Australia’s renewable energy landscape continues to progress, driven by significant government investment and new policy initiatives. In December 2024, the Minister for Climate Change and Energy announced 19 new renewable energy projects, adding 6.4 gigawatts (GW) to the National Electricity Market (NEM) — enough to power three million homes. This announcement aligns with the Federal Government’s broader commitment to supporting the transition to a net zero economy, with the 2024-2025 Budget allocating $22.7 billion to the Future Made in Australia plan.
Renewable energy zones (REZs), battery storage systems (BESS) and large-scale hydrogen projects are all gaining traction, supported by targeted government programs like the Capacity Investment Scheme, the Solar Sunshot Program and the Hydrogen Headstart initiative. At the same time, rooftop solar capacity continues to expand, with forecasts suggesting it will surpass the combined capacity of coal, gas, and hydro in the coming decades. Meanwhile, new legislative developments, such as the introduction of the Net Zero Economy Authority Act 2024 (Cth) and the passage of the Future Made in Australia Bill 2024 (Cth), reflect a strategic push to position Australia as a global leader in clean energy.
Despite these government commitments, this sector is still facing challenges due to competing priorities and inconsistent approaches between key decision makers at both a state and federal level. Although there seems to be a consensus that Australia needs more investment in renewable energy, stakeholders cannot reach an agreement on how or where to channel renewable energy efforts.
Following last year’s Queensland State election, the Liberal National Party (LNP) under David Crisafulli introduced a revised energy policy which seeks to prioritise cost control, energy reliability, and maintaining coal as a primary energy source. A key policy shift was the decision to halt the Pioneer-Burdekin pumped hydro project, a decision which was particularly divisive. In addition, the debate over nuclear energy has resurfaced following the federal opposition’s proposal for nuclear power plants, which has injected uncertainty into the renewable energy market, and increased concerns that renewable energy investment should be diverted to other jurisdictions with more certainty.
On top of this, the increased demand for dispatchable energy capacity, transmission network bottlenecks and delays in major infrastructure projects remain key hurdles.
Federal Budget 2024-2025 prioritises renewable energy
In the 2024/25 Federal Budget, the Federal Government committed $22.7 billion to the Future Made in Australia plan which aims to support Australia’s transition to a net zero economy. The plan focuses on attracting investment, adding value to our natural resources and strengthening our economic security, which will ultimately position Australia as a leader in renewable energy.
In this Plan, the Federal Government has allocated $1 billion to the Solar Sunshot program which aims to support innovative solar panel manufacturing facilities in Australia. The rationale behind this allocation is that while a significant number of homes in Australia have solar panels (the highest uptake in the world) only 1% of them are being made in Australia.
Further, the Federal Government’s $4 billion allocation to the Hydrogen Headstart program intends to provide support for large-scale renewable hydrogen projects through competitive production contracts. This investment will accelerate development of Australia’s hydrogen industry, promote the development of clean energy industries and help Australia connect to new global hydrogen supply chains. However even with this government policy and financial support, the emerging hydrogen industry continues to face setbacks, with private investors such as Origin and Fortescue ending or scaling back their proposed investment in hydrogen, stating that these projects just don’t stack up financially at this time. Further, the Queensland Government has pulled its support for the Gladstone Hydrogen Hub, which was regarded as a seamless fit given the city’s experience in heavy export industries like LNG.
Rooftop solar
Over the coming decades, the national capacity of rooftop solar is forecasted to exceed that of coal, gas and hydro, combined, in the NEM. Now, one in three Australian households have rooftop solar with 20GW of rooftop solar, which is set to triple in the future.
However, with this massive uptake, grid stability issues and infrastructure capacity are under strain. This rooftop capacity has the ability to cannibalise large-scale solar projects during daylight hours, impacting the financials of such projects by driving the price down, while offering little stability at peak evening times. Further, disputes over how much homes that export electricity to the grid should pay for this right remains unresolved. Currently, all consumers share infrastructure costs, but only solar owners receive a tariff in return.
Community batteries could help by storing excess energy for later use, supporting grid stability but would require large scale deployment to positively impact the grid.
Capacity Investment Scheme success
The Capacity Investment Scheme (CIS) is an Australian Government revenue underwriting scheme to accelerate investment in renewable energy generation, such as wind, solar and clean dispatchable capacity, such as battery storage. The CIS does this by setting a revenue ‘floor’ and ‘ceiling’ with the Federal Government compensating below the ‘floor’ and the generator compensating above the ‘ceiling’ to provide revenue certainty to projects.
