CEFC and ANZ loan discounts for SMEs support the business case for energy management upgrades

Energy briefing update – September 2022

With Australia’s energy price volatility expected to continue, it’s imperative businesses take a strategic approach to energy use and management. Taking proactive steps will bolster resilience and lower exposure to energy prices while providing long-term productivity improvements.

Smart energy management means understanding and adjusting the elements within your control, such as upgrading old, inefficient equipment and switching from gas- to electric-powered equipment. These solutions can be low cost, but they can also require significant up-front capital investment. Even at the best of times, access to that capital can be difficult for small and medium enterprises (SMEs).

Acknowledging this barrier, the Clean Energy Finance Corporation (CEFC) and ANZ Bank have made a welcome commitment of an additional $200 million in the form of discounted loans for investments in eligible energy management-related assets and projects.

“Whether it be an electric truck or solar panels, we want to give Australian businesses access to finance, services and advice to invest in equipment which will help them shift to low carbon business models and operations that put them on a path to net zero emissions.”

Isaac Rankin, ANZ Managing Director of Commercial and Private Banking
8 August 2022 ANZ Media Release

The discount of 50 basis points (0.5 per cent) provided by ANZ and the CEFC is available for loans of up to $5 million for eligible energy upgrades.

The Energy Efficiency Council has estimated that improving energy efficiency has the potential to save households and businesses up to $7.7 billion each year on energy bills. In other words, by not making these upgrades, SMEs are leaving money on the table. Many businesses are already on board with CEFC co-financing programs, which have already provided 5,500 loans for activities including upgrades to more efficient machinery, the purchase and installation of solar panels, and converting to electric vehicles. The benefits of these investments are seen not only in lower energy bills and decreased exposure to energy market volatility, but also in businesses’ ability to get ahead of the curve on reducing emissions and supporting the achievement of a prosperous, net zero economy.

Over the five years that ANZ and the CEFC have provided these loan discounts, the number of SMEs interested in reducing their emissions has grown strongly, in part due to pressure from customers, supply chains and investors. With the Commonwealth Government recently passing the Climate Change Bill to turn emissions reductions targets into law, reducing emissions will fast become a requirement rather than a “nice to have”.

TAX INCENTIVES SWEETEN THE DEAL – BUT TIME IS RUNNING OUT

Until the end of this financial year, businesses can couple these discounted loans with government tax incentives allowing them to instantly write off the entire value of eligible depreciating assets.

This temporary full expensing measure decreases the payback period for energy upgrades – which can already pay for themselves over time through reduced energy bills. Incorporating the tax write-off into the equation means the time period for repaying the investment shrinks. Eligible upgrades or improvements can include lighting, air conditioners, solar panels, batteries, water heaters, industrial equipment and vehicles, as long as they are purchased and installed before 30 June 2023.

The animation below provides an at-a-glance overview of the temporary full expensing tax incentive, and how it boosts the business case for energy upgrades:

Further details are explained in the tax incentives guide, including key terms, examples of eligible energy assets, and further details around the business benefits of energy upgrades.

With programs like the CEFC and ANZ’s discounted loans, generous tax incentives, and grants and government support, the time is ripe to invest in smart energy management.

Take a look at the tax incentives guide and sector spotlights to learn how your business can manage the risks - and capture the opportunities - of Australia’s energy transition and net zero transformation, and follow @_energybriefing on Twitter for timely updates and resources.

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About Navigating a dynamic energy landscape

There is an enormous amount of information on energy in the public domain, yet it can be hard for business leaders to extract what matters for their businesses.

Navigating a dynamic energy landscape: a briefing for Australian businesses is an executive-level briefing designed to cut through the noise and help businesses confidently navigate Australia’s dynamic energy landscape.

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