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1 November 2026

Powering the Regions Fund: a guide to Safeguard and industrial transformation funding

How the Powering the Regions Fund works, which streams are open as at October 2026, and how trade-exposed Safeguard facilities and regional industry can apply.

By Leigh Heaney, Watson Advisory

The Powering the Regions Fund (PRF) is the Australian Government’s main grant pool for cutting emissions at existing heavy industry, including facilities covered by the Safeguard Mechanism. This guide explains the three PRF streams, who runs each one, which are open as at 1 November 2026, and how to put together an application that holds up.

The short version: the Safeguard Transformation Stream (Round 2) is open until 6 May 2027. Applications are assessed in batches: those lodged by 5 November 2026 fall in Batch 2, and those lodged from 6 November 2026 fall in the final Batch 3. ARENA’s Industrial Transformation Stream is open on a rolling basis until its money runs out. The cement, lime, alumina and aluminium grant opportunity is closed.

Who this guide is for

  • Owners and operators of trade-exposed Safeguard Mechanism facilities in sectors such as metals, critical minerals, chemicals and cement.
  • Regional manufacturers, processors and miners that are not Safeguard facilities but want co-funding for electrification, energy efficiency, fuel switching or renewable energy projects.
  • Project developers, technology providers and consultants partnering with those facilities on shared or on-site infrastructure.
  • Finance, sustainability and government relations teams planning a decarbonisation capital program over the next five years.

What the Powering the Regions Fund is

The PRF sits under the Government’s Powering Australia Plan. The Department of Climate Change, Energy, the Environment and Water (DCCEEW) sets the policy, but the money is delivered through different agencies depending on the stream. DCCEEW lists three streams:

  • Safeguard Transformation Stream (STS). Grants for trade-exposed Safeguard facilities to cut their scope 1 (direct) emissions. Run through business.gov.au, with eligibility checked by the Business Grants Hub in the Department of Industry, Science and Resources. Open (Round 2).
  • Critical Inputs to Clean Energy Industries (CICEI). Support for domestic producers of clean energy inputs such as steel, cement, lime, alumina and aluminium. The cement, lime, alumina and aluminium grant opportunity on business.gov.au is closed.
  • Industrial Transformation Stream (ITS). A $400 million program delivered by the Australian Renewable Energy Agency (ARENA) for existing industrial facilities in regional Australia. Open (Round 3, rolling).

How the Safeguard Mechanism fits in

The Safeguard Mechanism applies to industrial facilities emitting more than 100,000 tonnes of carbon dioxide equivalent a year. Each facility has a baseline, and DCCEEW states that baselines will generally fall by 4.9% each year to 2030. Facilities that come in under their baseline can earn Safeguard Mechanism Credits; those over it must surrender credits or use other flexibility options. The Clean Energy Regulator administers the scheme, and DCCEEW is currently running a 2026-27 review of it.

That declining baseline is why the STS exists. Trade-exposed facilities face real costs from tighter limits but compete with overseas producers who may not. The STS aims to bring forward capital investment so those facilities can meet their obligations without moving production offshore, a risk the program calls carbon leakage.

Safeguard Transformation Stream Round 2 at a glance

  • $600 million has been announced over the life of the STS. About $321 million is available in Round 2, from 2025-26 to 2032-33.
  • Grants are $500,000 to $50 million and cover up to 50% of eligible project expenditure.
  • Your co-contribution must be cash. No more than 40% of it can come from state, territory or local government sources, including concessional loans.
  • Projects can run for up to 60 months and must finish by 31 March 2033.
  • The program is technology neutral. Carbon capture and storage can qualify if it reduces the facility’s scope 1 emissions and storage is permanent.
  • Front-end engineering and design (FEED) studies linked to the capital works can be claimed up to 10% of the grant, capped at $5 million, but only if your annual turnover is $3 billion or less.

Industrial Transformation Stream at a glance

  • ARENA allocated $150 million to Round 1 and $70 million to Round 2 (both closed). The remaining $180 million went to Round 3, which opened in September 2025 and stays open until funding is exhausted.
  • Round 3 focus areas are innovation in industrial decarbonisation and advancing commercial deployment.
  • It covers scope 1 and scope 2 emissions, so electricity-related projects count, unlike the STS.
  • ARENA expects grants to be at least $500,000, has no set maximum, and will contribute no more than 50% of eligible project costs.
  • It can fund feasibility studies and FEED through to trials, demonstrations and deployment, including two-stage projects.

