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Renewable energy construction set to soar with expected peak of $11.8 billion in 2025/26
More than double the previous record in 2018/19
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Our new report, the Renewable Energy Construction Outlook, reveals a remarkable surge in renewable construction in Australia, which began in 2022 and is expected to continue in the coming years.
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The sector experienced 37% increase in construction activity in 2021/22, and we anticipate even stronger growth rates of 49% in 2022/23 and 31% in 2023/24. By 2025/26, we expect the sector to reach an all-time peak of $11.8 billion in construction work done (in constant 2020/21 prices), more than double the previous peak of $5.5 billion recorded in 2018/19.
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Renewable energy construction in Australia has experienced significant growth since 2017, largely associated with Government policies and schemes. The first wave of growth occurred from 2006 to 2013, coinciding with a range of initiatives by the Rudd and Gillard Labor Governemnts, including: the introduction of an Expanded Renewable Energy Target scheme (with a target of 45,000 GWh), the proposal for an Emmissions Trading Scheme in 2008, and the passing of the Carbon Pricing Mechanism (CPM) in 2011. The peak of construction value during this time was $3 billion (in constant 2020/21 prices) in 2012/13, driven by wind energy projects. However, construction activity declined following the repeal of the Carbon Pricing Mechanism and the completion of wind projects.
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Another wave of construction activities was triggered by the 2020 Renewable Energy Target (RET), resulting in sustained high levels of construction through 2018/19 and 2019/20.
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Our estimates show that the renewable energy sector in Australia entered its third phase of growth in 2022, and this upward trend is expected to continue for the next few years with an expected peak in 2025/26. Although construction activities are expected to decline for the few years following the peak in 2025/26, they will stay at an historically high level. We expect average annual work done to be around $9 billion (in constant 2020/21 prices) for the rest of forecast period, supported by the large projects later in the forecast period.
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This very positive outlook for the next few years, and beyond, is supported by several factors, including
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- The Australian government's commitment to achieving net-zero emissions by 2050 and reducing emissions by 43% by 2030
- The closure of several coal-fired power stations in Australia between 2023 and 2035
- Large-scale battery storage and new transmission infrastructure being constructed
- State governments policies incentivising renewable energy investment.
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If your organisation requires help with project cost escalation forecasts, please get in touch with us, at info@macromonitor.com.au.
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Our most recent reports:
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Australian Construction Cost Trends
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This new report on the Australian construction cost outlook explains why cost growth has surged in recent quarters, and how long the spike in cost inflation will last.
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Australian Construction Outlook - Utilities
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This report highlights the main drivers of the imminent upturn in utilities construction – strong focus towards renewable energy investment, additional spending on the NBN and a recovery on the construction of gas pipelines
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Renewable Energy Construction Outlook
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This report examines the strength and composition of the current upturn, and determines the likely timing of the peak, and subsequent decline.
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Australian Construction Materials Forecasts
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Our latest forecasts assess the implications for construction materials demand of the current downturn in residential building, and the looming downturns in non-residential building and renewables investment.
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Australian Road and Bridge Works
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This report examines the strength and composition of the current upturn, and determines the likely timing of the peak, and subsequent decline.
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