Australia and the World Past and Present

In 2000 renewables made up less than 1% of the electricity grid on the east coast of Australia and the southern states where the majority of people live.

By 2023 that figure had risen to 39%.

The federal government wants renewables to make up 82% of the grid by 2030.

Michael Wu at the Centre for Independent Studies has analised subsidies to the renewable energy sector in his report ‘Counting the Cost: Subsidies for Renewable Energy’. He has looked at 10 years of data to 2022-23.

He writes that the total amount of subsidies over the decade stands at $29 billion.

There is a mix of direct government transfers and transfers from retail energy providers (which are passed in to consumers in the form of energy surcharges).

He has not counted the Snowy Hydro 2.0 project nor state and territory solar feed in tariff schemes.

He writes that the 2023-4 budget provides for $22 billion in subsidies to the industry into the future.

$13.7 billion of this comes in the form of ‘production tax incentives’ for green hydrogen and processed critical minerals.

There is the 1.7 billion Future Made in Australia Innovation Fund.

Under the Renewable Energy Target (RET) the government stipulates that a certain percentage of electricity must come from renewable sources. Electricity retailers must buy certificates and surrender them to the Clean Energy Regulator (CER). These can be Large-scale Generation Certificates or Small-scale Technology Certificates. The cost of this is essentially passed on to electricity consumers.

Over the last 10 years, Hu estimates that electricity retailers have passed on $14 billion to large-scale power stations and $11.5 billion to households and businesses.

This averages out to $2.6 billion per year and is therefore the largest subsidy going to renewables.

The RET is supposed to end in 2030.

The Clean Energy Finance Corporation (CEFC) offers concessional loans and equity investments. The CEFC began operations in 2012. Over 10 years it has provided $13.7 billion and the value of concessions is thought to be $89 million.

The Australian Renewable Energy Agency (ARENA) provides direct grants. ARENA was also set up in 2012 and since then it has provided $2.25 billion to 663 projects. For every $1 it pays out, $3.44 is leveraged from the private sector or other levels of government.

In the early 2020s funding commitments for new renewable projects were tapering off. So, in late 2023 the federal government announced its Capacity Investment Scheme. The scheme will provide price floors and ceilings in an attempt to reduce the risk of new projects for investors. However not all of the details have been ironed out and there is a lack of transparency around exactly what the floor and ceiling will be and how much the scheme will cost taxpayers.

According to the Productivity Commission’s Trade and Assistance Review 2022-23, the Future Made in Australia Innovation Fund will focus on renewable hydrogen, critical minerals processing, green metals, low carbon liquid fuels and clean energy manufacturing.

The renewable energy sector is Australia is subsidised. Proponents argue that this is a necessary step in the process of decarbonising the nation’s energy grid.

Subsidies have played an important role in turbocharging the development of new renewable projects. Nevertheless, it seems that Australia may not be able to reach its own targets within the time frames that have been set. Significant subsidies appear set to continue well into the future. Data on renewable subsidies is not always publicly available. Additionally, there is little certainty around many of the figures for the Capacity Investment Scheme.