Eligibility

Safeguard Transformation Stream

You can apply if you own or operate a trade-exposed Safeguard Mechanism facility that is not a new or expanded coal or gas production facility, hold an ABN, and are an Australian-incorporated entity, a company limited by guarantee or an incorporated association. A facility is trade-exposed if it produces a production variable listed in section 1 or 2 of Schedule 2 of the National Greenhouse and Energy Reporting (Safeguard Mechanism) Rule 2015. Round 2 asks applicants to identify that production variable.

Projects must be delivered either on-site at an eligible facility or as shared infrastructure with a practical connection to an eligible facility, located in regional Australia (outside a Greater Capital City, but including Kwinana). Joint applications from several eligible facilities are allowed, with extra requirements.

Ineligible costs include buying ACCUs or any other carbon credits, pre-feasibility and feasibility studies (other than eligible FEED), and the costs of reaching a final investment decision.

Industrial Transformation Stream

The lead applicant must hold an ABN and be a company incorporated under the Corporations Act 2001, a state or territory owned corporation (or subsidiary), or a local council or body representing councils. Universities and other research institutions cannot apply directly but can partner with an eligible applicant.

According to ARENA’s ITS FAQs, the project must:

  • address scope 1 and/or scope 2 emissions of an industrial activity that was operating by 1 June 2023;
  • be in regional Australia, meaning outside the Greater Capital City Statistical Areas (Kwinana Industrial Area included);
  • benefit an industrial facility under the operational control of an entity that meets the NGER corporate group reporting threshold (the lead applicant itself need not be that entity, which allows consortia);
  • not be early-stage research (technology readiness levels 1 to 3), and not be at a new or expanded coal or gas facility;
  • not have received, or be under assessment for, funding from the STS or CICEI.

Safeguard entities can apply to the ITS, but not for a project that is also seeking STS funding. For the STS, business.gov.au says you may apply for the same project under more than one Commonwealth program, but if successful you must choose one grant.

Step-by-step process

  1. Pick the right stream. Safeguard facility, scope 1 abatement and a capital-ready project: the STS. Regional facility, scope 2 or efficiency focus, or a study or demonstration: the ITS. You cannot run the same project through both.
  2. Read the current guidelines in full. For the STS, the Round 2 grant opportunity guidelines on business.gov.au are the primary authority over the FAQs. For the ITS, read the September 2025 Program Guidelines and Round 3 Focus Areas on arena.gov.au.
  3. Lock down your baseline data. Use your NGER and Safeguard reporting to show current emissions and a credible abatement estimate. STS technical assessors check that expected reductions are reasonable.
  4. Secure your co-funding. The STS requires cash co-contributions and independent certification that you have the funds. Board approvals, partner commitments and any state funding (within the 40% limit) should be documented before you lodge.
  5. For the STS: apply through the business.gov.au portal. Applications are scored on three criteria: contribution to Australia’s 2030, 2035 and 2050 emissions targets (50 points), capacity and capability to deliver (10 points), and impact of the grant on your project (40 points). The Powering the Regions Expert Advisory Panel scores eligible applications and the Minister makes the final decision.
  6. For the ITS: start with ARENA’s Funding Advice form. All ITS applicants must first lodge an enquiry. If invited, you submit an expression of interest in ARENANet (project plan of up to 20 pages, conflict of interest declaration and budget template), then a full application if you pass that stage. (Watson Advisory can help you prepare your ARENA enquiry and expression of interest: admin@watsonadvisory.com.au)
  7. Review the funding agreement early. ARENA asks applicants to either accept its template funding agreement or list objections in a compliance table. Raise problems at application stage, not after you are selected.
  8. Plan for engagement after lodging. Both programs may ask for clarification. Have a single point of contact and keep technical, finance and legal people available during assessment.

