Australia: Energy transition

After more than a decade of sustained momentum, Australia’s energy transition remains in an accelerated phase of infrastructure development. This is reflected in Clean Energy Australia's latest annual report, which shows that renewables:

• accounted for 42.7% of Australia’s total electricity generation in 2025 (up from 38.9% in 2024); and
• most notably, exceeded fossil fuel generation for the first time, in the final quarter of 2025.¹

The construction landscape in Australia spans multiple aspects of the energy transition supply chain including:

• generation technologies, such as utility-scale and rooftop solar, onshore and offshore wind, and emerging technologies including hydrogen;
• storage and firming capacity, such as battery energy storage systems (BESS) and pumped hydro;
• grid and network infrastructure, such as high-voltage transmission lines, substations, and grid stability infrastructure; and
• enabling infrastructure, such as EV charging networks.

Australia also plays a significant upstream role in the global energy transition as one of the world’s largest producers of critical minerals, including lithium, rare earths, cobalt, and nickel. However, due to a relatively nascent domestic manufacturing and processing capability, key equipment for renewable energy projects, including solar panels, wind turbines, and batteries, continue to be sourced from offshore manufacturers.

The acceleration has been underpinned by a material increase in project delivery, with approximately 5.9 gigawatts (GW) of new renewable generation capacity reaching completion in 2025 (representing a 28.3% year-on-year increase).² The scale of recent solar and wind project completions across multiple Australian states reflects the alignment of international capital with locally embedded development platforms, enabling new capacity to be unlocked in the Australian market.³ 

BESS is a standout growth area, with approximately 2 GW of large-scale battery capacity commissioned – representing a staggering 233% year-on-year increase.⁴ This positions Australia as the third-largest utility-scale battery market globally, behind only China and the United States, reflecting strong participation from both specialist BESS developers and integrated developers.⁵

Offshore wind is an emerging sector, with developers progressing feasibility-stage projects. In Western Australia, three offshore wind projects in the Bunbury zone were awarded feasibility licenses in 2025, with a combined potential capacity of approximately 4 GW.⁶ Momentum is also building on the east coast, with Victoria’s first offshore wind auction rescheduled for August 2026.

Hydrogen remains at an earlier stage but is actively being advanced by global developers and investors, with major hydrogen projects progressing with support from the Federal Government’s Hydrogen Headstart program.

On the transmission side, the Clean Energy Australia report highlights that a key constraint to further development is that network delivery is not keeping pace with the scale of renewable generation and storage seeking connection, with an estimated 64 GW of generation and storage currently awaiting grid connection.⁷

The capital supporting this infrastructure pipeline is substantial and diverse, spanning domestic superannuation funds, global pension and sovereign wealth investors, specialist infrastructure managers, and government-backed entities such as the Clean Energy Finance Corporation.

The report records cumulative investment of AUD31.4 billion across 20.6 GW of large-scale energy projects that have reached financial commitment since 2017.⁸ However, it also points to a slowdown in 2025, noting that only 2.3 GW of large-scale renewable generation reached financial close during the year (down from 4.4 GW in 2024), driven by rising inflation, regulatory bottlenecks, and slow transmission delivery.⁹

¹ Clean Energy Australia 2026 Report, Clean Energy Australia, 2026, pp. 1, 6.
² Clean Energy Australia 2026 Report, Clean Energy Australia, 2026, p. 6.
³ Clean Energy Australia 2026 Report, Clean Energy Australia, 2026, p. 9.
⁴ Clean Energy Australia 2026 Report, Clean Energy Australia, 2026, pp. 6, 9.
⁵ Clean Energy Australia 2026 Report, Clean Energy Australia, 2026, p. 1.
⁶ Clean Energy Australia 2026 Report, Clean Energy Australia, 2026, p. 12.
⁷ Clean Energy Australia 2026 Report, Clean Energy Australia, 2026, p. 16.
⁸ Clean Energy Australia 2026 Report, Clean Energy Australia, 2026, p. 13.
⁹ Clean Energy Australia 2026 Report, Clean Energy Australia 2026, pp. 15-16.

Contracting models are evolving in response to changing risk allocation and market constraints:

• Shift from traditional EPC to split-contract models: Market capacity constraints, coupled with contractor reluctance to assume full technology and performance risk, are continuing to drive a trend toward split-contract and multi-contract procurement structures. Under these models, owners separately contract with equipment suppliers (OEMs) and balance-of-plant (BOP) contractors, retaining interface risk. This necessitates careful risk management through detailed responsibility matrices and interface agreements.
• OEM-led delivery: In the BESS sector in particular, OEMs are increasingly offering integrated supply-and-install solutions for their proprietary systems. This approach blurs the traditional boundary between equipment supply and construction, and it requires careful consideration on a project-by-project basis as to the allocation of responsibility for installation, performance testing, and commissioning across the contract documents.
• Connection risk and works requirements: Due to the transfer of network and system strength remediation costs to developers under connection agreements with the relevant network service provider, and the iterative nature of Generator Performance Standards (GPS) requirements not fully known at the time of contracting, connection risk is a central commercial uncertainty affecting cost, timing, performance, and regulatory compliance. In response, contracting models have shifted away from fixed-price EPC wraps towards more fragmented, risk-sharing structures (for example, specific variation regimes for GPS changes). As a result, significant connection and compliance risk is ultimately retained by developers, as it cannot be fully priced or transferred at contract execution.
• Gap between mechanical completion and COD: Where there is a delay to energization by the relevant network service provider, a timing gap between mechanical completion (when the system is installed) and the Commercial Operation Date (when the system is energized, commissioned and registration with the Australian Energy Market Operator (AEMO) has occurred) can arise. This gap can occur due to factors outside contractor control, including network connection delays. As a result, consideration of the milestone structure, liquidated damages regime, performance testing regime, interim care and custody provisions and insurance arrangements during the gap period is required on a project-by-project basis to address the allocation of risk where assets are installed on site but energization and commissioning are delayed through no fault of the contractor.

