The document discusses various funding mechanisms for energy efficiency projects including grants, R&D tax incentives, energy certificate schemes, energy performance contracts, and environmental upgrade agreements. It provides details on key federal and state government programs that provide funding for energy efficiency and renewable energy initiatives, and how to access incentives like grants and tax offsets. It also explains energy certificate schemes, how accredited providers can generate certificates from efficiency projects, and how liable parties must surrender certificates to meet compliance obligations.

1. Funding mechanisms for
energy efficiency
Module 4

2. Disclaimer
This material has been developed as part of the UTS
Business School and Ernst & Young ‘Leadership & Change
for Energy Efficiency in Accounting & Management’ project.
The project is supported by the NSW Office of Environment &
Heritage as part of the Energy Efficiency Training Program. For
more information on the project, please go to:
http://www.business.uts.edu.au/energyefficiency/.
This presentation is for educational purposes only, and does not
contain specific or general advice. Please seek appropriate
advice before making any financial decisions.
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3. Introduction
One of the barriers to energy efficiency is that it is often cost
prohibitive – there are scarce funds to share across the
business.
This issue can be addresses by sourcing funds through
alternative measures:
► Grants
► R&D Tax Incentives
► Energy Certificate Schemes
► Energy Performance Contracts
► Environmental Upgrade Agreements
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4. Learning Objectives
At the end of this module, you will understand:
► What Federal Government grants are available for energy
efficiency projects and the process to apply for a grant
► The Federal Government’s Research and Development
Tax Incentive scheme and how to access it
► Accounting treatments of grants and R&D Incentive
► The various energy certificate schemes and how to
generate certificates
► The concept of energy performance contracts and their
benefits
► How to overcome the problem of split incentives with the
use of Environmental Upgrade Agreements
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5. Grants and Incentives Opportunities
► The Federal, State and Territory governments provide
support for energy efficiency initiatives via a range of
programs
► Funding programs typically cover some or all of the
following:
► Development of a new technology
► Trial and demonstration of a new technology to confirm feasibility
► Implementation of a new technology or processes to improve
environmental performance
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6. Key Funding Opportunities
Emerging Renewables Grant $126 Million
R&D Tax Incentive Uncapped
Clean Energy Legislation Package
Clean Energy Finance Corporation (CEFC) $10 Billion
Australian Renewable Energy Agency (ARENA) $3.2 Billion
Clean Technology Program $1.2 Billion
Clean Technology Food and Foundries Investment Program $200 million
Clean Technology Investment Program $800 million
Clean Technology Innovation $200 million
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7. Federal Government funds (1)
Initiative Funding Details Description Planned Outcomes
Emerging Renewables Total funds of $126 Million, The program splits projects Accelerate the development
Grant with no maximum funding into two funding categories: of renewable energy and
accept the limit of the enabling technologies in
program funding. Some ACRE Projects – for Australia, particularly in the
Available until 30 June 2012 matching funding required. following sectors:
renewable energy and
enabling technologies and ► Solar
Funds allocated as follows: products which lower the ► Wind
► at least $40 million to cost of renewable energy in ► Geothermal
assist development of Australia. ► Wave/Ocean/Tiday
renewable energy and ► Bioenergy/biofuels
enabling technologies ACRE Measures – ► Hybrid systems
with potential to renewable energy industry
contribute to the capacity building activity,
generation of large-scale skills development activity or
base load power, such as a preparatory activity for an
wave, geothermal and ACRE Project.
enabling technologies.
► 26.6 mil for the
geothermal energy sector.
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8. Federal Government funds (2)
Initiative Funding Details Description Planned Outcomes
R&D Tax Incentive A 45% refundable tax offset Federal tax incentive which To encourage industry to
will be available to small- rewards companies for conduct research and
medium enterprises (SMEs) conducting qualified activity development activities that
Available now with an annual aggregate in and outside of Australia in may not otherwise have
turnover of less than $20 the form of a tax offset. been conducted
million.
A 40% non-refundable tax
offset will be available to
companies with an annual
aggregate turnover of $20
million or more.
Unused offset amounts may
be able to be carried forward
for use in future income
years.
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9. Clean Energy Legislation Package (1)
Initiative Funding Details Description Planned Outcomes
Clean Energy Finance $10 billion over 5 years. Investment in the Promote commercialisation
Corporation commercialisation and and deployment of
► The renewable energy deployment of renewable renewable energy, energy
stream will invest in energy, energy efficiency efficiency and low-pollution
Projected program start and low-pollution technologies, and
renewable technologies,
date: 2013 - 2014 technologies. It will also manufacturing businesses.
which may include
geothermal and wave invest in manufacturing
energy and large scale businesses that provide
solar power generation. inputs for these sectors; for
($5 billion) example, manufacturing
wind turbine blades.