Timelines

  • STS Batch 2: 6 May to 5 November 2026, closing at 5:00pm AEST. Applications lodged after that fall in Batch 3.
  • STS Batch 3 (final): 6 November 2026 to 6 May 2027, closing at 5:00pm AEST. Late applications cannot be considered.
  • STS funding split: up to 50% of Round 2 funding was offered in Batch 1 and up to 25% in each of Batches 2 and 3, with any unallocated money rolling forward.
  • STS decisions: business.gov.au expects outcomes within 3 to 5 months of each batch closing, followed by grant agreement negotiations.
  • STS future rounds: the program FAQs say further rounds are not anticipated at this time.
  • ITS Round 3: open on an ongoing basis until funding is exhausted. ARENA reserves the right to change funding amounts and dates. We could not find a published figure for how much of the $180 million remains uncommitted, so ask ARENA through its Funding Advice form.

With Batch 2 closing on 5 November 2026, most new STS applicants should be aiming at Batch 3. That still means a complete, board-endorsed application by early May 2027, so engineering, costings and financing decisions need to be well advanced over summer. (We can review your Batch 3 application before you lodge it: admin@watsonadvisory.com.au)

Common mistakes

  • Applying to the wrong stream. A scope 2 project such as a renewable power purchase arrangement does not reduce scope 1 emissions and will not fit the STS.
  • Treating feasibility work as capital. The STS will not fund feasibility studies or pre-FID costs. If the project is not ready for capital works, the ITS may suit better.
  • Counting in-kind contributions for the STS. STS co-contributions must be cash, and state or local support can make up no more than 40% of them.
  • Weak “impact of grant” arguments. Under the STS this criterion is worth 40 of 100 points. Show clearly what happens with and without the grant: timing, scale or whether the project proceeds at all.
  • Location errors. Both streams use a regional test based on Greater Capital City boundaries (Kwinana excepted). Check the site on the ABS maps before you invest in an application.
  • Missing the batch cut-off. Applications that miss a batch are not rejected, but they wait months longer for a decision and compete for a smaller share of funds.

FAQ

Is the Powering the Regions Fund still open?

Partly. STS Round 2 is open until 6 May 2027, and ARENA’s ITS Round 3 is open until its funding runs out. The cement, lime, alumina and aluminium opportunity under CICEI is closed.

Do I need to be a Safeguard facility to get PRF funding?

Only for the STS. The ITS is open to regional industrial facilities more broadly, provided the facility is under the operational control of an entity that meets the NGER corporate group threshold.

Can I combine PRF funding with state grants?

For the STS, yes, but state, territory and local government funding (including concessional loans) can make up no more than 40% of your co-contribution. Check the ITS guidelines for ARENA’s approach to other government funding.

Can a PRF grant pay for carbon credits?

No. Buying ACCUs or any other carbon credits is ineligible under the STS. The program funds new capital investment that reduces scope 1 emissions.

How long does an STS decision take?

business.gov.au expects assessment to be finalised and announced within 3 to 5 months of each batch closing date, with grant agreement negotiations starting then. (Watson Advisory can help you prepare for grant agreement negotiations: admin@watsonadvisory.com.au)

Who decides which projects are funded?

For the STS, the Business Grants Hub checks eligibility, the Powering the Regions Expert Advisory Panel scores applications, and the Minister makes the final decision. For the ITS, ARENA assesses applications against its program guidelines.

How Watson Advisory can help

We help industrial clients choose the right PRF stream, frame the emissions and “impact of grant” case, and engage with DCCEEW, ARENA and ministers’ offices in line with the lobbying codes. If you are aiming for STS Batch 3 or an ITS enquiry, now is the time to start. Contact us at admin@watsonadvisory.com.au.

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About the author: Leigh Heaney is a Partner at Watson Advisory, specialising in government relations and public affairs. Leigh spent more than a decade as chief of staff to a senior federal frontbencher in both the House of Representatives and the Senate. Before joining Watson Advisory, Leigh was Government Relations director at Australia’s renewable energy peak body, working on the Capacity Investment Scheme and the production tax credits in the Future Made in Australia package.

This guide is general information only, current as at 22 October 2026. It is not legal, financial or tax advice. Program guidelines, eligibility and funding rounds change often, so check the official guidelines before applying, or contact Watson Advisory for advice on your circumstances.

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