Carbon tax does have a silver lining

While the unpopular carbon tax comes into force this month it is linked to some good news in the form of the generous $800m CleanTechnology Investment Program (CTIP) specifically for Australian manufacturers.

The goal of the merit-based program is to support manufacturers to maintain competitiveness in a carbon constrained economy through grants for investment in energy efficient capital equipment and low emission technologies, processes and products.

Michael Ryan, Senior Finance Broker with Finlease, says the AusIndustry managed program is very attractive and spells dollars for manufacturing companies. 

It is also interesting to note the tax benefit that flows from the investment in terms of the depreciation allowance, for example, using a rate of 10% prime cost, a deduction of $10,000 is claimable for every $100,000 in value," Ryan told Manufacturers' Monthly.

"With the 50% grant contribution plus the depreciation deduction (on full value) it makes this opportunity very attractive."

Mark Gadd, MD of Autonomous Energy agrees saying this is really great news for manufacturers, but warns companies should move quickly. 

"From past experience, with similar programs, the further into a program the harder it is to get the money," he said.

In terms of rebate, Gadd explains there is an applicant to grant ratio of either one for one, or two for one, depending on turnover, or three for one for projects over $10m.

"Typically it's one for one for companies with an annual turnover of less than $100m, or two for one if the turnover is higher," he told Manufacturers' Monthly.

Gadd says under the program, areas of energy saving are very wide ranging. 

"It all depends on what type of equipment is being upgraded but lighting is probably the area with most scope. 

"Lighting in most manufacturing plants is inefficient, and there are some large savings there, larger than people might think. 

"It's also a more certain energy efficiency saving, rather than calculating energy savings in upgrades to process controls and high efficiency motors for example."

With energy efficiency, Gadd says it's really site specific. 

"There is not much point in having a top 10 list of things to do. You need a professional energy audit to show exactly how and where energy can be saved, and what the costs and savings are, with the potential for very short ROIs," he said.

Getting the money

Gadd says his company offers a range of products and services that can be funded by the program. "Firstly we determine their eligibility, that's just a simple phone call.

"Then if the company already has plans for more energy efficient motors and/or lighting, or other areas, we can work with them to apply for CTIP funding or we can work with them to plan an energy efficiency or renewable energy project, including project design, specifications, cost feasibility, operating performance requirements. We will conduct the energy and emission savings which is a key part of the application as well as develop project milestones and budgets.

"The energy and emission savings can be in the form of an energy audit, but doesn't have to be. In terms of getting the best energy efficiency options, an energy audit is the best place to start, but some clients might already have done that.

"The cost of the energy audit can be applied for as part of the CTIP, in addition to that some states have their own subsidy programs for energy audits," he said.

Another option for reducing energy consumption and emissions, which is often overlooked and eligible under CTIP, is solar photovoltaics (PV), says Gadd.

"The financials on solar PV have changed dramatically in the past couple of years and is now far more feasible than a lot of other energy efficiency options.

"The costs associated with solar PV and the costs associated with the electricity generated by solar PV are very predictable unlike gas or co-gen for example.

"In our analysis of solar PV we have found it much more cost effective from day one than co-gen. Once we include the CTIP funding, we are looking at a ROI of just over three years, with an average KW/hr cost of just 2.9c, compared with today's electricity costs of 18c per KW/hr. That's over a 20 year period.

"These figures apply to any size manufacturer as the systems are entirely modular. Size is determined by roof space and budget and how much energy the company is using.

"We don't oversize the system, we try to match it to energy demand. It's grid interactive, so if the company is using more electricity than it is generating, it's imported from the grid, if the solar panels are generating more than required the electricity is sold back to the grid," he said.

Gadd admits that different levels of electricity will be generated per year, but says it is feasible right across Australia. 

This is because manufacturers have large roofs, plus most of their electricity load is during the daytime when the solar panels produce electricity, he says.