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Sun Fund Bill 1997

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EXPLANATORY MEMORANDUM

 

 

Sun Fund Bill 1997

 

 

Outline

 

The Sun Fund Bill creates the Sun Fund, using money that would otherwise be paid as diesel fuel rebate for electricity generation.  Farmers and others who are eligible for the diesel fuel rebate can opt instead to obtain a grant to subsidise the capital cost of installing renewable energy systems to replace diesel electricity generation.

 

Diesel systems are cheap to buy but expensive to run.  Renewable systems are expensive to buy and cheap to run.  The Sun Fund tackles this basic problem by giving an upfront grant to invest in renewables.

 

The Sun Fund has benefits all round—it is revenue neutral to the government, optional for farmers and others who choose to participate, a massive stimulus to renewable energy industries and jobs in Australia, and a significant contribution to reducing greenhouse gas emissions.

 

It is a creative, positive and practical idea, supported in principle during debate in the Senate and by companies like BP Solar which considers that the Sun Fund would provide "an excellent base business for Australian companies working in the renewable energy sectors with obvious benefits in employment throughout Australia" (Richard Collins, Manager Renewable Power Systems, BP Solar, 27 May 1997).

 

The Sun Fund Bill amends the Customs Act 1901 and the Excise Act 1901 to establish the Sun Fund which consists each year of a sum equal to the amount paid in 1996/97 as diesel fuel rebate for electricity generation (estimated at $85 million).  Each year, grants may be made from the Sun Fund to people who are eligible for the diesel fuel rebate for electricity generation to subsidise the capital cost of installing photovoltaic, wind or solar-thermal systems.

 

Sun Fund grants will be subject to the following conditions:

·       the maximum grant is 10 times a person's annual entitlement to diesel fuel rebate for electricity generation, provided this does not exceed 70% of the capital cost of the renewable system;

·       the annual entitlement will be established either by proof of consumption or by a schedule based on the size of premises (the schedule is a disallowable instrument);

·       the diesel fuel rebate cannot be claimed for electricity generation for as many years after receiving the grant as correspond to the size of the grant (e.g. a grant equivalent to two years' entitlement to diesel fuel rebate for electricity generation will rule out receipt of diesel fuel rebate for electricity generation for two years);

·       the amount available to be granted each year will be capped at the amount spent as rebate for electricity generation in 1996/97; and

·       applications will be dealt with on a first come-first served basis.

 

 

Financial Impact

 

Over time, the Sun Fund will be revenue neutral to positive for the government.  Eligibility for a Sun Fund grant depends on eligibility for the diesel fuel rebate and the amount of the grant to any individual cannot exceed her or his entitlement to diesel fuel rebate for electricity generation over a ten year period.

 

The amount allocated to the Sun Fund each year is equal to the amount spent in 1996/97 on diesel fuel rebate for electricity generation (estimated at $85 million).  Depending on the rate of take-up, total expenditure will be higher in the earlier years and correspondingly reduced in the later years of the scheme.

 

The Sun Fund will result in a significant net reduction in government expenditure resulting from replacement of diesel electricity generation by renewable systems;  and, where hybrid diesel/renewable systems are employed, by ineligibility for diesel fuel rebate for residual use of diesel during the period of the Sun Fund grant.

 

 

Environmental Impact

 

The Sun Fund is environmentally positive.  It will reduce greenhouse gas emissions in two ways:

·       directly through replacing diesel fuel generators with renewables; and

·       indirectly through stimulating rapid development of a renewables manufacturing industry which can then displace dirty technologies from the market in Australia and overseas.

 

The estimated reduction in greenhouse gas emissions if the scheme is fully implemented is 1.5 million tonnes per year, which is 1.1% of carbon dioxide emissions from electricity production in Australia.

 

 

Social Impact

 

The Sun Fund will provide a massive stimulus to Australia's renewables industry and therefore to jobs in manufacturing, sales and service.

