Budget Review October 2022–23 Index

Stephen McMaugh and Tessa Satherley

The Budget addresses most of the Government’s major election commitments relating to renewable energy, as outlined in the Australian Labor Party’s pre-election Powering Australia plan. It also paves the way for regulatory intervention to address surging prices in the east coast gas market.


Flagship measure: Rewiring the Nation

The Government has made an overall commitment of $20 billion under the Powering Australia – Rewiring the Nation (RTN) measure that will provide concessional loans and equity to invest in transmission infrastructure projects (Budget Measures: budget paper no. 2: 2022–23, p. 72). This delivers on its election commitment and responds to the requirement for construction of around 10,000 km of major transmission lines foreshadowed for the future operation of the National Electricity Market (NEM) (p. 8).

The Budget papers outline that RTN will be managed by a new Rewiring the Nation Office (RTNO) within the Department of Climate Change, Energy the Environment and Water (DCCEEW). The Australian Energy Market Operator (AEMO) will be the technical advisor and the Clean Energy Finance Corporation (CEFC) the financing arm.

This approach appears to indicate that the Government no longer intends to establish a separate Rewiring the Nation Corporation (Labor’s original plan, as costed by the Parliamentary Budget Office). This is consistent with the findings of a KPMG survey of senior executives on transmission investment issues, which found unanimous support for using existing market bodies in the allocation of funding to new transmission projects (p. 31).

The Budget is not immediately clear on how many years the $20 billion for concessional finance and equity investments cover. However, the CEFC will receive an $8.6 billion capital injection this financial year (Agency Resourcing: budget paper no. 4: 2022–23, p. 125), which the CEFC has stated is ‘an $8.6 billion capital injection … for RTN-related investments’.

The CEFC says this funding will be ‘subject to parliamentary approval’ and ‘will be the first injection of new capital to the CEFC’ beyond the original amounts set out in the Clean Energy Finance Corporation Act 2012.

On 19 October, the Prime Minister announced agreements with Tasmania and Victoria supporting major transmission projects through the RTN: the Marinus link between Victoria and Tasmania, and the Victoria–New South Wales Interconnector (VNI West) Kerang link, respectively.

The Victorian agreement also includes a commitment to coordinate regulatory processes for the development of offshore wind. The Budget measure Establishing Offshore Renewables in Australia provides $0.5 million in 2022–23 to develop an offshore renewable energy industry growth strategy (Budget paper no. 2, p. 61). Since the passage of the Offshore Electricity Infrastructure Act 2021, offshore wind projects announced in Australia have reportedly exceeded 50 GW of proposed capacity.

Funding for the Powering Australia – Rewiring the Nation measure also includes $9.4 million over 4 years to deliver reforms to transmission regulations. This includes funding for the ‘Regulatory Investment Test – Transmission’ (RIT-T) and for the designation of ‘Nationally Significant Transmission Projects’. Energy ministers agreed at their meeting on 12 August 2022 that they will ‘identify and declare transmission of national significance … to accelerate the timely delivery of these critical projects and ensure better community consultation’.

During the 2022 election campaign, Labor committed to improving the RIT-T process – which is widely regarded as excessively complex and lengthy (pp. 7–8). The Rewiring the Nation measure also includes $5.8 million over 3 years to conduct a review of AEMO’s Integrated System Plan (ISP) framework and consider alternative transmission planning frameworks from other jurisdictions (Budget paper no. 2, p. 72).

The federal–state Energy Ministers forum appears to expect the review to have an impact in time to ‘supercharge’ AEMO’s upcoming 2024 ISP, as well as achieve better integration of electricity and gas system planning. The Energy Ministers stated that the review ‘will also work with non-NEM jurisdictions to support more coordinated investment and delivery’.

The Budget’s investments through RTN and other measures – discussed here and in the climate and disasters Budget Review article – have been welcomed by diverse stakeholders, including state governments, Energy Networks Australia, the Clean Energy Council, the Actuaries Institute, the Business Council of Australia, the National Farmers Federation and major environment and climate peak bodies.

Clean Energy Council Chief Executive Kane Thornton especially welcomed the RTN:

Tonight’s announcements reveal a breadth and depth of commitment not seen before when it comes to successfully managing a fast and fair transition to renewable energy. Funding, like that announced last week under the Rewiring the Nation program to proceed with Marinus Link and for Clean Energy Finance Corporation funding for the Victoria-NSW KerangLink interconnector, enabling more clean, low-cost renewable energy and storage to power Australian homes and business is what will ultimately ease cost-of-living pressures.

Other measures

The Government will implement a National Energy Transformation Partnership through the Support for Energy Security and Reliability measure, with funding of $157.9 million over 6 years (Budget paper no. 2, p. 77). This includes:

  • developing ‘mechanisms to ensure firming capacity for the National Electricity Market, manage future generator closures and support large scale battery projects’
  • changes to AEMO’s powers and the National Gas Rules (see below)
  • improving energy system planning and performance management by ‘developing analysis of Australia’s regional energy supply and demand’.

The Support for the Australian Energy Regulator to Implement Regulatory Changes measure also provides $8.5 million over 4 years from 2022–23 (and $1.9 million per year ongoing) to implement the Post-2025 reforms to the National Electricity Market (Budget paper no. 2, p. 192). These reforms are intended to tackle challenges posed by the energy transition, including ensuring reliable and affordable energy, integration of renewable generation, and providing transmission networks to meet future needs.