The CIS is the Australian Government’s pathway to boost investment in renewable energy generation and dispatchable storage. This investment is intended assist in reaching Australia’s target of 82% renewable energy on the grid by 2030.
The CIS also encourages new investment in renewable energy dispatchable capacity, which will contribute towards Australia meeting its growing electricity demand as ageing coal power stations exit the grid.
Six new projects in Victoria and South Australia have been successfully developed under the CIS.
The Victorian projects are:
- Wooreen 350 megawatts (MW) lithium-ion battery system operated by EnergyAustralia; and
- Springvale Energy Hub 115 MW lithium-ion battery system to be developed by Project Power.
The South Australian projects are:
- Limestone Coast West 250MW lithium-ion battery operated by Pacific Green;
- Solar River 170MW lithium-ion battery alongside a 230MW solar farm, operated by Zen Energy;
- Clements Gap 60MW lithium-ion battery, operated by Pacific Blue; and
- Hallett 50MW lithium-ion battery owned by Energy Australia.
It is forecasted that successful clean dispatchable capacity projects will be able to deliver 3,626 megawatt hours (MWh) of energy which is enough to supply the peak electricity demand for a million homes.
Renewable energy zone (REZ) progress
The Queensland Government released its REZ Roadmap in May 2024, which sets out the planned framework for development of REZs. This also includes the identification of potential REZ locations to be incorporated into the Queensland SuperGrid Infrastructure Blueprint. Legislative force was provided to the REZ framework on 26 April 2024 with the Energy (Renewable Transformation and Jobs) Act 2024 (Qld) being granted assent.
At present, the Queensland Government has identified 12 potential REZ locations, grouped into Southern, Central, North and Far North Queensland regions. Of these, the Central Queensland region has made the most progress, having completed initial community sessions in 2024.
However, REZs continue to face transmission and grid connection issues, and arguments about impact on competing land uses impacting the roll out of projects. It appears somewhat unlikely the REZ policy in Queensland will be proactively pursued by the Queensland State Government given recent announcements in respect to planning requirements for wind projects, and soon likely large scale solar projects.
Similarly, the REZs in New South Wales have been established now for several years. while the environmental assessment process for individual renewable energy projects within these zones continue to be progressed by proponents, the major hurdles associated with development of projects within these REZs still remains the substantial road upgrades required to transport wind turbines to the regions and the acquisition of land interests required for the development of major grid connection infrastructure.
Battery energy storage system (BESS)
With the retirement of coal generators, generation capacity is increasingly being obtained from renewable energy sources like wind and solar, which have varying outputs. Consequently, focus has shifted towards BESS to combat output variations and maintain system security. This focus is supported by the Australian Renewable Energy Agency (ARENA) which expressed a need for ‘significantly increased firming of the grid, including energy storage, to balance the variability of renewable energy sources and provide essential system services’.
Despite significant investment interest and commencement of new developments, Australia’s current storage capacity of 3GW falls far short of the capacity required. According to the Australian Energy Market Operator (AEMO) Integrated System Plan published in 2024, the NEM alone will need 36GW of storage capacity in the year 2034-2035.
Although policies, such as community batteries and CIS, attempt to resolve this, other challenges include the connection of BESS to the grid, resistance to the installation of crucial high-voltage powerlines and Australia’s comparatively high battery costs caused by most domestically sourced lithium being exported to China.
Unsuccessful transmission line rollout
AEMO has warned of potential energy gaps in New South Wales, Victoria, and South Australia unless there is swift investment in renewable energy projects and the transmission lines required to connect these projects to the grid. A number of transmission line developments have been delayed, with setbacks ranging from one to five years, and an average delay of about three years across the country. Victoria has experienced the worst delays, with projects running approximately four years behind schedule.
A key challenge lies in delivering the necessary transmission interconnectors to connect renewable generation and storage capacity to replace outgoing coal-fired power stations. The main roadblocks to progress include excessive red tape, a lack of national planning and coordination, and opposition from local communities and landholders.
The slow pace of the transmission line rollout has hindered Australia’s ability to reach its climate targets and could pose a threat to the reliability and security of the nation’s power systems.
Nuclear
In June 2024, the federal opposition party announced plans to build seven nuclear power plants by 2050 if elected, sparking widespread debate on the role of nuclear energy in Australia’s future. Nuclear power is currently banned under federal and state laws, including the Australian Radiation Protection and Nuclear Safety Act 1998 (Cth) and the Environment Protection and Biodiversity Conservation Act 1999 (Cth). Overcoming these bans would be the first step, but significant barriers remain, such as high costs, a lack of local expertise, safety concerns, waste disposal challenges, and regulatory hurdles. Additionally, nuclear power faces timing disadvantages, with approval and construction taking up to 20 years, compared to the much faster development of renewable energy projects.
