Australian Energy Week

12 June 2026

Australian Energy Week

Nevenka Codevelle - CEO

I would like to start by acknowledging the Traditional Custodians of the land on which we meet today, the Wurundjeri Woi Wurrung people of the Kulin Nation, and pay my respects to Elders past and present. I extend that respect to all Aboriginal and Torres Strait Islander peoples here today.

The energy transition is taking place on Aboriginal land and its success will be judged by the benefits it delivers to all Australians, including economic, social and cultural benefits for First Nations communities.

I would like to call out and encourage projects and First Nations communities to explore the First Nations set-aside in the Capacity Investment Scheme tenders being run this year, starting with Tender 9 which is currently open. The set aside allocates capacity for projects that demonstrate strong equity or revenue-sharing arrangements with First Nations communities. I would also like to take a moment to acknowledge the injury and hurt to the Wiradjuri people by the irreversible destruction of an Aboriginal rock shelter recently caused as part of construction of the Central West Orana Renewable Energy Zone in NSW. What happened was devastating and a blight on what we are all trying to achieve together in this energy transition.

There is no doubt that we are at a hard part of the energy transition – delivery.

Delivery of energy infrastructure projects, whether it be transmission, generation or storage, take large sums of capital, planets to align on a myriad of project requirements and a healthy appetite for risk.

While policy and ambition are largely set by Governments, investment and delivery largely sits with private sector industry. The space in between policy ambition on the one hand, and investment and delivery on the other, is where ASL sits.

Today, I would like to share our insights on:

• What’s working,
• What needs more work, and
• What to watch,
• as well as provide some reflections on ESEM development post last year’s NEM Review Panel recommendations.

First, to restate the problem we are all trying to solve.

Australia’s coal generation fleet, which has served the country well for decades, is aging. Its become less reliable and it’s retiring. Two-thirds of the remaining fleet capacity is projected to retire by 2035, with all plant expected to retire by 2049.

This is all happening at a time of increasing demand, driven by electrification, electric vehicles and of course, data centre growth.

The challenge now is to replace this generation and ensure additional capacity for future demand to support an affordable, reliable and secure electricity system for all Australians. And it has to happen now, at increasing pace and scale.

While we have a National Market, it is clear that each jurisdiction faces its own unique challenges, depending on (among other things) its generation mix, network constraints and the age of its fleet.

Given this, we have seen jurisdictions develop different policy measures and schemes to support what they need.

This includes:

• In NSW, the Electricity Infrastructure Roadmap, covers Renewable Energy Zone development, and generation, firming and Long Duration Storage procurement.
• In SA, the Firm Energy Reliability Mechanism (or FERM) scheme supports long duration dispatchable capacity.
• And nationally the Australian Government’s Capacity Investment Scheme (or CIS), is aimed at delivering 40 GW of additional capacity and achieving 82% renewable electricity by 2030.

ASL plays an important role in each of these schemes.

Since our establishment 4 years ago, ASL has completed 17 competitive tenders covering generation, firming and long duration storage, across these three different jurisdictional schemes. In doing so, this has supported 128 projects, representing around 25 GW of generation and around 89GWh of storage capacity.

Generally, the assessment of projects in our tenders covers three things:

• financial value – essentially bang for buck for consumers and the system,
• deliverability - how likely the projects are to proceed, and
• social licence and First Nations benefits and quality of engagement.

Our role under the NSW Roadmap also covers planning and trajectory setting, access fee determination and REZ authorisation.

The insights I’ll share today come out of all of this experience.

First, ‘What’s working’.

Let’s start with the progress to date, which has actually been pretty good. Of course we’ll always want more done, more quickly, but overall, solid progress has been made in a relatively short period.

Just considering the schemes ASL is a part of. The first NSW Roadmap tender was launched in September 2022, the first NEM CIS tender in May 2024 and the results of the first SA FERM tender were announced just a few weeks ago. In short, the schemes have not been up and running for all that long.

Across the broader NEM, more than 6.4 GW of renewable generation and grid-scale batteries reached full output in 2025 – more than double that of 2024. And in the fourth quarter, renewables supplied more than 50 per cent of electricity for the first time.

That growing share is helping to ease wholesale prices, with prices falling 12 per cent between the first quarter of 2025 and the first quarter of 2026, which is good news for consumers.

Governments are also hyper focused on solving the problem statement. While there may be differences of view in how that should be approached, there is a shared recognition that the energy system is in transition and that replacing the ageing coal fleet is a national imperative.

That shared recognition is critical. It translates into policy commitment, which underpins investor confidence. In that regard, we saw a record $14 billion invested in Australia’s clean energy sectors in 2025.

So the core preconditions are there. We have a recognised national imperative, relative policy certainty across jurisdictions and capital is flowing.

In terms of technologies, a clear success story in the current market is grid-scale batteries, and also solar and hybrid projects. The development pipeline is strong and growing, projects are getting delivered, battery durations are extending and costs have come down.

Last year alone, 2 gigawatts of large-scale battery capacity was commissioned — a 233 per cent increase — enabled by $4.8 billion dollars in financial commitments, up 67 per cent. In NSW, we estimate there is more than 40 gigawatts of hybrid projects in the development pipeline.