Another election commitment funded in the Budget is the Powering Australia – Solar Banks measure, with $102.2 million over 4 years to deploy community-scale solar and clean energy technologies in ‘regional communities, social housing, apartments, rental accommodation, and households that are traditionally unable to access rooftop solar’ (Budget paper no. 2, p. 73). It appears that this will be delivered via transfers to the states of $101 million over 2 years, but with state allocations yet to be determined (Federal Financial Relations: Budget paper no. 3: 2022–23, p. 68).

The related Powering Australia – Community Batteries for Household Solar measure provides $224.3 million over 4 years (Budget paper no. 2, p. 69). The Australian Renewable Energy Agency will administer $188.4 million of this to ‘help roll out up to 342 community batteries across Australia providing access to battery storage to households’. The DCCEEW will receive $30.3 million, of which $29 million is administered funds (Portfolio Budget Statements: Budget related paper no. 1.3: 2022–23, Table 1.2, p. 23). The ACCC will also receive $3.3 million under this measure, but its role is currently unclear.

Other complementary measures in Budget paper no. 2 include:

  • Enabling a Low Emissions Future and Supporting Green Markets, a Guarantee of Origin Certificate scheme to verify emissions associated with Australian renewable electricity, hydrogen and other low emissions commodities (p. 59)
  • Energy Efficiency Grants for Small and Medium Sized Enterprises (p. 60)
  • the First Nations Community Microgrids Program (p. 61)
  • New Energy Apprenticeships and the New Energy Skills Program (p. 101)
  • Powering Australia – Commonwealth Fleet Leases (p. 109)
  • National Reconstruction Fund – establishment, $15 billion for ‘targeted co-investments’ in priority areas, including renewables and low emission technologies (p. 153)
  • local energy-related projects under Supporting Australian Industry (p. 155).

Conversely, the Budget cuts $63.9 million from the unsuccessful 2018–19 Underwriting New Generation Investments program, initially established to support new electricity generation projects, including gas- and coal-fired generation. This funding has been re-aligned to support dispatchable energy storage technology such as big batteries (Budget paper no. 2, p. 77).


Changes to spending measures

The DCCEEW’s breakdown of program cuts to former portfolio programs under the Government Spending Audit notably includes:

  • 2022–23 March Budget measure Energy and Emissions Reduction (including a saving of $50.3 million over the forward estimates by cutting ‘Accelerating Gas Priority Infrastructure’)
  • 2021–22 Budget measure Emissions Reduction and New Investments under the Technology Investment Roadmap (including $50 million from cutting ‘CCUS [Carbon Capture, Use and Storage] Hubs and Technologies’ – see the climate and disasters Budget Review article)
  • 2021–22 Budget measure Improving Energy Affordability and Reliability ($7 million from cutting ‘Hydrogen Ready Gas Infrastructure’).

Budget paper no. 2 also indicates the Government is not proceeding with:

  • the ‘Optimise and Discover’ program under the 2021–22 MYEFO measure Strategic Basin Plans – additional funding (p. 157)
  • the 2019–20 MYEFO measure Grid Reliability Fund – establishment (p. 80).

Although the Australian Conservation Foundation commended the Government for ‘not proceeding with certain environmentally harmful or low value gas, carbon capture and storage pipeline investments’, it complained that ‘the Fuel Tax Credit scheme continues to cost taxpayers $39.4 billion over the forward estimates, subsidising the fuel bills of big mining companies’ (see Budget paper no. 1, p. 180), and that ‘$1.9 billion is allocated for the Middle Arm petrochemical precinct at the port of Darwin’ (under the measure Responsible Investment to Grow Our Regions in Budget paper no. 2, p. 163).

Funding for regulation

The Budget captures the Government’s first salvo in its evolving response to high gas prices in eastern Australia – a source of concern to both industry and households, due to both the direct costs (especially to industrial gas users) and flow-on impacts on electricity prices.

Dramatic gas price increases in 2022 have largely been driven by developments on international markets outside government control (see the Library’s Briefing Book article on coal, gas and decarbonisation).

The Budget funds a number of regulatory measures intended to apply downward pressure on domestic gas prices, including increased monitoring by the ACCC, new regulatory roles for the Australian Energy Regulator (AER) and changes to AEMO’s powers.

The Supporting the Supply of Australian Gas measure in Budget paper no. 2 (p. 157) provides $65.7 million over 9 years:

This is complemented by the measure Support for the Australian Energy Regulator to Implement Regulatory Changes (Budget paper no. 2, p. 192), which includes $14.3 million over 4 years from 2022–23 (and $3.2 million per year ongoing) for the AER to administer and enforce new gas pipeline regulations and to monitor gas pipeline markets. This responds to long-standing concerns about poor transparency in this part of the gas market and uncompetitive conduct by pipeline owners (pp. 27–28).

The Support for Energy Security and Reliability measure (Budget paper no. 2, p. 77) also provides for $23 million over 3 years from 2022–23 to make changes to AEMO’s powers and the National Gas Rules to increase the security, resilience and reliability of the east coast gas market – supported by state energy ministers.

In a recent interview, the Treasurer indicated that the Government intends to pursue further regulatory action to place downward pressure on gas prices, with the potential for a mandatory code of conduct to be enforced for the gas industry:

Supply is part of the problem, and that’s why the heads of agreement is important … but clearly, we need to go beyond that. There’s a code of conduct that applies to this industry and we’ve said that we will work to make that code of conduct mandatory, and we’ll make it more focused on meaningful offers and that means going beyond supply and considering issues like price.

Other regulatory channels may be available through further reform of the (state-based) National Gas Rules and/or National Gas Law in partnership with the States and Territories. The latest Energy Ministers’ communique indicates that federal and state energy ministers are currently leaving all options open to achieve their consensus goal of lowering domestic gas prices.


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