The new $5 billion Net Zero Fund will offer very cheap loans to major companies looking to decarbonise or build energy components in Australia from the middle of this year.
The terms of the new fund, housed inside the National Reconstruction Fund (NRF), were released today.
It will offer loans at the 5-year government bond rate minus 1 per cent, a 3-4 per cent discount on current NRF rates.
The fund is a key part of the federal government’s proposal to help hard-to-abate sectors start spending on decarbonisation, and kick-start manufacturing in areas such as hydrogen electrolysers and solar.
The cheap loans will get energy costs down for industry and help them stay globally competitive, says energy minister Chris Bowen.
“By lowering the cost of finance for clean energy upgrades, the Net Zero Fund helps big energy users invest sooner, use energy more efficiently and reduce the risks of volatile fossil fuel prices,” he said in a statement today.
“This fund helps back the next wave of clean industrial investment, and it backs Australian workers and regional communities that rely on these industries.”
Bowen included a jab at his counterparts across the desk, saying that while the Liberals and Nationals “argue about slogans”, cheaper finance allowed more projects to stack up economically and bring down emissions faster.
The new fund replaces an existing target of $3 billion in investments in renewables and low emissions technologies priority areas.
It’s also focused on nine sub-sectors in manufacturing which need a push – and cash – to switch from current equipment to modern, less emissions intensive versions.
These cover everything from aluminium and cement making to food, waste and resource recovery, pulp and paper, and iron and steel manufacturing.
By slashing the rate of return to the bond rate minus 1 per cent, the government expects the fund to take on more risk than a commercial funder would be comfortable with, and make projects more attractive to private investors.
That, it hopes, will assuage doubts and worries about the cost of transitioning.
“Backing Australian heavy industry and manufacturing to reduce its emissions and lower energy costs is a big national challenge that demands leadership, planning and an appetite for risk,” said industry minister Tim Ayers in a statement,
“Globally competitive financing from the NRF’s Net Zero Fund will make sure public investment in decarbonisation crowds in billions of dollars in private capital and drives down industrial energy costs and emissions.”
The Net Zero Fund is not the only cashed-up moneybox the federal government is using to push industry into change.
In September it sank another $2 billion into green bank the Clean Energy Finance Corporation (CEFC) to fund a faster rollout of large scale wind and solar, and just over $13 billion via a range of initiatives into green hydrogen and steel.
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