Australia’s Renewable Energy Supply Chain: Who’s Really Making Money?

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Renewables are reshaping Australia's industrial landscape, but they are not a uniform investment proposition.

• Australia's energy transition is real, but picking winners remains tricky
• The real debate is no longer renewables versus fossil fuels
• Investors better distinguish between different segments and commensurate risk profiles
• Timely delivery of projects remains essential; delay risks are real and tangible

By Lily Brown

Australia’s energy transition is no longer just a future goal. It’s already reshaping the country’s industrial base — and where investors put their capital.

Renewable energy capacity hit record levels in 2024, with 7.5GW of new renewable generation added across large-scale and small-scale systems, including 4.3GW of large-scale projects approved to create LGCs and around 3.2GW of rooftop solar.

Renewables’ share of the market rose to 42.7% in Q3 2025, compared to 39.3% in the same period the previous year.

Yet for equity investors, the headline growth hides a more difficult reality: earnings across the renewables supply chain aren’t growing in step with capacity. Instead, profits are splitting by segment, showing sharp differences between those capturing lasting value and those absorbing cost, volatility, or project risk.

This is no longer a “renewables versus fossil fuels” debate. It’s an industrial supply-chain story, and one that requires closer examination of where margins, cash flow and risk are actually landing.

Australia’s $12.7bn Clean Energy Wave

Recent investment data show just how capital-intensive this ecosystem has become.

Investment commitments for large-scale renewable generation reached about $9bn in 2024, roughly a 500% jump from 2023’s $1.5bn, while utility-scale storage commitments lifted total clean energy investment to around $12.7bn; the largest wave of clean energy investment in Australia’s history.

The Clean Energy Council reports 74 storage projects equalling 13.3GW/35GWh were either committed or under construction as of the third quarter of 2025, significantly higher than the 5GW/12GWh under construction a year earlier.

For investors, the takeaway is clear: renewables are no longer a niche growth theme, but a sprawling, capital-heavy supply chain, and not all links are equally profitable.

Australia’s Strategic Position: Resource Strength, System Constraints

What investors increasingly call “renewables exposure” spans four distinct layers:

• Upstream materials – lithium, rare earths, copper and other critical inputs.
• Components and manufacturing – turbines, inverters, battery cells and cabling.
• Services and integration – EPC contracting, grid connection, maintenance.
• Capital and financing – asset ownership, project finance and consumer lending.

Australia enters this phase with clear advantages upstream, but significant weaknesses downstream.

To meet the federal target of 82% renewable electricity by 2030, the Clean Energy Council continues to estimate that Australia needs to add around 6-7GW of new utility-scale renewable generation to the NEM each year, well above the 4.3GW of large-scale projects approved in 2024.

That gap highlights both reliance on imported turbines, inverters and battery cells, and the limited pace at which projects can be delivered locally.

Grid infrastructure is emerging as another binding constraint, with research indicating growing grid queues, lagging investment and extending lead times.

AEMO’s 2025 Electricity Statement of Opportunities also stresses this concern, cautioning that timely delivery of capacity and transmission projects is essential, and that delay risks extend well beyond the near term.

For investors, these bottlenecks matter not as abstract policy risks, but because they directly affect capex timing, revenue recognition and free cash flow.

Earnings Reality Check: Where the Numbers Are —and Aren’t— Showing Up

Upstream Materials: Volume Growth, Margin Compression

Nowhere is the disconnect between renewable demand and earnings more visible than in lithium.

Pilbara Minerals‘ ((PLS)) FY25 result demonstrates this clearly. The company lifted spodumene concentrate production by 4% to around 754.6kt in FY25, exceeding the upper end of guidance, while sales volumes rose 7% to about 760.1kt.

Yet revenue fell roughly -39% to around $769m as the average realised price dropped about -43% to US$672/t (CIF China, SC5.3% basis), driving an -83% decline in underlying EBITDA to about $97m despite record output.

The result shows how lithium price cycles can overwhelm volume gains and compress margins even when operations perform well.

IGO Ltd‘s ((IGO)) FY25 financials tell a similar story of price-driven earnings pressure. Group revenue declined to about $528m from $841m the prior year, and the company reported an EBITDA loss of around -$43m amid a difficult pricing environment for both nickel and lithium, including a significant non-cash impairment of its Kwinana refinery assets within the Tianqi Lithium Energy Australia joint venture.

IGO’s nickel business revenue fell to roughly $512m from $823m, with underlying EBITDA also materially lower, even though key operations like Greenbushes remained technically robust.

