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The Federal Government has announced its 2021-22 Budget, with funding for the energy and water sectors, plus a major investment in the digital economy. 

More than $1.8 billion has been allocated in the 2021-22 Budget for the energy sector. The Federal Government highlighted the $58.6 million for the gas sector; but the majority of the energy industry’s allocation has gone towards emissions reduction, with more than $1.2 billion allocated to this space.

Federal Minister for Energy and Emissions Reduction, Angus Taylor, said the Budget is supporting the Federal Government’s responsible and pragmatic approach to energy policy and emissions reduction, setting Australia up for a post-COVID world.

“Our 2021-22 Budget measures will provide reliable, secure and affordable energy to all Australians, and increase investment in technology solutions to reduce emissions in a way that supports jobs and economic growth,” Mr Taylor said.

“These initiatives will secure Australia’s recovery while also bolstering our position as a leader in the development of low emissions technologies, which are vital to achieving net zero emissions globally.

“Australia is focused on investing in commercialising technologies, not harmful taxes, in the global effort to reduce emissions. Our 2021-22 Budget measures continue this approach, while strengthening our energy security and supporting the growth of new industries and jobs into the future.”

Electricity

The Federal Government is continuing its commitment to maintain affordability, reliability and security in the electricity system. 2021-22 initiatives include:

  • A $24.9 million package to assist new gas generators become hydrogen ready
  • Up to $30 million for early works on Australian Industrial Power’s (AIP) Port Kembla gas generator project
  • $30 million to support a big battery and the rollout of microgrids in remote Indigenous communities, as part of a future Northern Territory-Commonwealth bilateral agreement on energy and emissions reduction
  • Up to $76.9 million to secure the Portland aluminium smelter’s participation in the Reliability and Emergency Reserve Trader scheme, and help Victoria keep the lights on at times of peak demand
  • Up to $19.3 million to support the deployment of a renewable energy microgrid incorporating hydrogen in the Daintree in Northern Queensland, improving the affordability, reliability and security of energy supply in the region and reducing emissions
  • $34.3 million to implement the Federal Government’s consumer-focused reform agenda including post-2025 electricity market reforms and expand the role of the Australian Energy Infrastructure Commissioner (formerly the National Wind Farm Commissioner) to also resolve transmission line concerns in communities

Gas

Building on support announced in last year’s Budget, the Federal Government’s latest initiatives to drive Australia’s gas-fired recovery include:

  • Up to $38.7 million to support critical gas infrastructure projects to alleviate the forecast gas supply shortfalls
  • $5.6 million to further strengthen the Federal Government’s gas system planning framework through delivery of the National Gas Infrastructure Plan
  • $6.2 million to design, consult and implement reforms to accelerate the development of the Wallumbilla Gas Supply Hub
  • $4.6 million to develop initiatives that empower gas-reliant businesses to negotiate competitive outcomes in their gas supply agreements
  • $3.5 million to design and implement a framework to facilitate Commonwealth support for medium to long-term gas infrastructure to secure Australia’s future gas supply

Fuel security

The Budget also sets out measures to further strengthen Australia’s long-term fuel security, building on the Government’s investment in the 2020-21 Budget, including:

  • A refinery production payment to help maintain Australia’s refining capability
  • Support to assist the refiners to conduct infrastructure upgrades, subject to consultation with industry
  • $50.7 million to establish a new fuel security framework, including for the implementation and monitoring of the minimum stockholding obligation and the production payment, ensuring industry complies

Emissions reduction

New initiatives in the Budget will support investment in new and emerging low-emissions technologies prioritised under the Government’s Technology Investment Roadmap, while boosting international collaboration on achieving technology breakthroughs, lowering energy costs and creating more than 6,000 jobs.

In total, $1.2 billion has been allocated to establish Australia at the forefront of low emissions technology innovation and commercialisation, including:

  • $639 million to back low emissions international technology partnerships and initiatives by co-funding research and demonstration projects and developing a high-integrity carbon offset scheme in our Indo-Pacific region
  • $275.5 million to accelerate the development of four additional clean hydrogen export hubs (for a total of five), increasing the government’s commitment to building an Australian hydrogen industry to more than $850 million
  • $263.7 million to support the development of carbon capture technologies and hubs, building on the $50 million provided in the 2020-21 Budget
  • $59.6 million to support a National Soil Carbon Innovation Challenge and trial new agricultural feed technologies that reduce emissions from livestock
  • $279.9 million to establish the below baseline crediting mechanism recommended by the King Review, which will support large industrial facilities to reduce energy consumption and emissions while improving productivity and international competitiveness
  • $26.4 million to help Australian businesses and supply chains to reduce energy costs through more energy efficient industrial equipment and business practices
  • Establishing a $50 million venture capital financing function within the Australian Renewable Energy Agency to support Australian clean tech innovation
  • $10.4 million to expand the range of certifications offered by the government’s Climate Active program and ensure it remains a best practice standard and certification scheme for business looking to voluntarily reduce emissions
  • $14.3 million to reduce costs and streamline the reporting requirements for businesses covered by the National Greenhouse and Energy Reporting Scheme

“This Budget builds on the Government’s existing initiatives to guarantee reliable and affordable energy, stimulate jobs and reduce emissions without imposing new costs on households, businesses or the economy,” Mr Taylor said.