► The clean energy stream
will invest more broadly;
for example, in low-
emissions cogeneration
technology, but will still be
able to invest in
renewable energy.
($5 billion)
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10. Clean Energy Legislation Package (2)
Initiative Funding Details Description Planned Outcomes
Australian Renewable $3.2 billion over 9 years. ARENA will provide early- Distribute funds to
Energy Agency stage grants and financing Companies which promote
assistance for projects that clean energy technology
(ARENA) ARENA will also receive
future funding from strengthen renewable development through a
discretional dividends paid energy and energy efficiency multitude of industries.
Projected funding start date: by the Clean Energy technologies and make them
1 July 2012 Finance Corporation and a more cost competitive.
share of future carbon
pricing mechanism revenue ARENA will oversee existing
should the Jobs and Government support for
Competitiveness Program programs currently delivered
be modified following by the Australian Centre for
Productivity Commission Renewable Energy, the
reviews. Department of Resources,
Energy and Tourism, the
Australian Solar Institute and
the proposed Australian
Biofuels Research Institute.
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11. Clean Energy Legislation Package (3)
Initiative Funding Details Description Planned Outcomes
Clean Technology $200 million over 6 years. The program will assist food Reduced emissions and
Food and Foundries and beverage processing costs of manufacturing in
Investment Program The grant ratio is dependant and metal foundries to the food processing sector.
on the size of the grant and embrace less emissions-
the turnover of the applicant: intensive and more energy-
Available Now efficient production
Applicant Annual Grant processes and capital
to Grant Turn- Size investment.
Funding over
1:1 <100 M $25k -
<500k
Examples include:
► Adoption and deployment
2:1 ≥$100M $25k-
<$500k of technologies to reduce
2:1 N/A $500k - energy use/carbon
<$10 M emission
3:1 N/A ≥$10 M ► Process re-engineering
involving adoption of
energy or carbon efficient
manufacturing
► Conversion of facilities
from coal to natural gas
► Cogeneration plants
► Implement energy
efficient opportunities
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12. Clean Energy Legislation Package (4)
Initiative Manufacturing Activities Covered
Clean Technology In order to qualify for the Clean Technology Food and Foundries Investment Program, the
Food and Foundries applicant must have one of the following ANZSIC class: (1111 – 1173, 1181 – 1199, 1211
– 1214, 2121, 2141 and 2210).
Investment Program
Of particular note:
Food and Beverage Processing and Manufacturing
1. 1131 Milk and Cream Processing
2. 1161 Grain Mill Product Manufacturing
3. 1182 Confectionery Manufacturing
4. 1212 Beer Manufacturing
Metal Foundries
1. 2121 Iron and Steel Castings
2. 2141 Non-Ferrous Metal Casting
3. 2210 Iron and Steel Forging
Ineligible Activities:
1. 1174 Bakery Product Manufacturing (Non-factory based)
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13. Clean Energy Legislation Package (4)
Initiative Funding Details Description Planned Outcomes
Clean Technology $800 million over 7 years. Support investments in This investment will help
Investment energy-efficient capital modernise parts of the
The applicant must meet equipment and low-pollution Australian manufacturing
Program technologies, processes and sector and help
prescribed energy or emissions
thresholds in the 12 month period products, such as: manufacturers compete in a
Available Now before submitting an application ► Development of products low-carbon world, with
or be directly liable under the and adoption of benefits for the job security of
carbon pricing mechanisms. technologies to reduce manufacturing workers.
energy use/carbon
The grant ratio is dependant on emission
the size of the grant and the ► Establish new facilities to
turnover of the applicant: replace existing eligible
manufacturing facilities
Applicant Annual Grant
to Grant Turn- Size ► Process re-engineering
Funding over
involving energy/carbon
1:1 <100 M $25k - efficient manufacturing
<500k
► Conversion of facilities
2:1 ≥$100M $25k-
<$500k from coal to natural gas
2:1 N/A $500k -
► Cogeneration plants
<$10 M ► Implementation of energy
3:1 N/A ≥$10 M efficiency opportunities
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14. Clean Energy Legislation Package (4)
Initiative Manufacturing Activities Covered
Clean Technology In order to qualify for the Clean Technology Investment Program, the applicant must have
Investment Program one of the following ANZSIC class: (1220 – 2110, 2122 – 2139, 2142 – 2149 and 2221–
2599).
