Post Federal election, where's the energy at?

Continuing the renewables led transition

Labor confirmed its commitment to a renewables-led transition. Much of Labor’s policy framework remained unchanged during the election campaign, with most policies already announced to the market. 

Labor has recommitted to its 82 per cent renewable energy target for the National Electricity Market (NEM) by 2030, but has yet to confirm its 2035 emissions reduction target under the Paris Agreement.

Labor aims to reach net zero before 2050 by continuing to follow the optimal development path outlined in AEMO’s 2024 Integrated System Plan. Labor’s approach is detailed in its Powering Australia plan. Its cornerstones are:

1. expanding the Capacity Investment Scheme to target a total of 32 GW of new renewable capacity, made up of 23 GW of renewable capacity and 9 GW of clean dispatchable capacity;
2. establishing a new National Energy Transformation Partnership; and
3. continued transmission buildout supported by the $20 billion Rewiring the Nation fund.

In February 2025, Labor announced an additional $2 billion to the Clean Energy Finance Corporation (CEFC), the world’s largest dedicated green bank, taking CEFC’s total investment capacity to $32.5 billion.

Gas

AEMO predicts that Australia is projected to face gas shortfall risk under peak conditions from 2028 and structural supply gaps will emerge from 2029, primarily due to a lack of new gas supplies and high levels of LNG exports. The challenge for the Labor government will be to secure the gas Australia needs to ensure energy reliability and affordability throughout the transition.

Various gas market interventions were already undertaken during Labor’s previous term – many of which are still in their early stages and have not eliminated the gas shortfall risks and supply gaps identified by AEMO.

Top 5 policy and regulatory areas of focus to deliver the energy transition

1. Planning and environment approvals reforms – Streamlined and certain planning and environmental approval processes are crucial to successfully transition the Australian electricity sector to renewables by the mid to late 2030s.

2. Market redesign – Market design needs to address the transitional period as renewables as a proportion of total generation increases and coal reduces.  A period of over-capacity in generation may result in suppressed prices that require external underwriting or support to renewables development.

3. Coordinated and orderly closure of coal – Coordinated Commonwealth and State action is required for the closure of the remaining coal-fired generators, providing certainty for coal generators and clear signals to renewables developers, as well as to developers of storage and firming capacity such as pumped hydro.

4. Major transmission and social licence – Different models are required to deliver major transmission projects, including greater State involvement in the planning and coordination of social licence, greater contestability of who will develop and operate these projects and alternative regulated revenue models that more accurately reflect project specific risks and costs.

5. Gas supply – Greater focus is needed on the new gas-fired generation, starting with the gas supply measures in this article and the inclusion of gas-fired peaking projects in the Capacity Investment Scheme.

In 2022 and 2023, the Government introduced several measures targeting the East Coast gas market, aiming to reduce prices, secure domestic supply and address future shortfalls. These included:

• tightening of the Australian Domestic Gas Security Mechanism in 2023, which expanded the Government’s ability to limit LNG exports or require exporters to source additional gas when domestic shortfalls are identified. The mechanism has not yet needed to be activated.
• the 2022 Gas Market Code, which has a price cap of $12 per gigajoule aimed at reducing gas prices for buyers including gas-fired power generators. The Government has attributed recent price reductions to the cap (although industry sentiment reflects that other factors, such as easing global demand, has significantly impacted these prices). Many producers have secured exemptions from the cap by committing to supply additional volumes to the domestic market. In practice, the Code’s complex procedural requirements have generally made it more challenging to enter into long-term gas contracts, impacting marketing strategies and pricing outcomes. A formal review of the Code is scheduled by 1 July 2025.

During the pre-election debates, there was limited detail on Labor’s proposed approach to the forecasted gas shortfalls. The Future Gas Strategy, released in 2024, acknowledges on paper the essential role of gas in the energy transition and its continued importance beyond 2050. While the strategy outlines a broad framework for managing gas supply, it does not include binding legislative commitments or clear implementation timelines. However, since its publication, there has been stronger state-level support for new gas and LNG projects. Accelerated government support and implementation measures are urgent and critical to meet the goals of the Future Gas Strategy.

Industry

In January 2025, Labor announced a new Green Aluminium Production Credit, available from 2028-29, to provide targeted support to Australian aluminium smelters switching to reliable, renewable electricity before 2036. Facilities will be eligible for support for every tonne of clean Australian-made aluminium over a period of 10 years.

In February 2025, Labor announced a $1 billion Green Iron Fund to boost green iron manufacturing and supply chains by supporting early mover green iron projects and unlocking private investment at scale. 

As part of the 2024-25 Budget, Labor announced a Critical Minerals Production Tax Incentive from 1 July 2027. The incentive aims to address the lack of domestic processing capability and will provide eligible recipients with a temporary and uncapped refundable tax offset of 10 per cent for the costs of processing the 31 critical minerals currently listed in Australia. The credit will be available for a maximum of 10 years between 1 July 2027 and 30 June 2040.

Labor also established a temporary Hydrogen Production Tax Incentive from 1 July 2027. The temporary measure will incentivise renewable hydrogen production for eligible Australian resident corporations with a time-limited and uncapped refundable tax offset. The incentive will provide a $2 incentive per kilogram of renewable hydrogen produced for up to 10 years, between 1 July 2027 and 30 June 2040 for projects that reach final investment decisions by 2030.

Homes and vehicles

In domestic homes, the $2.3 billion Cheaper Home Batteries initiative is set to commence as of July 2025 and will provide subsidies covering up to 30 per cent of the cost of a ‘typical’ home battery system. The program aims to accelerate the uptake of household batteries and encourage one million home batteries by 2030. Small businesses and community facilities will also be able to access the subsidy.

Building on its existing $2.5 billion energy bill relief rolled out in the 2024-25 financial year, Labor also announced a $1.8 billion extension of the Energy Bill Relief Fund by six months in the 2025-26 Budget. Australian households and eligible small businesses with electricity bills may receive up to $150 in energy bill rebates from 1 July 2025 to the end of 2025. 

The New Vehicle Efficiency Standard which commenced on 1 January 2025 has been retained. The standard applies to new vehicles sold in Australia and incentivises car companies to supply new cars that use less fuel per kilometre. Each vehicle manufacturer has a set average CO2 target for the vehicles they produce, which they must meet or beat, with the target being lowered over time. 

Conclusion 

Whilst there is limited ‘new news’ from the election announcements of the Labor Government, as we identify in our top 5 ‘wish list’ of areas needing focused policy and regulatory development, there is still significant work to achieve the renewables-led energy transition at the core of Labor’s energy strategy. 

Authors: Abbie Pokorny (Executive Counsel), Rebecca Bahrami (Senior Associate) and Kathy Kim (Graduate)