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Australia launches new rules to support low emission technologies

The Australian government has launched new rules aimed at supporting the next generation of low emission energy technologies (LETs).

The Australian Renewable Energy Agency (Implementing the Technology Roadmap) Regulations 2021 came into effect in July.

The Australian government has allocated the Australian Renewable Energy Agency (ARENA) A$192.5 million ($141.8m) to deliver programmes including supporting microgrids in regional Australia, reducing barriers to the use of electric vehicles or vehicles powered by biofuels or clean hydrogen, and investigating energy efficiency and emissions reduction in energy-intensive industries, according to a statement by ARENA.

Under the new rules, ARENA will be able to support priority technologies identified in the first Low Emissions Technology Statement, including green hydrogen, energy storage, low emission aluminium and steel, carbon capture and storage (CCS) and soil carbon.

George Varma, a renewables and clean tech expert at Pinsent Masons, the law firm behind Out-Law, said: “While there is conjecture around ARENA’s new funding mandate to invest in LETs with the major concern being will this distract AREAN from its original mandate which is funding renewable energy projects, these technologies do have an important role to play in harm minimisation and facilitating the transition to a low carbon economy. Expanding ARENA’s mandate to support LET projects is, in my view, complimentary and not contrary to ARENA’s goals and objectives.”

“Transitioning to a clean energy future will require consideration and adoption of different types of technologies to achieve net zero targets. Focusing on developing renewable energy projects in isolation will not help us to curb emissions sufficiently,” he said.

The broadening of ARENA’s investment authority is also likely to attract broader levels of investment in both the renewable energy and LET markets. 

Jeremy King, a project finance expert at Pinsent Masons, the law firm behind Out-Law, said: “Additional government grants for priority LET areas gives support for projects that may otherwise not get funded through traditional, private sector sources. Private sector debt financiers are notoriously reluctant to back new technology, so much more so if the debt is being sought on a no recourse, or limited recourse, project finance basis. Perhaps ARENA’s expanded mandate will encourage some more debt financiers to back projects and treat the ARENA funding as a de facto injection of equity, thereby enabling private sector sponsors to de-gear the overall project or get something novel off the ground. The green hydrogen space is ripe for this type of funding, and over time, could be a game-changer in Australia’s energy transition.”

In 2020 the Australian government announced a total funding package of A$1.6 billion ($1.2bn) for ARENA including guaranteed baseline funding of A$1.43bn ($1.1bn) over the next 10 years. The fund package is expected to help ARENA to continue to invest in renewable energy as well as supporting priority low emission technologies.

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