Ineligible Activities:
1. 2121 Iron and Steel Casting
2. 2210 Iron and Steel Forging
3. 2141 Non-Ferrous Metal Casting
4. Activities covered under the Clean Technology Food and Foundries Grant
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15. Clean Energy Legislation Package (5)
Initiative Funding Details Description Planned Outcomes
Clean Technology $200 million over 5 years The Government will provide Increased investment in
Innovation Program an additional $200 million clean technology from the
Funding will be on a over five years for grants to private sector.
co-contribution basis, with support business investment
Projected funding start date: in research and
industry providing one dollar
July 2012 development (R&D) in the
for every dollar from the
Government. areas of:
► renewable energy;
► low-pollution/clean
This assistance recognises
that, in some instances, a technology; and
higher rate of Government ► energy efficiency.
support for innovation to
reduce carbon pollution will This funding will be in
be important, at least for a addition to the broader R&D
transitional period, until tax concession and will help
private investment Australian businesses
increases. creatively work towards a
clean energy future.
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16. General Features of Competitive Applications
► Company has focused strategic business plan and project fits
within core business
► Track record in successfully undertaking and commercialising
technology
► Strong management team and well qualified technical team
► Strong technical and commercial advantages for project
outcome
► Need for funding and ability to provide matching fund
► Able to quantify climate change benefit
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17. R&D Tax Incentive – Eligibility Guide
► Are you a company incorporated in Australia or a permanent
establishment?
► Will the R&D activities:
► Include experimental activities
► Generate new knowledge to fill a gap in technical knowledge
► Follow a systematic scientific process
► Is the company undertaking the project on its own behalf?
► Is the majority of the project to be undertaken in Australia?
► Will the company maintain contemporaneous records that
substantiate the carrying on of these activities?
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18. R&D Tax Incentive - How to access
► Identify eligible R&D activities and calculate eligible R&D expenditure.
► Register R&D activities with AusIndustry (within 10 months of the
company’s year end).
► The AusIndustry registration team will review the application for
completeness and may ask for further information.
► Once processed, AusIndustry will provide a notice of registration
which includes a number for inclusion in the ATO R&D Tax Incentive
Schedule.
► Claim the benefit by completing the Australian Taxation Office R&D
Tax Incentive Schedule and the relevant labels in the company’s tax
return.
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19. Case Study 1 – Small manufacturing company
► A small Australian manufacturing company has become aware of the
‘waste’ heat which is created during their novel manufacturing
processes.
► The company does not have internal expertise in this area but have
engaged an engineering consultancy firm who has collected heat
data, produced models and presented a series of potential ways to
recycle the heat.
► The budgeted project costs are as follows:
► Design and modelling - $250,000
► Procurement and construction - $500,000
► Commissioning and testing – 150,000
► Project management - $100,000
► Could this project be eligible for the R&D tax incentive, what
expenditure may be eligible, and what could the benefit be?
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20. Case Study 2 – Mining Company
► A mining company is aware that one of its current waste water plant is
struggling to process water to meet the EPA requirements, primarily due to
increasing plant throughput.
► The company has considered replicating the existing treatment plant (to
double capacity) however it has also identified an opportunity to develop a
new water treatment process, which could also reduce emissions associated
with the current process.
► The cost to duplicate the existing plant is $3 mil.
► The costs to develop a new process includes:
► Design and modelling – $500,000
► Detailed design, procurement and construction - $4 mil
► Commissioning and testing - $500,000
► This second option would cost more to deliver, but could it be eligible for a
grant/R&D tax incentive?
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21. Accounting for Grants and R&D Tax Incentive
Government grants
► Entities account for government grants in accordance with
AASB 120 (Accounting for Government Grants and Disclosure
of Government Assistance)
R&D Tax Incentive
45% refundable R&D tax offset:
► Should be treated as a government grant (AASB 120) rather
than a reduction in tax payable as the receipt does not depend
on taxable profits, and it is certain.
40% non-refundable R&D tax offset:
► Should be treated as a reduction in current income tax
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22. Energy Certificate Schemes
► There are a number of schemes in Australia that support and
encourage renewable energy installation and energy efficiency
initiatives. The schemes are designed to increase opportunities
to improve energy efficiency by rewarding companies who
undertake eligible projects that either reduce electricity
consumption or improve the efficiency of energy use.