“Our investments in emissions reduction, energy, gas and fuel security will create more than 9,000 jobs across the country, grow our economy and ensure Australia continues to meet and beat our emissions reduction targets.”

Water

The 2021-22 Budget invests up to a further $258 million, including up to $160 million through the National Water Grid Connections pathway, from the $3.5 billion National Water Grid Fund towards the construction of new and augmented water infrastructure projects.

The National Water Grid Fund replaces the National Water Infrastructure Development Fund and better reflect its relationship with the Federal Government’s commitment to a National Water Grid.

A total of $75.7 million has been committed to new and augmented projects, with a further $22.3 million committed to eight business cases that will help inform future investment decision in water infrastructure for the ongoing development of the National Water Grid.

In addition to this, the Australian Government has announced a new funding pathway, National Water Grid Connections, of up to $160 million over two years to allow delivery of smaller scale water infrastructure projects. Under this funding pathway, there is up to $20 million available for each state and territory to deliver projects with a Federal Government contribution of up to $5 million per project.

Deputy Prime Minister and Minister for Infrastructure, Transport and Regional Development Michael McCormack said the Federal Government was investing $75.7 million towards an additional four new construction projects.

“This will deliver increased water security, build resilience in our regions, deliver jobs and grow our critical agriculture sector,” Mr McCormack said.

“This ongoing investment in water infrastructure builds on the eight construction projects already completed since our establishment of the National Water Grid Authority in late 2019, bringing the total number of construction projects in the investment pipeline to 30.”

The new and augmented construction projects being funded in partnership with states include:

  • Eurobodalla Southern Storage (New South Wales) – $51.2 million
  • Werribee Irrigation District Modernisation (Victoria) – $11.0 million
  • Recycled Water on the Bellarine (Victoria) – $5.5 million
  • Warwick Recycled Water for Agriculture (Queensland) – $0.5 million
  • An additional $7.5 million for Rookwood Weir ($183.6 million in total) to enhance the existing investment in delivering water security in north Queensland by raising the weir wall a further 700 millimetres, which will yield an additional 10,000 megalitres of water

The Deputy Prime Minister said the 2021-22 Budget would continue to help increase water security in areas where extensive irrigated agriculture already exists, while also helping to unlock new agricultural regions, especially in Australia’s north.

“We are delivering on building bigger water infrastructure and we will also deliver on the smaller scale infrastructure projects which promote local economic activity and job creation,” Mr McCormack said.

“This is building on progress already underway right across Australia with projects such as Rookwood Weir construction and Urannah Dam business case in Queensland; the commencement of the Phase 2 of the Macalister Irrigation District modernisation project in Victoria and the completion of the business case for the Don Irrigation Scheme in Tasmania.”

Minister for Resources, Water and Northern Australia, Keith Pitt, said new measures in the 2021-22 Budget will build a more secure and resilient Australia, delivering jobs, opportunities and long-term benefits, particularly for regional Australia, as the economy recovers from the COVID-19 pandemic.

“The 2021-22 Budget locks in funding to accelerate the development of northern Australia, and to build a global resources strategy and network to strengthen a vital sector that continues to underpin our economic recovery and wellbeing,” Mr Pitt said.

“While rain and cooler weather have eased drought conditions across parts of eastern Australia, the government continues to invest in practical measures to help farmers improve water infrastructure, and to reform water markets in the Murray–Darling Basin.”

In the water portfolio, Mr Pitt said Budget measures are centred on three key areas to set Australia up for the future:

  • Providing practical support to farmers who experienced drought to improve their on-farm water infrastructure in partnership with states
  • Reforming water markets to ensure water users could have confidence in their integrity and operation
  • Improving Murray–Darling Basin modelling to build the confidence of governments, water users and communities in planning for an uncertain future

“We have extended the On-farm Emergency Water Infrastructure Rebate Scheme for 12 months until June 2022 to ensure drought-affected farmers can access the $50 million in rebate funding secured through the 2020-21 Budget,” Mr Pitt said.

“We will form an expert panel to progress important reforms to Murray–Darling Basin water markets in ways that support water users while improving market efficiency, information and governance.

“Reforming our water markets will need strong collaboration between governments, as well as with communities.

