This will potentially include support for supply chain businesses that focus on producing inputs required in such projects. The government also manages a suite of equity and tax-based initiatives to help develop the Australian venture capital sector—an important source of seed funding for clean energy innovation.

The government is working to improve financial understanding of CCS technology through the CCS Flagships program and Global CCS Institute.

² This is in addition to support provided through the carbon pricing mechanism, the Renewable Energy Target, research sector funding, concessional excise treatment for alternative transport fuels, general venture capital support from the government, and land-sector measures to support the transition to a clean energy future.

³ The Australian Energy Market Commission's reviews of energy market frameworks, distribution frameworks and demand-side participation are addressing issues relating to barriers to the connection, integration and efficient use of new clean energy technologies.

Page Last Updated: 8/11/2012 2:38 PM