“Australia’s first electrification budget:” How the promised billions might be used

Electrification and energy efficiency advocates are welcoming the allocation of almost $3 billion in the Albanese government’s 2023-24 federal budget to measures that will help homes and businesses drive down their everyday energy costs and cut their emissions and reliance on fossil fuels.

In what Rewiring Australia co-founder Saul Griffith has dubbed “Australia’s first electrification budget,” federal Treasurer Jim Chalmers has set aside $1 billion for the Clean Energy Finance Corporation to help households afford the shift to gas-free, all electric and solar powered homes.

Another $300 million of federal money will go towards electric and efficiency upgrades to 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 to small businesses to upgrade their energy performance.

And taking the total up closer to $3 billion is the $1.25 billion committed to decarbonising Australian industry through the Powering the Regions Fund, announced alongside reforms to 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,” said Chalmers in his Budget speech on Tuesday night.

“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.

“A common-sense program that will help family budgets – and reduce emissions.”

See: Labor creates $2bn renewable hydrogen fund as part of $4bn green energy package

A good start

The measures are both welcome and long overdue as 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, with a woefully inefficient existing housing stock and a hodge-podge of regulations that mean some new-build houses aren’t much better.

“This time last year, Australia was ranked last in the developed world for policy and practice in energy performance,” said Energy Efficiency Council chief Luke Menzel on Tuesday night.

“Tonight’s Budget demonstrated we have a government committed to ensuring that never happens again.

“To reach net zero by 2050, millions of Australian homes need upgrades to boost energy efficiency and electrify appliances. This is a huge undertaking, and today’s budget commitment is a great start.”

Rewiring Australia, which has been lobbying hard for electrification to be championed in the budget, says the measures announced by Chalmers represent “a profound reset” of Australia’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 Reduction Act.”

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.”

How will the funding be used?

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 a broad 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.

That said, 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 the Australian economy are already doing it,” Griffith told RenewEconomy on Thursday.

“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.

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 propertis 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,” he told RE.

“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.”

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, he told RenewEconomy.

A final word

“Tonight’s Budget marks the most significant investment in energy performance in years,” says the EEC.

“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.

“Tonight’s investment allows us to use abundant Aussie wind and sunshine to power more of our driving, cooking and heating, simultaneously slashing energy bills and carbon emissions.”