The Coalition’s plan to build taxpayer-funded nuclear reactors in Australia is creating uncertainty and delaying investment in major solar and wind projects. Their proposal, which lacks bipartisan support for stronger climate targets, risks driving investors to more stable markets. While the Coalition claims small reactors could be operational by 2035 and a large one by 2037, experts, including CSIRO, argue this timeline is unrealistic, with nuclear development unlikely before the 2040s.
This shift in energy policy threatens Australia’s $40 billion renewable sector, creating investor hesitation ahead of the federal election, despite nuclear power’s long lead time before impacting the grid. With the federal election approaching, renewable developers are somewhat forced to wait and see. While a potential nuclear development would not affect the grid for years, its approval would signal a shift in priorities if the Coalition takes power.
Offshore wind projects
Australia’s offshore wind development faces significant supply chain obstacles, including limited local manufacturing capabilities for turbines and blades, reliance on global suppliers, and underdeveloped port infrastructure. While several ports are planning upgrades to support offshore wind, hurdles with obtaining environmental approval cause significant delays, which pose further complications.
The offshore wind industry is facing challenges due to the current macroeconomic environment. Rising costs, driven by inflated supply chain expenses, are making offshore wind more expensive than onshore renewables. This has led to a high number of project cancellations, as stakeholders reassess the industry’s outlook following reported cost increases of 40-60%. Despite its potential, the industry’s profitability and growth are under pressure.
Similar to onshore projects, offshore wind has faced considerable community opposition, largely based on visual impact. This has driven the designated zones to be reduced and pushed further offshore, increasing development and transmission costs, potentially putting a type of renewable energy development used around the world to avoid competing land use issues out of reach.
LNP withdraws support from Gladstone Hydrogen Project
The Queensland Government recently withdrew funding for the Central Queensland Hydrogen Project, a $12.5 billion initiative aimed at producing green hydrogen for export, which had been championed by the previous Labor government. Federal Energy Minister Chris Bowen expressed disappointment, highlighting the Project’s potential to generate significant economic benefits, including thousands of jobs. Despite this setback, Minister Bowen reaffirmed the Federal Government’s commitment to supporting green hydrogen initiatives, though the withdrawal of support for this Project raises concerns about the future of renewable energy projects and jobs in Central Queensland.
Snowy Hydro delays
Snowy 2.0 Pumped Storage Power Station, once slated for completion in 2021, has faced repeated delays and is now expected to be finished by December 2028, with commissioning in 2029. The project’s budget has expanded from the initial $2 billion estimate to $12 billion, reflecting unforeseen complexities in planning, technical challenges that emerged during implementation, and the unprecedented impact of COVID-19 disruptions.
Despite setbacks, Snowy 2.0 remains critical for Australia’s energy future, providing 2,200 MW of hydropower by transferring water between the Tantangara Dam and Talbingo Reservoir, supporting grid stability and renewable energy integration.
Pumped Hydro scrapped
In November 2024, Queensland Premier David Crisafulli announced the cancellation of the Pioneer-Burdekin Pumped Hydro Project, citing financial unviability, environmental approval issues, and lack of Traditional Owner consent. The project’s estimated costs had escalated from an initial $12 billion to potentially as high as $27.7 billion, leading to concerns about its feasibility.
The Queensland government plans to explore smaller, more manageable pumped hydro projects in partnership with the private sector, though specific details of any such projects are yet to be disclosed. The cancellation of this specific project has raised concerns about potential increases in future power prices and the state’s ability to meet its renewable energy targets.
Australia’s renewable energy potential hindered by policy inconsistency
While Australia’s clean energy transformation is progressing, the road ahead is not without obstacles. Grid reliability, investment in transmission infrastructure, and integration of storage solutions remain critical to meeting the target of 82% renewable electricity generation by 2030. Further, inconsistent approaches and competing priorities continue to create issues on both a state and federal policy level.
The ongoing policy debate at the policy level serves only to delay projects, increase costs and prevent streamlined development. Until these issues are resolved, investors cannot be expected to pursue largescale investment.
As renewable energy continues to be the cheapest and cleanest source of energy, and with Australia’s abundant space, sunlight, wind and waves, it remains an attractive destination for global investment into this sector. However, without major changes and coordination between all levels of government, opportunities will surely be missed with the ultimate outcome being more expensive and less reliable electricity supply.