“And we’re committed to developing a state-of-the-art modelling capability for the whole Basin to ensure farmers, communities and governments can make decisions confident in the data they rely on.

“These measures are on top of the $270 million Murray–Darling Communities Investment Package announced last year to put communities and jobs at the heart of Basin Plan implementation. In 2021-22, $130 million of that is committed to support our communities.

“We have also closed the Water Efficiency Program and ruled out water buybacks, diverting over $1.3 billion to focus on off-farm efficiency projects.

“Off-farm water recovery means we can actually progress our river health targets and, unlike on-farm programs, we do not reduce water availability in the consumptive pool.”

Digital economy

Also included in the Budget is almost $1.2 billion of funding for Australia’s digital future through the Digital Economy Strategy. 

The strategy outlines the policies and actions the Federal Government is taking to grow Australia’s future as a modern and leading digital economy by 2030.

As part of the strategy, the government will invest $40.2 million over the forward estimates and $6.3 million ongoing to enhance Australia’s location-based data infrastructure to create a secure, dynamic and three-dimensional Digital Atlas of Australia. 

This will assist with better informing decision making for governments, businesses and community organisations to respond to needs and challenges at both the local and national levels.

The strategy also targets investment in emerging technologies, building digital skills, encouraging business investment and enhancing government service delivery.

Key initiatives in the strategy include:

  • Over $100 million to support digital skills for Australians including a new pilot program for work‑based digital cadetships that offer a flexible way for workers to build digital skills, investments in the cyber workforce and scholarships for emerging technology graduates
  • Building Australia’s capability in Artificial Intelligence (AI) with $124.1 million in initiatives, including a National Artificial Intelligence Centre led by CSIRO Data 61, supported by a network of AI and Digital Capability Centres to drive adoption of AI across the economy
  • Helping small and medium businesses build their digital capacity through a $12.7 million expansion of the Digital Solutions – Australian Small Business Advisory Service, and $15.3 million to drive business uptake of e‑Invoicing
  • $35.7 million to support emerging aviation technologies like drones, including grants to support the use of these technologies to address priority needs in regional Australia
  • Unlocking the value of data in the economy and setting the standards for the next generation of data management, including $111.3 million to accelerate the rollout of the Consumer Data Right in banking, energy and telecommunications
  • Over $50 million to enhance cyber security in government, data centres and future telecommunications networks

Minister for the Digital Economy, Jane Hume, said the 2021‑22 Budget represents a landmark investment in Australia’s digital future.

“So many Australians are already participating in the digital economy, some without even realising it. Every contactless purchase, e‑Invoice, business website or small business going online – it’s all part of it and it’s growing rapidly,” Ms Hume said.

“This is a really exciting announcement, which will drive investment and uptake of emerging technologies, unlock the value of data, build skills for a modern economy and enhance government service delivery.”

Industry response

Naturally, industry response to the Budget has been mixed.

The Australian Petroleum Production & Exploration Association (APPEA) said the budget was a mixed bag, with a number of good measures but a new levy for industry will impact investment confidence and jobs.

APPEA Chief Executive, Andrew McConville, said support for gas-related strategic basins is a big tick, as is the announcement for new hydrogen and carbon storage initiatives to help lower emissions.

“Increased funding for gas infrastructure of $173.6 million in the Northern Territory on top of the $58.6 million will mean more supply for the domestic market and that will help keep prices competitive,” Mr McConville said.

But Mr McConville said the industry was disappointed that measures outlined in APPEA’s pre-budget submission such as making wage costs immediately tax deductible for capital-intensive industries, were not represented.

“We will continue to work with the government to get the fiscal settings right and the extension of the temporary full expensing and temporary loss carry back measures are a good first step.”

Greens Leader, Adam Bandt, accused the government of “fast-tracking climate collapse” through the Budget.

“The Morrison government is handing $1.1 billion in new money to the oil, gas and coal industry, $11.4 billion next year alone, and with a total of a $51 billion across the forwards, this is one of the biggest handouts to the fossil fuel corporations in a Budget ever,” Mr Bandt said.

Clean Energy Council Chief Executive, Kane Thornton, said the Budget was a missed opportunity for the Federal Government to embrace Australia’s renewable energy sector and follow the lead of international, state and territory counterparts to use the clean energy transition to drive job creation and economic recovery.

“If this truly is the infrastructure budget, Infrastructure Australia has identified that there is a need for major transmission upgrades to supply network access to renewable energy zones as a high priority, particularly in light of retiring thermal generation,” Mr Thornton said.

“The lack of transmission investment is now one of the most critical challenges facing Australia’s energy industry.

“It’s disappointing that in a ‘nation-building’ infrastructure budget, upgrades that will enable the access and security of clean, low-cost power have not been prioritised.”

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