Australian electricity system and market: Renewable energy expansion

Through the National Electricity Market (NEM), Australia operates one of the world’s longest interconnected electricity networks, stretching over 5,000 kilometres. The electricity system is undergoing a profound transformation to renewable energy, driven by exceptional solar and wind resources and ambitious policy targets: 82 per cent renewables in the electricity mix by 2030. The momentum of this transformation is already evident: Australian households are global leaders in rooftop solar and the uptake of battery storage, and in the fourth quarter of 2025 renewables met more than half of electricity demand in the NEM for the first time. At the same time, grid expansion, security of supply and affordability remain key challenges. This briefing series offers an overview of the key structures and central debates surrounding Australia’s electricity system and market.

The third briefing focuses on the expansion of renewable energy in Australia’s electricity system. It provides an overview of Australia’s energy policy objectives, the key support and governance instruments, and the role of the Integrated System Plan (ISP) in scaling up solar, wind and storage projects. It also discusses instruments such as the Capacity Investment Scheme (CIS), which uses contracts for difference to underpin revenues for renewable energy and storage projects. In addition, it outlines project development and financing options, as well as the shift in offtake strategies towards “semi-merchant models”, where revenues are generated both through long-term power purchase agreements (PPAs) and via the spot market. Another key focus is on the current challenges for investment decisions and project development, including delays in grid expansion, rising costs, and uncertainty around regulatory and political frameworks.

The briefing is available as a PDF in German.

Further publications in this series

• First briefing: Market design and regulatory framework

• Second briefing: Electricity grid

• Fourth briefing: Energy storage