These evolving delivery models place increased project management obligations on owners and developers, who must develop in-house capability or engage specialist consultants to manage multiple contractor interfaces. Overall, contracting models are shifting toward structures that prioritize flexibility and deliverability, but with greater residual risk being retained by owners.

The new and developing nature of energy transition technologies gives rise to several specific risks for contracting parties:

• Technology performance risk: Developing technologies may not have been extensively tested in Australian conditions. For example, with developing BESS technology, degradation rates and cycle-life warranties continue to be key areas of negotiation, particularly in relation to performance guarantees.
• Supply chain concentration risk: A significant proportion of solar modules and battery cells are manufactured in China, exposing projects to trade policy and logistics risks. This may also potentially increase modern slavery compliance risk under the Modern Slavery Act 2018 (Cth), particularly where supply chains pass through regions with varying labor standards and regulatory environments. International OEMs must be prepared to provide supply chain compliance warranties, support audit rights, and address modern slavery due diligence requirements that are subject to increasing scrutiny by Australian regulators, investors, and offtake customers.
• Integration risk: Hybrid projects (for example, co-located solar and BESS combinations) create complex integration challenges where responsibility for system-level performance may sit across multiple technologies and contractors. Mitigation strategies include robust performance testing regimes, clear interface protocols, technology-specific warranties, and carefully structured defect liability and performance guarantee frameworks that appropriately allocate integration and performance risk.

Australia is experiencing acute delivery pressures on energy transition projects including:

• Contractor and workforce capacity: The volume of projects is straining a limited pool of experienced contractors, with strong competition for skilled labor such as electricians, high-voltage technicians, and commissioning engineers.
• Supply chain constraints: Global pressures affecting transformers, switchgear, and specialist cabling continue to extend lead times and delay projects. Concentration of manufacturing in a small number of jurisdictions amplifies this risk.
• Grid connection delays: Connection processes are experiencing significant backlogs, creating bottlenecks between construction completion and commercial operation.
• Global logistics disruptions: Ongoing geopolitical instability in the Middle East, including disruptions to key shipping routes such as the Red Sea, has increased freight costs, delivery timelines, and broader supply chain volatility.

Mitigation strategies include early contractor engagement and pre-qualification, long-lead procurement of critical equipment, and collaborative contracting approaches that provide contractors with greater visibility of pipeline and the ability to plan resources accordingly and develop pricing for foreseeable design, construction, and regulatory risks prior to long-form contract execution.

Beyond new technology and delivery risks, the following areas are driving disputes on energy transition projects in Australia:

• Evolving grid connection requirements: GPS changes arising after contract execution are a key source of disputes. Contractors resist absorbing unforeseen scope changes that may not be able to be priced prior to entry into construction contracts, while owners face pressure from connection timelines and offtake commitments that may not accommodate redesign delays. Disputes typically concern the valuation of GPS-driven variations, whether changes fall within base scope or constitute a variation, and entitlements to extensions of time. Mitigation measures include early engagement with AEMO and the relevant NSP to narrow foreseeable GPS outcomes, and sufficiently certain variation regimes with clear triggers, pre-agreed valuation methodologies, and program relief.
• Interface gaps in multi-contract delivery models: Split-scope procurement models mean the owner retains interface risk. Disputes arise where defects, performance shortfalls, or delays occur at scope boundaries and no contractor accepts overall integration responsibility. Mitigation typically requires sophisticated interface and coordination frameworks, supported by back‑to‑back indemnities for delay costs across the contract suite and multi-party escalation and dispute resolution mechanisms.

To position themselves for the growing pipeline of energy transition projects in Australia, stakeholders will need to proactively build capability by attracting and retaining personnel with sector-specific expertise, adapt to evolving delivery models and stay abreast of the rapidly evolving regulatory frameworks at both a Commonwealth and State level that apply to and support renewable energy project development.

Project owners will need to continue to invest in technical and project management capability and develop procurement frameworks tailored to energy transition technologies. In split scope delivery models, this includes developing in-house capability to manage multiple contractor interfaces, coordinate connection processes with transmission network service providers, AEMO and other project stakeholders, including traditional owners and other community stakeholders.

Domestic contractors will need to develop workforce capability, build track records in emerging technologies, and deepen collaboration with OEMs and delivery partners. International OEMs entering the Australian market should familiarize themselves with Australia’s unique regulatory framework which varies from State to State, including the Security of Payment legislation (which provides statutory rights to progress payment claims and rapid adjudication that cannot be contracted out of), proportionate liability legislation, work health and safety legislation and planning, environment and cultural heritage laws.

Funders will need to enhance technology-specific due diligence capability, adapt financing structures to accommodate evolving contracting models (including split scope delivery and increased connection risk) and early-stage and first-of-a-kind projects.