Australia Risks 12-18 GW Renewable Gap Due To Slow Investment, Study Finds

Australia has run into a problem of plenty for its solar capacity. 2024 saw the continuing issue of curtailments as solar regularly oversupplied to a grid run on baseload coal and gas power. The rush to build large batteries has helped, but not enough clearly.

The National Electricity Market (NEM) is stalling investment in Australia’s energy sector at a critical time. New research indicates that Australia’s market settings must attract and coordinate the $122 billion investment needed to transition to a renewable energy future. Research by the Clean Energy Investor Group (CEIG) and Castalia Advisors reveals that the National Electricity Market’s (NEM) outdated design—built for an era of coal and gas—is hindering investment in large-scale renewable projects like wind, solar, and batteries.

The ‘Future Market Design Discussion Paper’ shows that: 

• Continued blunt market settings risk making Australia uncompetitive and driving domestic and international investors to other countries. 
• Australia is caught in a vicious cycle of negotiating extensions for ageing and unreliable coal plants, which delays the investments required to replace retiring coal generation. 
• While government initiatives like the Capacity Investment Scheme and Renewable Energy Zones are doing their best to patch the NEM, their fragmented approach fails to address problems with the market’s fundamental design. 

Impact Of Low Renewable Energy Investment

The Clean Energy Investment Group (CEIG) If actual investment remains below the Integrated System Plan’s projected requirements by 6–9%, it will create a significant gap in renewable capacity—12– 18GW by 2040 and 15–23GW by 2050—highlighting the urgent need for stronger investment signals within the NEM. The discussion paper welcomes the Federal Government’s independent review of the NEM’s wholesale market settings and urges it to be ambitious. It emphasizes, “Transitioning from the current design to a future NEM will take time. Still, a clear pathway with interim steps must be communicated to avoid freezing investment today and to ensure the grid remains reliable and affordable as the aging coal fleet retires.” 

Chief Executive Officer (CEO) of the Clean Energy Investor Group, Richie Merzian said,“The national electricity market was designed in an era of flip-phones and Nokia. A rethink is essential to attract sufficient investment, lower the cost of capital for renewables, and build Australia’s modern clean energy grid. The Federal Government’s independent review of the NEM is a key step toward creating a grid that supports firmed renewable energy and CEIG looks forward to working with the Panel.” 

Executive Direction of Castalia Advisors, Alex Sundakov said, “Our report finds that the market’s inability to incentivise and enable financing of sufficient coordinated investment is the single greatest barrier to achieving reliable and affordable as well as near-zero-emissions grid. This is not primarily a technical challenge—it is a market design challenge that requires thoughtful reform to unlock Australia’s renewable energy potential.” He added, “A cohesive rethink of the NEM is critical to delivering the scale of investment required to meet Australia’s clean energy targets.”