Australia’s renewable energy ambitions are advancing as the country moves to reduce its long-standing dependence on coal and broaden its electricity mix. After decades in which coal formed the backbone of the power system, the government is seeking a more diverse energy base that can support long-term energy self-sufficiency while contributing to the green transition. Market activity is reinforcing that shift, with energy companies investing across a wider range of cleaner energy sources.

Australia still has a large and ageing coal fleet, leaving policymakers to decide whether to continue relying heavily on coal production or diversify the national energy mix to strengthen energy security. Black coal accounted for 37.5 per cent of Australia’s electricity production in 2025, while brown coal supplied 12.1 per cent. That marked a major decline from 2000, when coal’s total contribution was around 80 per cent, and it has made the pace of replacement capacity a central issue for the power system.

In 2024, the government launched the Renewable Energy Target (RET), a scheme designed to reduce greenhouse gas emissions in the electricity sector and increase renewable electricity generation. The RET sets a target of delivering an additional 33,000 gigawatt-hours (GWh) of electricity from renewable sources each year from 2020 to 2030.

Daniel Westerman, chief executive of the Australian Energy Market Operator (AEMO), has said Australia has reached the point where coal is being replaced by renewable alternatives. “Our old coal-fired power stations are breaking down; they’re retiring,” Westerman said. “They’re getting replaced by the least-cost energy, which is renewable energy, backed with storage, connected in with transmission. We’ll have a bit of gas there for the winter doldrums. That is just what’s happening,” he added. His comments point to the role of storage and transmission alongside generation, as renewable output needs supporting infrastructure to replace ageing coal plants reliably.

In 2023, Climate Change Minister Chris Bowen said the COP28 climate summit had made clear that “our future is in clean energy, and the age of fossil fuels will end.” His comments followed an agreement signed by almost 200 states calling on all countries to transition away from fossil fuels. Although the Australian government has supported the transition, the country’s shift has largely been driven by market forces rather than strict legislation or regulation.

Renewables supplied 42.7 per cent of Australia’s electricity generation in 2025, up from 38.9 per cent in 2024. Wind power accounted for about 15.7 per cent of generation, rooftop solar for 13.9 per cent, utility-scale solar for 7.7 per cent, and hydropower for 5.3 per cent. New renewable energy additions reached 5.9 GW in 2025, a 28.3 per cent increase from the previous year.

Battery storage is also expanding rapidly. Home battery sales rose 260 per cent from 2024 to 2025, while large-scale battery capacity increased 233 per cent, making Australia the world’s third-largest utility-scale battery market. Almost 270,000 home batteries were purchased in 2025. The rise in adoption has been supported by favourable national policies on battery storage, and it is becoming more important as rooftop solar, wind and utility-scale solar make up a larger share of electricity supply.

Australia contributed 10 per cent of new global battery capacity in March as the trend continued. The country has also benefited in recent months from cheaper batteries from China following Beijing’s trade war with the United States. According to data from consultancy Rystad Energy, Australia is currently the third-largest importer of Chinese batteries after Germany and the United States.

David Dixon, a senior analyst at Rystad, said, “Australia won’t stay at number three, but it has been going gangbusters.” He added, “We have never seen anything of this magnitude before.” Australia has now surpassed 2 GWh of battery storage per million people after what Dixon described as an “unprecedented build-out”.

Rooftop solar remains highly popular in Australia. Around four million homes produce rooftop solar power, giving the country the highest rooftop photovoltaic penetration in the world. In utility-scale solar, 3.3 GW of new generation capacity was commissioned in 2025. Of that total, 18 projects were utility-scale developments, amounting to 2 GW and representing $2.7 billion in investment. The government also approved seven wind projects totalling 1.4 GW, well above the 775 MW commissioned in 2024.

In March, the government endorsed 16 projects with a combined value of $22.1 billion in New South Wales (NSW) through its newly established Investment Delivery Authority (IDA). The IDA’s first funding round used a streamlined assessment process and included several renewable energy and energy security initiatives. In total, 14 energy projects valued at $24 billion were endorsed, covering pumped hydro storage, battery storage systems, wind farms, solar photovoltaic power plants, and gas infrastructure. The government aims to use the new IDA system to accelerate future investment activity.

Australia is still catching up after decades of heavy reliance on coal, but the government is working to speed the deployment of renewable energy. Market forces are also supporting the transition as energy companies and industries seek to improve energy security and decarbonise operations. The next phase of the shift will depend not only on how much wind and solar capacity is added, but also on how quickly storage, transmission and firming resources are built to support the changing electricity mix.

By Felicity Bradstock for Oilprice.com