In an energy only market with increasing volatility due to a high level of weather dependencies, utility scale batteries have become a perfect complement to solar and also wind, and one investors are increasingly requiring.

To capture this potential and help meet the ambitious development pathway we have set as Consumer Trustee, ASL now offers a unique battery hybrid LTESA product.

Battery costs have also fallen 93 per cent over the past 15 years, and further reductions are expected. Batteries are now increasingly economical at both short and longer durations. In NSW, 11 out of 13 long-duration storage projects are lithium-ion batteries. Of the seven markets around the world that back 8 hours plus storage, NSW is leading the world as the only one that currently has operating projects.

So that’s the good news. Let’s talk about ‘what needs more work’.

While utility scale batteries are booming, investment in new wind generation is slower. The diversity benefits of wind are clear, and we need it.

The Clean Energy Council reports that financial commitments to onshore wind fell 57 per cent in 2025, to $2.6 billion—well short of what’s required to meet our energy objectives.

Looking first at the commercial environment. When we launched our first NSW generation tender in 2022, the market looked very different. Projects that stacked up two or three years ago are now much more marginal.

Wind development costs were lower and corporate PPAs were more readily available at terms that would support project development. Buyers were racing to meet 2025 sustainability targets, contract tenors were longer, business cases were stronger, and LGCs provided a meaningful additional revenue stream.

In that context, ASL set pricing expectations close to debt break-even, with generation LTESAs often seen as a form of insurance—useful to have, but unlikely to be exercised in the short-term.

But the world has changed. Rising interest rates, construction cost inflation, global supply chain pressures, and fewer long-term offtake opportunities have materially impacted wind project economics.

Projects have also increased in scale. A 1 Gigawatt wind project requires more than $3 billion dollars in capital. That is a large cheque — and it creates a substantial absolute exposure to financing costs.

These commercial challenges are further exacerbated by lower wholesale prices, making some form of revenue support such as those offered under jurisdictional schemes an effective precondition for investment.

We cannot wait until coal retires for price signals to stimulate investment. We need the investment to happen now.

Our messaging to the market now is that projects should bid into tenders competitively but for what they need to get built. Not to secure windfall gains, but to reach a genuinely bankable position and move rapidly to FID.

But revenue support alone will not solve the whole investment challenge for wind. Securing planning approvals, grid connections and social licence are all required.

The challenges are well understood. There are though green shoots aimed at making things easier. This includes the new NSW Renewable Energy Planning Framework and proposed legislative changes to fast-track priority energy projects.

So what should we be keeping an eye on?

At forums like this, it’s easy to focus on what has to be built - the commercial realities and system challenges of the energy transition.

But most important of all, is to never lose sight of who we are building this system for, and why.

The compact we, as a sector, have effectively made with the Australian public is that this energy transition will deliver for them, lower emission, reliable and affordable energy. Australians are funding this transition. They are its ultimate investors.

Maintaining public support is essential, not just because it’s the right thing to do but because it underpins community and political support. This in turn ensures policy stability and ultimately improves investor confidence.

This is increasingly difficult in an environment where cost of living concerns and dissatisfaction are driving people away from the political mainstream, with alternative views on energy policy.

This is why delivery is critical. More projects built and operational will put downward pressure on wholesale electricity prices, and keep the lights on ready for the next wave of coal plant closures.

In short, as we go about Australia’s largest and most consequential asset replacement program, we are constantly being held to account by the public to deliver on the compact we made – to deliver lower emission, reliable and affordable energy.

So finally let’s turn to “What’s next”.

In addition to jurisdictional schemes, work is well underway by Governments’ on the development of the Electricity Services Entry Mechanism (or ESEM), following the recommendations made by the NEM Review Panel last year.

From a delivery and investment perspective, I would particularly call out the Panel’s recommendations to deepen the contracts market and close the tenor gap, as important pathways to help address the offtake and investability challenges we see in the market today.

In December last year, Energy Ministers tasked officials with developing a work program aimed at delivering the first ESEM tender by the end of 2027. In May this year, Ministers agreed to progress a legislative package to implement the ESEM and to engage ASL to continue preparatory work.

ASL is also supporting Victoria with the integration of its forthcoming offshore wind tender into the future ESEM.

The NEM Review Implementation Taskforce is now developing the legislative package. This is expected to be submitted to Ministers for consideration in coming months, ahead of a period of public consultation, with final agreement on reforms anticipated in December 2026.

As part of this preparatory work, ASL, together with the Commonwealth, has established a contracts co-design working group. This group brings together a broad cross-section of industry experts and will inform the future ESEM contract design.

Designing an ESEM framework that meets different jurisdictional priorities, delivers consumer benefits from an interconnected national market, and is able to evolve as we move through this transition, is no easy task. It certainly requires agility, flexibility and practical application.

The next few years are critical.

2026 must be a year of financial close and commitment, not only to meet targets but because the lights have to stay on as coal exists.

Tenders are already underway, seeking to bring historically large volumes of generation and dispatchable capacity to financial close. Work on the ESEM is progressing. Governments are focused and industry is mobilised.

We all just have to get on with it, and deliver on our commitment to the Australian public.