Rare earths have also seen earnings volatility. Lynas Rare Earths‘ ((LYC)) FY25 result showed annual revenue increasing to $556.5m from $463.3m, driven by higher NdPr production and sales, but net profit falling sharply to around $8m from $84.5m as higher costs and softer pricing weighed on profitability despite the completion of major capital projects.

Investor implication: upstream materials remain structurally tied to electrification, but near-term earnings are driven by commodity pricing cycles, not renewable build-out alone.

Infrastructure-Style Exposure: Smoother, If Less Explosive

By contrast, infrastructure-like exposures show far less earnings volatility. APA Group‘s ((APA)) FY25 result, supported by regulated and contracted energy infrastructure, reported revenue (excluding pass-through) up about 4.7% to $2.7bn and underlying EBITDA up 6.4% to approximately $2.0bn, with free cash flow slightly higher at around $1.08bn.

Distributions increased 1.8% to 57.0c per security, and management outlined a roughly $2.1bn organic growth pipeline funded within existing balance sheet capacity.

While not a pure renewables play, APA illustrates the distinction investors must make: stable cash flow profiles often sit outside the most visible parts of the energy transition, but can deliver superior risk-adjusted returns.

Components and Manufacturing: Scale Still Matters

Despite accelerating project approvals, Australia remains heavily dependent on imported turbines, inverters and battery cells.

While the Clean Energy Council’s 2025 Clean Energy Australia report highlights a healthy pipeline of projects, domestic OEM presence remains limited. This is because Australia’s strict labour and regulatory markets have pushed a lot of production offshore.

For batteries, for instance, core elements (like lithium) are sent overseas, where they are processed, and then return as cells for storing power. This reinforces Australia’s reliance on global manufacturers.

For ASX-listed manufacturers, this means scale disadvantages and margin pressure relative to global incumbents.

Strong deployment volumes do not automatically translate into pricing power or profitability.

Services and Integration: Backlogs Ahead of Margins

Contractors and integrators sit closer to the investment pulse, but execution risk remains high.

Downer EDI‘s ((DOW)) FY25 results point to a healthy forward outlook in energy and utilities, alongside a renewed focus on selective tendering and “risk guard rails” that have reduced exposure to low-margin contracts.

Management noted the merger of Utilities and Industrial & Energy has strengthened technical capabilities for energy-transition opportunities and the completion and non-renewal of underperforming power and water contracts should support margin performance, even as near-term revenue is impacted.

The takeaway is clear: revenue visibility and work-in-hand are improving faster than profitability, and margin recovery depends on disciplined bidding, labour availability and successful delivery.

Bottlenecks That Hit the P&L

As highlighted earlier, grid connection delays, planning approvals and transmission constraints are no longer peripheral risks.

According to the AEMO, these factors directly link to higher project costs, increased reliability risks and deferred commissioning.

For developers, this translates into deferred revenue and stretched balance sheets. For EPC contractors, it raises the risk of cost overruns on fixed-price contracts.

For investors, it means longer timelines and lower near-term returns than headline project announcements imply.

Where Value Is Accruing — and Where It Isn’t

Pulling the strands together, a pattern is emerging:

• Most volatile – upstream materials, despite structural demand
• Most constrained – local components manufacturing
• Most execution-dependent – services and integration
• Most defensive – diversified miners and infrastructure-style assets

AEMO’s latest reliability outlook indicates last financial year saw a record 4.4GW of new generation and storage commissioned, and an additional 5.2–10.1GW per year is expected over the next five years.

The latter projectgion is supported by a “healthy” 10-year investment pipeline of committed and anticipated projects, as highlighted earlier.

AEMO CEO Daniel Westerman noted “timely delivery of new generation, storage and transmission” is critical, as delay risks persist despite more than 10GW of projects moving into more advanced development categories compared with the prior year.

Bottom Line

Renewables are reshaping Australia’s industrial landscape, but they are not a uniform investment proposition. Capacity additions are hitting records, yet earnings remain uneven, cyclical and exposed to bottlenecks.

For investors, the task is no longer to identify who is “exposed” to renewables, but who can convert that exposure into cash flow through pricing power, integration capability and balance-sheet resilience.

In Australia’s renewables supply chain, exposure is easy to claim. Profits are harder to prove.

FNArena’s dedicated ESG Focus news section zooms in on matters Environmental, Social & Governance (ESG) that are increasingly guiding investors preferences and decisions globally. For more news updates, past and future: 
https://www.fnarena.com/index.php/financial-news/daily-financial-news/category/esg-focus/

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