SINGAPORE (Reuters) - Australia is set to unlock more than A$13 billion in government funds for clean energy that could boost investments for large solar power stations, but wind farm developers are at risk if the money disrupts an existing green scheme.

The Senate on Tuesday passed laws supporting renewables and a national carbon price to accelerate investment in cleaner energy.

Geothermal, wave power and energy efficiency projects are also likely to benefit from two independent bodies to be approved by the Senate, the A$10 billion dollars ($10.3 billion) Clean Energy Finance Corporation (CEFC) and A$3.2 billion Australian Renewable Energy Agency.

Wind farms and household solar are unlikely to get access to the cash because the technologies are more mature, cheaper than other renewables and less in need of support.

But getting the design right for the CEFC in particular will be crucial, energy policy analysts say, or the risk is undermining an existing scheme that has driven major investment in wind farms.

"Not only does the CEFC stimulate certain technologies but it also acts against other technologies, so the wind industry might come out really loudly against the CEFC," said Tony Wood, director of the energy program at the Grattan Institute in Melbourne, an independent think tank.

Australia is blessed with vast potential to generate renewable energy from the sun, wind, geothermal, wave as well as hydro power. While government programs have tried to support green energy, about 90 percent of the country's power comes from coal and gas.

With energy costs and greenhouse gas emissions rising, the government is trying to change this.

The CEFC starts in 2013 and runs for 5 years, with half the money set aside for renewable energy and the remainder to support lower-emissions technologies and energy efficiency. It aims to commercialize green energy power generation that needs additional financial help to make it viable.

It potentially represents the most important program to ramp up green investment since the government overhauled and expanded a market-based scheme that mandates a national target of 20 percent renewable energy by 2020.

REVIEW

That scheme, the Mandatory Renewable Energy Target, has led to a dramatic rise in wind farm investment, with more than 2,000 megawatts of capacity now installed and about another 9,000 MW of projects proposed.

The projects earn renewable energy certificates, currently trading at about A$40 per megawatt/hour, that retailers and some generators have to buy to meet green energy targets.

The government is reviewing the design of the CEFC, with wind farm developers fearing a major scaling up of rival renewable energy technologies that would also earn renewable energy certificates could distort the market.

"The CEFC needs to have the right principles around it to make sure that it doesn't create a market distortion under the renewable energy target and that's what we will be advocating for strongly," said Lane Crockett, managing director, Australia, of Pacific Hydro, a large wind farm developer.

"If there was a market distortion, it could threaten wind assets," he said, adding the A$5 billion under the finance corporation should deploy renewable energy investment for assets or generation above and beyond the 20 percent renewable energy target, and focus on less mature technologies.

Questions remain over the level of risk CEFC is willing to take and the type of financial support for projects.

"The CEFC, being a government-owned body, wouldn't be expected to give the rate of return that banks or others would, so people talk about it that would be just above the bond rate," said Paul Curnow, who advises on carbon, renewable energy and environmental markets for law firm Baker & McKenzie in Sydney.

"It could be loan guarantees, early stage equity, concessional loans," he said, steps that would help bridge the price gap in servicing debt costs and the money a project earns from selling power and earning renewable energy certificates.

A major issue for many large renewable energy projects is the high initial capital cost and debt repayments. Depending on the technology, the long-term power purchase agreement as well as money from renewable energy certificates might not cover the debt servicing costs. Sweeteners become essential.

The smaller Australian Renewable Energy Agency, set to start next year and run for nine years, will focus on grants to emerging green energy technologies to help with research and development and bringing them up to commercial scale.

WAVE AND GEOTHERMAL

The agency will repackage existing programs, with additional support for large-scale solar expected, along with money for geothermal and wave power developers.

Beneficiaries could include Carnegie Wave Energy Ltd and Oceanlinx and geothermal companies Geodynamics Ltd, Green Rock Energy Ltd and Pacific Hydro.

"In Australia, local banks will often only lend for 5 to 8 years, so if the CEFC is able to take a long-term view, able to invest 10 to 15 years, then the returns on areas such as solar and geothermal start to make more sense as the returns on investment kick in with higher energy and carbon pricing over this longer period," said Curnow.

Geodynamics says it aims to complete a 25 MW plant by Dec 2013 and is targeting production of more than 500 MW by 2018.

Large-scale solar is set to benefit from both funding bodies. This includes utility-scale solar photovoltaic (PV) power plants and solar thermal, which focuses the sun's energy to drive steam turbines to generate power.

These can use large numbers of parabolic troughs to heat fluids to drive the turbine, or use acres of mirrors to focus sunlight to a point on top of a tower.

Leading power generation equipment maker Alstom is confident it will benefit since its turbines can be used for both types of solar thermal technology. Alstom also has a stake in U.S. solar tower firm BrightSource.

"We haven't secured deals with anybody at this point," said Gwen Andrews, vice-president Asia and Oceania for environmental policies and global advocacy at Alstom.

"But with the new funding announcements coming out, we are very hopeful of the future for solar thermal in Australia."

The government earlier this year announced it would partially fund the country's two largest solar power stations with total capacity of 400 MW. Investors include French nuclear firm Areva, BP Solar and Pacific Hydro.

Curnow said it was too early to judge how successful the CEFC would be. If the aim was to solely support the target of 20 percent renewable energy, then the body might not be able to spend the full A$10 billion because there were already sizeable green energy investments in the pipeline.

"If you just need a 20 percent target, then assuming all of those projects going forward need some support from the CEFC, you have to question whether they could spend that money, since the aim is to leverage private investments," he said.

"So it does imply that we are going to see more renewables than the 20 percent."

($1 = 0.967 Australian Dollars)