Victorian Energy Efficiency Certificates (VEECs)
► Current price: $19/ VEEC
Energy Savings Certificates (NSW)
► During 2011 the price fluctuated
between $25 -$31/ ESC
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23. Energy Savings Scheme (NSW)
How it works:
► An Energy Savings Certificate (ESC) is a tradable certificate. Each
ESC represents the equivalent of 1 tonne of CO2-e and is derived
from the measurement of energy savings.
► ESCs are created by accredited certificate providers (ACPs) when
they carry out activities that increase the efficiency of electricity
consumption or reduce electricity consumption.
► By 18 March each year, liable parties (NSW electricity retailers) must
surrender a specified number of certificates to meet with their
compliance obligations for the previous calendar year.
Future Developments
► The Federal Government is considering a National Energy Savings
Initiative.
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24. How it works
Energy Saver Accredited Trading Cash!!
Organisation Certificate Provider
Implements Energy ► Calculates the amount of ACP trades ESC’s Money provided
Saving actions such certificates, evidence of with Utilities at back to participant
as lighting retrofits savings provided to market price minus any ACP Fee
IPART generating cash or commission
► Generates the Energy
Saving Certificates(ESC)
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25. Renewable Energy Certificates (RECS)
► The Renewable Energy Target (RET) creates a financial incentive for investment in
renewable energy sources through the creation and sale of certificates.
The Small-scale Renewable Energy Scheme (SRES)
► Creates a financial incentive for owners to install eligible small-scale installations such
as solar water heaters, heat pumps, solar panel systems, small-scale wind systems, or
small-scale hydro systems. It does this by legislating demand for Small-scale
Technology Certificates .
Small-scale Technology Certificates (STCs)
► 1 MWh of renewable electricity deemed to be generated by Small Generation Units unless the
Solar Credits REC multiplier applies; or
► 1 MWh of electricity deemed to be displaced by the installation of Solar Water Heaters.
The Large-scale Renewable Energy Target (LRET)
► Creates a financial incentive for the establishment and growth of renewable energy
power stations, such as wind and solar farms, or hydro-electric power stations. It does
this by legislating demand for Large-scale Generation Certificates .
Large-scale Generation Certificates (LGCs)
► 1 MWh of renewable electricity generated above the power station baseline
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26. Case Study – Metropolitan Building
Commercial Lighting Energy Saving Formula
Opportunities:
► Twin T8 to single T8 with high
efficiency reflector
► 150W halogen to 15W high
intensity LED
► 50W halogen down lights with
LED
Outcomes:
► Capital cost $446,760
► Savings $94,275
► 630 MWh of electricity
► 6,600 ESC value of $166,500
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27. Energy Performance Contracts
► Energy performance contracts are an effective way of providing new energy
efficient capital equipment, energy savings, or reducing maintenance costs.
► Under an energy performance contract, the contractor generally provides the
capital, equipment installation and maintenance for a facility. In exchange, the
► contractor receives a fee over the length of the contract, which is generated
by the equipment energy savings.
► The best applications for an energy performance contract are in high capital
cost equipment and systems with high savings-to-investment ratios
Company Incentive
►Ability to improve energy efficiency with limited
►resources or upfront financial commitment
Contractor Incentive
► Achieve optimal energy
efficiency to maximise
earnings
27

28. Case Study 3 – Industrial Plant
► An industrial plant has limited resources for improving the
energy efficiency of its equipment. How could Company
ABC upgrade its equipment whilst not having to source
additional capital?
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29. Case Study 3 – Industrial Plant
Industrial Plant
An industrial plant has limited resources for
improving the energy efficiency of its
equipment.
Contractor
Working with a contractor, The industrial
plant can upgrade its energy management
system and equipment.
As a result the plant will use less energy,
which means savings on the annual energy
bills.
The work the contractor undertakes is paid
for by the savings which are gained from
using less energy, operating more efficiently
and reducing maintenance costs.
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30. Split Incentives – Benefit Imbalance
Debt or
equity
capital
charge
Power
savings
30

31. Balancing out the benefits –
Environmental Upgrade Agreements
Increase Debt or
in Base equity
Rent capital
charge
Power Increase Valuation
Savings in Base Uplift
Rent
Example: City of Sydney
http://www.cityofsydney.nsw.gov.au/council/documents/policies/EnvironmentalUpgradeAgreementsPolicy.PDF
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32. Subsidised Energy Audits
► The Office of Environment and Heritage is able to provide subsidise
energy audits and facilitation to help NSW businesses identify and
implement energy savings.
http://www.environment.nsw.gov.au/sustainbus/energyauditing.htm
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33. Thank you
Module 4