Australia’s first electrification budget

Electrification and energy efficiency advocates welcomed the allocation of almost $3 billion in the 2023-24 federal budget to help homes and businesses drive down their everyday energy costs and cut their emissions and reliance on fossil fuels.

$1billion was set aside for the Clean Energy Finance Corporation to help households afford the shift to gas-free, all electric and solar powered homes. RewiringAustralia co-founder and chief scientist Saul Griffith dubbed it “Australia’s first electrification budget.”

An additional $300 million of federal money will go towards electric and efficiency upgrades for social and public housing through a like-for-like funding partnership with the states and territories.

The newly allocated $1.3 billion adds to the already announced $310 million Small Business Energy Incentive – a bonus tax incentive for small businesses to upgrade their energy performance.

Taking the total closer to $3 billion is $1.25 billion committed to decarbonisingAustralian industry through the Powering the Regions Fund, announced alongside reforms to the Safeguard Mechanism last month.

“A big part of making sure that energy bills are more affordable into the future is improving the energy efficiency of Australian homes – and not just new builds,” Federal Treasurer Jim Chalmers said in his Budget speech.

“Through this Budget, we are investing $1 billion to help provide low-cost loans for double-glazing, solar panels and other improvements that will make homes easier– and cheaper – to keep cool in summer and warm in winter.

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A good start

The measures are both welcome and long overdue. They are a relatively quick and simple way to offer cost-of-living relief to households and businesses at a time when budgets are tight, and emissions reduction at a time when the global carbon budget is rapidly disappearing.

As it stands, Australia lags embarrassingly behind on home electrification and efficiency. We have a woefully inefficient existing housing stock and a hodge-podge of regulations that mean even some new houses aren’t much better.

In mid 2022 “Australia was ranked last in the developed world for policy and practice in energy performance,” says Energy Efficiency Council chief Luke Menzel.

“To reach net zero by 2050, millions of Australian homes need upgrades to boost energy efficiency and electrify appliances. This is a huge undertaking,” says Menzel, who is hopeful that the 2023 Budget will be the start of an upgrade process.

Rewiring Australia, which lobbied hard for electrification to be championed in the budget, says the measures announced by Chalmers represent “a profound reset” ofAustralia’s federal climate and energy policy.

“This is Australia’s first electrification budget. It positions us to become a world leader in the efficient electric energy system of the future. It demonstrates federal ministers have worked hard to start the massive shift towards a new energy paradigm across the economy,” Griffith says.

“We are excited to work with the government over the coming year to optimise the energy system to this commitment to electrification and make these investments go further, and further cut energy costs. We are excited that the government is making a substantial downpayment on an answer to the US Inflation ReductionAct.”

Independent member for Wentworth, Allegra Spender is also impressed, describing the household electrification package as a “big highlight” of the the budget.

“Getting Australian households off expensive gas will drive down power bills and emissions – and is something I fought hard to ensure features in the budget,”Spender says.

But she adds that the $1.3 billion committed on Tuesday must be “just a first step, because there is much more to do.”

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How will the funding be used?

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CEFC funding

The$1 billion to be distributed by the Clean Energy Finance Corporation will support lower cost lending for around 11,000 homes to invest in “battery-ready, solar PV, modern appliances and other improvements.”

The finer details of how the CEFC will distribute the $1 billion, and through which private lending partners, are yet to be nutted out. In the past, the federal government’s green bank has partnered with a broad range of lenders using abroad range of financing products.

This has included working with outfits like Plenti to offer low or zero-interest loans with zero up-front cost, and in this instance could be used to get panels on rooftops and other upgrades including the purchase of efficient electric appliances that can then be paid off using instant savings on energy bills.

Saul Griffith says the CEFC will need to get “way out of its comfort zone” to make the best of this $1 billion funding opportunity and direct it to the people who most need it.

“The people who can easily afford to [go solar and electric] without risk in theAustralian economy are already doing it,” Griffith told RenewEconomy.

“They’ve got access to credit and they’ve got money. What you’re really trying to do is make sure that middle income and low income households can afford it because they have the most again, on the energy savings.

“That $1 billion could do $40 billion worth of work, or more. So what would be highly effective is to find leverage mechanisms in the private markets. If it’s just a direct subsidy to wealthy households, it’s less effective,” Griffith says.

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Social housing upgrades

The$300 million to be used for upgrades to social housing will be spread across another 60,000 properties, and the promise of like-for-like funding with states and territories means those properties could potentially access up to $10,000 each towards slashing their grid and fossil energy use.

“This is a one-two punch to high energy bills,” said the EEC’s Menzel.

“Fixing the energy performance of social housing is one of the best things we can do to shield the most vulnerable in our community from needlessly high energy bills.”

“It’s a substantive amount of money,” says Griffith, and “the right type of sector to aim at to deal with cost of living. So it’s good.”

But Griffith says state governments will need to be smart how they go about the upgrades to use the funding to the greatest the impact.

“If they’re clever, they will look at the [properties] whose maintenance and renovation schedules are next up and then do comprehensive retrofits on those and go all electric – and then put in place a plan to get all of the social housing stock up to a really, really high standard of electrification and, and also efficiency."

“If they could pair with …a model for improving Australia’s building codes and actually regulating standards, that would be spectacular,” Griffith adds.

“It would be really good if the government could make sure that there’s regulatory teeth to match the fiscal commitments here.”

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Unsung heroes

Rewiring Australia’s Saul Griffith says one of the “under-explored wins” from the Budget is the collective amount of money put aside for energy skills training, including through the new national Net Zero Authority that has been funded and tasked with supporting workers in emissions-intensive sectors to access new employment and skills.

“I’m actually thinking that might be one of the brightest lights [in the Budget] because they could be the tens of 1000s of sparkies and trainees and technicians we need” to drive electrification and energy upgrades in Australia."

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A final word

The Energy Efficiency Council says this year's Budget marks the most significant investment in energy performance in years.

“It represents a new dawn for energy efficiency, energy management and electrification, as well as a new, collaborative approach which will help ensure we make the most of our nation’s abundant renewable energy resources.”

“The electrification budget builds on Australia’s love affair with rooftop solar,” says Griffith.

“It will help households to realise cost savings from substituting expensive gas machines for clean, electric alternatives."

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