2025 Energy predictions scorecard
At the start of 2025, Hamilton Locke published our predictions for Australia’s new energy sector. We’ve evaluated how those forecasts measured up against actual developments. Here’s what we got right, where we missed the mark, and what surprised us.
International landscape uncertainty
- What we predicted: We anticipated uncertainty in the international landscape with factors such as Donald Trump’s election reshaping the global new energy landscape.
- What happened: Despite maintaining a trade surplus with the US, a 10% tariff imposed on Australia by the US in April 2025 created supply chain uncertainty. However, October’s landmark US-Australia Critical Minerals Production Tax Credit Agreement secured Australian access to US hydrogen and critical minerals incentives, strengthening bilateral clean energy cooperation.
Domestic policies hinge on federal election outcome
- What we predicted: We proposed the 2025 federal election would be a key energy policy determinant and forecasted continued renewable support if Labor were re-elected.
- What happened: The sector responded to Labor’s re-election with remarkable momentum. The Albanese Government approved 54 renewable energy projects by 30 November, bringing total approvals to 123 since 2022.1 Close to 7 GW of renewable capacity was added to the grid in 2025, sufficient to power approximately 2.4 million homes.2
Continued growth in Distributed Energy Resources (DER) and grid evolution
- What we predicted: We anticipated robust DER growth driven by consumer demand, market competition, and grid stabilisation, leading to increased virtual power plant (VPP) solutions.
- What happened: Australia saw strong DER growth in 2025, with rooftop solar, batteries and VPPs expanding and renewables supplying a record 43% of grid electricity.3 From 1 July to 31 December, Australians installed 184,672 home batteries under the Cheaper Home Batteries Programme, adding 4.27 GWh of storage capacity.4 AEMO and the AEMC actively shaped DER integration to support grid stability and consumer participation.5
Increased adoption of generation and storage technologies
- What we predicted: We forecast continued battery energy storage system deployment through the Capacity Investment Scheme, with wind and solar projects increasingly co-located with (or retrofitted to include) BESS. We suggested sodium-ion batteries could emerge in 2025 and anticipated offshore wind momentum if Labor were re-elected.
- What happened: The Capacity Investment Scheme delivered strongly, opening four tenders covering 6.6 GW of generation capacity and 18.4 GWh of dispatchable energy, with 40 projects announced.6 Big battery investment soared in 2024-2025, with significant uptake in new financial commitments.7However, our prediction on sodium-ion batteries proved premature. For example, CATL confirmed large-scale sodium-ion battery deployment for 2026, not 2025. Contrary to predictions, offshore wind experienced crisis in 2025, with multiple major project cancellations.
Workforce development challenges
- What we predicted: We identified critical workforce transition challenges with 5 GW of coal retirement expected in 15-20 years and anticipated increased demand for skilled project managers.
- What happened: Workforce shortages persist, although AEMO predicted that new energy infrastructure investment will support more than 60,000 energy jobs over 20 years.8
Technology and innovation – AI impact
- What we predicted: We forecast AI would dramatically increase electricity consumption by data centres and highlighted AI’s potential to optimise energy systems through grid management and predictive maintenance.
- What happened: Australian data centres consumed approximately 3.9 TWh of grid electricity.9 According to AEMO, this figure is forecast to grow substantially as AI and cloud workloads expand according to AEMO, reflecting rising AI-driven computing demand.
Circular economy focus
- What we predicted: We anticipated increased focus on circular economy principles in 2025, specifically around reusing and recycling energy facility components, driven by ESG obligations, energy security, economic imperatives and technological advancements.
- What happened: Circular economy became a focus for many Australian states. The Energy and Climate Change Ministerial Council convened in 2025 and New South Wales advocated for a national solar panel reuse and recycling scheme. Individual states including New South Wales and Victoria updated recycling regulations to promote circular economy.
2026 predictions
1. Energy storage and battery technology
Battery energy storage systems will continue their rapid expansion into the NEM in 2026, with Australia cementing its position as a global leader in BESS deployment. Four-hour batteries will dominate the utility-scale market, with government tenders (for example, the Capacity Investment Scheme and Long-Term Energy Service Agreements) favouring long duration storage systems.
In the distributed energy resources (DER) space, developers will increasingly aggregate sub-5MW solar and battery projects, moving deals quickly on a low-cost base, whilst rooftop batteries (alongside rooftop solar) continue driving overall growth.
2. AI and data centre demand
Data centres and artificial intelligence will emerge as a prominent demand-side driver in 2026. Data centre power demand will increase and test grid limits whilst driving growing corporate PPA activity. However, tighter connection requirements, conservative load forecasting, and a shift towards behind-the-metre and co-located generation may moderate growth, signalling a more disciplined development phase.
