Australia’s Response To Inflation Reduction Act

• Australian Parliament clears NRF with its AUD 15 billion budget to support 7 priority areas
• It includes state support for solar panels, wind turbines and battery manufacturing among others
• Renewables and low-emission technologies get the largest chunk of the budget among all priority areas with up to AUD 3 billion

After the US, India, and Europe, it is now Australia that's taking domestic manufacturing of solar PV technology seriously through its AUD 15 billion ($10 billion) National Reconstruction Fund (NRF) that has now passed through the federal Parliament as 'one of the largest peacetime investments in Australian manufacturing capability'.

Modelled on the Australian government's green bank Clean Energy Finance Corporation (CEFC) that's responsible for investing AUD 10 billion ($6.7 billion) in clean energy projects, the NRF will target projects and investments in 'high-value market opportunities' support the government's 'Future Made in Australia agenda'.

Of the 7 priority areas of the Australian economy, renewables and low-emission technologies make the cut for the largest chunk of the deal with up to AUD 3 billion ($2 billion). Under this, the NRF plans to support production of solar panels, batteries, components of wind turbines, hydrogen electrolyzers, modernizing steel and aluminum, among others.

The other 6 priority areas as medical science, transport, value-add in the agriculture, forestry and fisheries sectors, value-add in resources as mining of raw materials, defence capability and enabling capabilities across engineering, and software development.

According to the Federal Minister for Industry and Science Ed Husic, "The most successful modern economies are built on strong, advanced manufacturing capability. The NRF will help deliver this for Australia."

NRF will be administered by an independent board appointed by the Minister for Industry and Science and Minister for Finance. It will provide finance as loans, equity investment and guarantees to the industry move up the value chain to address supply chain vulnerabilities, take advantage of opportunities in a net zero economy and become more productive.

In December 2022, the government had sought consultation on the proposed plan for the NRF. Details about the same and an official presentation are available on the Department of Industry, Science and Resources' website.

The clean energy industry had been demanding a federal initiative on the lines of the Inflation Reduction Act (IRA) to secure support for investments in this space (see Now Australian RE Industry Wants IRA-Like State Support).

The US is already seeing an invigorating response from national and international players to either expand or set up PV value chain manufacturing in the country thanks to the IRA (see US Solar PV Encapsulant Fab From Hanwha Group).

Recently, India concluded its Production Linked Incentive (PLI) scheme tranche-II awarding INR 139.4 billion ($1.7 billion) for 39.6 GW new vertically integrated solar manufacturing capacity that saw US' First Solar among the winners (see India Allocates 39.6 GW PV Under PLI Tranche-II).

European Commission (EC) is also working on the Green Deal Industrial Plan (GDIP) as the European Union's (EU) response to the IRA to stop this investor drain to the US in solar manufacturing but considering the sheer size of the bloc, it is taking time to give the plans a concrete shape. However, the pressure is building up (see Report On EU's Suitable Response To US' IRA).