Australia’s energy transition has reached an uncomfortable point.
Energy demand is growing, electrification and data centres are coming, and coal is progressively retiring. Yet new renewable energy generation and vital network infrastructure is not being built fast enough.
We are making the infrastructure we need harder, slower and more expensive to deliver. Investors are losing confidence, while communities are increasingly frustrated by the pace and impact of development.
It feels like we are trying to win a drag race with the handbrake on.
Some blame renewable costs, particularly wind; others blame the market, approvals, communities or government processes.
The reality is more complicated. We are not facing one problem, but cumulative complexity in a system that has become increasingly difficult to navigate.
The real problem is the accumulated risk premium.
Planning delays, connection uncertainty, policy changes, construction costs, community conflict and poor coordination all add to the risk premium.
Investors do not invest in projects. They invest in risk-adjusted returns.
The higher the risk, the higher the required return. Today, too many risks are making investment harder and increasing the cost of finance.
The economics matter, as part of a bigger story
There is a legitimate conversation to be had about the cost of new renewable generation, particularly wind.
Renewable energy cost reductions achieved over the last decade were extraordinary. But while solar and battery costs continue to fall, new wind projects have become more expensive. As I discussed on Energy Insiders, turbine costs have increased, but the biggest pressure has come from Balance of Plant, as COVID, geopolitical disruption, inflation, higher interest rates and broader construction pressures have increased the cost of infrastructure.
Contractors are also pricing uncertainty into EPC bids. Connection delays, commissioning challenges, oversized transport approvals and planning conditions have left contractors idle and increase costs. These risks are all reflected in EPC pricing.
I expect wind costs may stabilise and fall slightly as turbine competition increases, with Envision and Nordex Acciona deeper in the market, and contracting becomes more efficient. But David Leitch is probably right: real savings will only come when we start building at scale again.
Ironically, the hardest part of renewable development in Australia is often not construction – it is everything that happens before a single sod is turned.
There is a reason the industry’s biggest celebration is financial close: development is often the hardest part. The irony is that we celebrate paperwork, not infrastructure.
Cost is only part of the challenge. Investors are also pricing uncertainty around similar issues: connection timeframes, planning and environmental processes, community expectations, market revenues and future policy settings.
Projects are taking longer and costing more to develop. Every year of delay compounds inflation, financing, contractor and equipment costs while pushing revenue further into the future. Every additional uncertainty makes projects harder to finance and pushes them closer to becoming unviable.
The problem is that many processes have become fragmented and unpredictable, with too much focus on perfecting process rather than enabling reasonable development.
Finally, we’re lacking effective coordination.
The energy transition is one of Australia’s largest and most complex infrastructure challenges. Yet it is being managed by everyone in parallel – governments, regulators, market bodies, communities and industry – with everyone responsible for a piece but no one accountable for the whole or the interfaces between them.
Australia needs to address three connected challenges
1. Fix coordination and delivery
In my experience managing large energy projects, failures occur when accountability for delivery is unclear. Major projects need someone managing interfaces, resolving bottlenecks and keeping focus on time, cost and risk.
Without creating more bureaucracy, we need a practical body accountable for coordinating delivery of the transition.
Calls for a National Transition Authority are not new, with the ACTU, Business Council of Australia, Investor Group on Climate Change and others having advocated for greater national coordination. We could also consider expanding the Net Zero Economy Authority to take on this role.
We need to put someone in charge of delivering the transition.
2. Fix the market signals
Australia needs better market signals both to get new generation built and ensure reliability as the system changes.
Short term, we need simpler mechanisms to increase investment certainty and get projects moving. As David Leitch has argued, Contracts for Difference, providing a predictable revenue profile similar to a long-term Power Purchase Agreements, have been proven in Australia and overseas to get projects built.
Also, as renewable penetration increases, traditional firming revenue streams such as arbitrage and FCAS are becoming more challenging. Without stronger signals for reliability and firming, investment in storage and flexible capacity will become increasingly difficult.
Government-backed mechanisms are needed to kickstart investment and should work alongside genuine market reform.
3. Fix planning and system reform
Australia’s energy sector has already shown that major reform is possible.
Through stakeholder leadership, difficult conversations and cultural change, the Connection Reform Initiative has delivered meaningful improvements to grid processes.
Planning and approvals need a similar focus.
This does not mean lowering standards. Strong environmental assessment, community engagement and network processes are essential. The challenge is reducing unnecessary complexity, improving consistency and accepting reasonable risk.
A coordinated public-private effort on planning and approvals could remove unnecessary delays and create a clearer pathway for critical infrastructure.
The goal is better decisions, made with appropriate rigour, at the pace the transition requires.
Let’s get this done
We cannot afford to make the transition harder than it needs to be.
Too often the debate is framed as the renewable energy industry vs traditional energy, community or government. That framing misses the point.
At its core we all want the same thing: affordable and secure energy delivered responsibly.
The question is whether we can build the systems needed to deliver it.
Supercharging Australia’s energy system was always going to be complex. But complexity does not need to become paralysis.
The answer is not to blindly accelerate or lower standards. It is to remove unnecessary friction, accept reasonable risk, improve decision-making and strengthen accountability.
The next phase of the energy transition will not be won by ambition alone.
It will be won by execution.
Shane Quinnell is Managing Director of Essence Renewables, providing development, commercial and strategic advisory services to renewable energy and major infrastructure projects. He has around 15 years’ experience developing utility-scale wind, solar and battery projects, and was previously Head of Development – NSW and QLD at WestWind Energy and State Manager – Queensland at Lightsource bp.