AI and robotics advancement promises to transform construction by replacing repetitive labour, potentially increasing efficiency and bridging skill shortages.
3. Investment
Foreign capital investment in Australian renewables will continue, particularly from Asian utilities and infrastructure funds. However, investor preferences will shift towards operating or near-operational assets rather than early-stage projects.
4. Critical minerals
Critical mineral security will escalate as a national priority, with growing tensions over China’s dominance in processing lithium, rare earths, and graphite potentially driving new federal initiatives supporting domestic processing and supply chain diversification.
5. Politics
International politics will continue to have a significant influence on the new energy sector. Noting the next federal election will not be held until 2028, we anticipate that the new energy transition will be less politicised throughout 2026. Escalating trade restrictions and tariffs on Chinese equipment will create cost pressures, pushing developers towards alternative suppliers from South Korea, Europe, India and Southeast Asia.
6. Circular economy
Pressure will build for a harmonised national approach to solar panel and battery recycling, moving beyond isolated state initiatives. New South Wales’s Product Lifecycle Responsibility Regulations could form a precedent for national frameworks. Developers will face increasing pressure to demonstrate end-of-life capability at early project stages, with new decentralised recycling facilities emerging near population centres.
7. Sector challenges
Community engagement: Greater harmonisation of community benefit schemes is expected, with tangible benefits potentially shifting sentiment in previously opposed regions, though politicised stances will remain.
Offshore wind: Offshore wind will continue struggling with cost and investor uncertainty
Hydrogen: Hydrogen faces ongoing commercial viability challenges, highlighting that Australia’s energy transition will not proceed uniformly across all technologies.
8. Evolving offtake market
Hybrid offtake agreements will be increasingly common in 2026, blending run-of-the-meter, stepped pricing, and government-backed structures to unlock previously unviable projects. Stepped pricing will enable mid-sized corporates to enter the PPA market for the first time, whilst government-backed mechanisms can catalyse investment in technologies where traditional financial structures proved insufficient. This may create entirely new bankable asset classes, from co-located storage to green hydrogen facilities, broadening the offtaker pool beyond conventional energy buyers and monetising previously stranded renewable assets.
The Hamilton Locke team advises across the energy project life cycle – from project development, grid connection, financing, and construction, including the buying and selling of development and operating projects. For more information, please contact Matt Baumgurtel or Adriaan van der Merwe.
1 Chris Bowen, Minister for Climate Change and Energy, Powering the Renewable Energy Transition: Year in Review (Joint Media Release, 2025) https://minister.dcceew.gov.au/bowen/media-releases/joint-media-release-powering-renewable-energy-transition-year-review.
2 Ibid.
3 Green Review, ‘Australia’s Grid Hits Record 43 Per Cent Renewables in 2025’, Green Review (Web Page) https://greenreview.com.au/energy/australias-grid-hits-record-43-per-cent-renewables-in-2025/.
4 Chris Bowen, From 1 July to 31 December Australians Have Installed 184,672 Home Batteries (LinkedIn Post, 31 December 2025) https://www.linkedin.com/posts/chris-bowen-274565340_from-1-july-to-31-december-australians-have-activity-7411957169698353152-31sc.
5 Australian Energy Market Operator, ‘Markets and Framework’, DER Program (Web Page) https://www.aemo.com.au/initiatives/major-programs/nem-distributed-energy-resources-der-program/markets-and-framework; Australian Energy Market Operator, ‘About the DER Program’, DER Program (Web Page) https://www.aemo.com.au/initiatives/major-programs/nem-distributed-energy-resources-der-program/about-the-der-program.
6 Solar Quarter, Australia Accelerates Renewable Energy Transition with Record Project Approvals in 2025 (5 January 2026) https://solarquarter.com/2026/01/05/australia-accelerates-renewable-energy-transition-with-record-project-approvals-in-2025/.
7 Clean Energy Council, Clean Energy Australia Report 2025 (Report, 2025) https://cleanenergycouncil.org.au/news-resources/clean-energy-australia-report-2025.
8 Clean Energy Finance Corporation, CEFC Welcomes Additional $2 Billion Capital Allocation from Australian Government (Media Statement, 23 January 2025) https://www.cefc.com.au/media/statement/cefc-welcomes-additional-2-billion-capital-allocation-from-australian-government/.
9 Oxford Economics Australia, ‘Australia Data Centre Energy Consumption Report’ (Report, Australian Energy Market Operator, 2025) https://www.aemo.com.au/-/media/files/stakeholder_consultation/consultations/nem-consultations/2024/2025-iasr-scenarios/final-docs/oxford-economics-australia-data-centre-energy-consumption-report.pdf?la=en&utm_source=chatgpt.com.
