Albanese government faces pressure to cut green energy subsidies

Home battery uptake has outpaced Treasury projections

Treasury now predicts that the Albanese government’s home battery program will cost $7.2bn, more than triple the original $2.3bn projection. The Guardian accompanied the forecast with the caveat “for what it’s worth” and reported that, a month into the program, the expected cost had moved toward $14bn as uptake outpaced official forecasts.

The home battery program has offered households and businesses a taxpayer-backed 30% rebate since July last year. Treasury officials originally estimated that it would lead to a million new batteries by 2030 at a cost of $2.3bn. The Guardian’s analysis said Treasury officials’ failure to anticipate the program’s popularity had undermined the case for the subsidy. The original design gave households an incentive to buy bigger, more expensive batteries, and Treasury subsequently tweaked the design to address that incentive. The current $7.2bn estimate followed that design change.

The home battery program is receiving the most focus among the calls to cut green-energy subsidies for households. That relative attention comes as Treasurer Jim Chalmers faces increasing pressure to fight inflation by reducing spending in the mid-year budget update. The Albanese government faces pressure to reduce both the home battery subsidy and the electric-vehicle subsidy. Despite reports that Treasury was pushing for cuts to the home battery scheme, The Guardian said the argument for those cuts had hardly been made.

A 2022 electric-vehicle subsidy is also under pressure. It exempts workers from fringe benefits tax when they lease an EV through their employer. The Guardian reported that the subsidy proved more popular and expensive than predicted. When budget experts were asked broader questions about the major pressures on the federal government’s finances, they rarely cited home battery rebates or electric vehicle tax breaks as leading targets.

The Guardian’s analysis presented scaling back nuclear-powered submarine spending and diesel fuel rebates for miners as a stronger economic case than reducing green-energy subsidies. It contrasted the calls to reduce household subsidies with scaling back billions of dollars in diesel rebates and questioned the politics of that comparison.

In a Monday speech, opposition leader Angus Taylor promised to “abolish Labor’s ideological climate bureaucracy” as part of his promised $31bn in budget savings over four years. The Albanese government’s recent effort to apply an income test to private healthcare rebates for people over 65 also met protests from the Coalition.

Stephen Bartos, an economics professor at the University of Canberra and a former deputy secretary at the Department of Finance and New South Wales parliamentary budget officer, said green subsidies “shouldn’t be their first port of call” if the objective is to close the budget deficit. He described them as small relative to health, the national disability insurance scheme and defence, while noting that the rationale for green subsidies was declining. Bartos also said: “nobody is mentioning nuclear-powered submarines”.

The national disability insurance scheme was expected to cost nearly $54bn in 2025–26, putting cost control at the center of the government’s fiscal plans. In 2023, the Parliamentary Budget Office estimated that acquiring nuclear-powered submarines under the Aukus agreement could cost as much as $368bn over the life of the program. The federal fuel tax credit, which mainly benefits major global mining companies, costs about $11bn a year and is rising fast.

Bartos is critical of government tax breaks for electric vehicles but says the case for public support for batteries is stronger. “I would probably be looking at where the price signals encouraging adoption [of clean energy] are weakest, and that’s probably batteries. For EVs, people are shifting no matter what,” he said.

According to The Guardian’s analysis, the cost overruns amplified derision of home batteries as “middle-class welfare” of the worst sort. Alison Reeve, director of the energy and climate change program at the Grattan Institute, said she understood the cost concerns but disputed that characterization. She said the evidence was “pretty thin when you look at where the batteries are being installed”. Installations were in homes across outer suburbs such as western Sydney and regional areas, rather than enclaves of comfortably well-off households.

The Guardian’s analysis also warned that pursuing short-term fiscal objectives could sacrifice long-term clean-energy goals. “Batteries are going to be a big part of our energy future,” Reeve said. “We do need to do some stimulating of that industry until it can stand on its own two feet.” The analysis said reducing support would damage the network of small businesses, suppliers and tradies that had invested in the developing home-battery industry.

Reeve said one design option was to ensure subsidized batteries delivered a community benefit by contributing to the power grid when needed. “We need to make sure we are maximising the public benefit, rather than just the private benefit,” she said. She cited lessons from Western Australia’s home battery support scheme: “If you look at the west coast, you couldn’t get the state subsidy unless you linked yourself up to a virtual power plan run by the network operator. That was in order to benefit the whole network.” Reeve also said: “We also need a clear path out of the subsidy so it doesn’t grow uncontrollably.”