 

The Department of Primary Industries and Energy estimates that there are currently 320 jobs in manufacturing, sales and service of photovoltaics.  We estimate that the Sun Fund will stimulate the creation of at least 1000 new long-term jobs in manufacturing, sales and service of renewable energy systems.

 

 



 

 

 

notes on clauses

 

Clauses 1 and 2

 

These clauses give the short title and commencement date of the bill.

 

Clause 3

 

This clause provides that the Customs Act 1901 and the Excise Act 1901 are amended as specified in the schedules to the Bill.

 

 

Schedule 1

 

This schedule amends the Customs Act 1901 .

 

Item 1

 

This inserts a reference to new subsection 164(2A) in subsection 164(1), which lists the categories of people eligible for the diesel fuel rebate.

 

Item 2

 

New subsection 164(2A) provides that any person already eligible to claim the diesel fuel rebate for electricity generation is eligible to apply for a grant from the Sun Fund.

 

Item 3

 

This item creates the Sun Fund.

 

Section 166A

 

This outlines that the Sun Fund comprises funds that would otherwise be payable as diesel fuel rebate for electricity generation and that persons eligible for the diesel fuel rebate may apply to the Sun Fund for grants to subsidise the cost of installing photovoltaic, wind or solar-thermal systems.

 

Section 166B

 

This section establishes the Sun Fund, specifies that it is a trust account for audit purposes, and defines that it is to be used to subsidise the capital costs of installing photovoltaic, wind or solar thermal energy systems to replace diesel fuel generation systems.



 

Section 166C

 

Each year an amount equal to the amount paid as diesel fuel rebate for electricity generation in 1996/97 will be paid into the Sun Fund.

 

Section 166D

 

Grants can be paid from the Sun Fund to people who would be eligible for the diesel fuel rebate for electricity generation.  They can be used to subsidise the purchase and installation of photovoltaic, wind or solar-thermal systems.  Grant applications will be processed in order of receipt and if refused because funds available for the year have been spent, applicants can re-apply for the following year.

 

Total grants for a year cannot exceed the amount determined in section 166C (estimated to be $85 million) plus interest.

 

Section 166E

 

Interest accrued by the Sun Fund must be paid into the Sun Fund.

 

Section 166F

 

Parliament is to appropriate money for the Sun Fund.

 

Section 166G

 

A person is eligible to apply for a grant from the Sun Fund only if she or he is eligible for the diesel fuel rebate for electricity generation.  An application must be on the prescribed form.

 

Section 166H

 

The conditions applying to a grant are as follows:

·       the maximum grant is equal to ten times the annual rebate that would have been payable for electricity generation;

·       the amount of the annual rebate is determined either by proof of actual electricity use for at least 12 months out of the two years preceding the application or in accordance with a schedule of grants determined by the Minister, which is a disallowable instrument;

·       the maximum grant must not exceed 70% of the installed cost of the photovoltaic, wind or solar-thermal system; and

·       when a grant has been made, the person ceases to be eligible for the diesel fuel rebate for electricity generation for as many years as correspond to the size of the grant (this means that a person with a hybrid diesel/renewable system would not receive the diesel fuel rebate for the diesel used to generate electricity for this period).

 

An estimated 100 MW of the 600 MW electricity currently supplied by diesel is in small systems.  A farmer running an average small system of about 2 kW to supply a moderate sized house and machinery would be eligible for a grant of about $7500 from the Sun Fund.

 

 

Schedule 2

 

 

This schedule amends the Excise Act 1901 .

 

Item 1

 

This inserts a reference to new subsection 78A(2A) in subsection 78A(1), which lists the categories of people eligible for the diesel fuel rebate.

 

Item 2

 

New subsection 78A(2A) provides that any person already eligible to claim the diesel fuel rebate for electricity generation is eligible to apply for a grant from the Sun Fund, in accordance with the provisions set out in the amendments to the Customs Act 1901 .