Why the CIS’s Design is Stranding Australia's Renewable Pipeline

2025Q4

Australia is pushing hard toward an 82% renewable energy target by 2030, recently expanding the Capacity Investment Scheme (CIS) from 32 GW to 40 GW. The new target includes 26 GW of renewable generation and 14 GW of clean dispatchable storage. On paper, the scale of government support appears positive. 

However, there is a widening gap emerging between ambition and delivery. Of the roughly 20 GW of CIS Agreements (CISAs) awarded, progression is severely limited. On our count, only 0.5 GW of the 13 GW of awarded generation capacity has reached Final Investment Decision (FID), a conversion rate of just 4%, and no new wind projects in the National Electricity Market (NEM) reached FID in 2025.

At the same time, renewables supplied 42.7% of NEM energy in Q3 2025 an increase of 3.4% compared to the same quarter in 2024.  This is well below the circa 8% annual growth in renewables penetration required to meet the 82% target. 

This raises the key question for 2026: will the CIS deliver?

Quick recap: What is the CIS? 

The CIS is a government-funded initiative designed to accelerate Australia's energy transition. It allocates Revenue Support Agreements (CISAs) through a series of competitive auctions, running between 2024 and 2026. Eligible projects secure a winning CISA by bidding the lowest revenue floors.

Once a project is operational the CISA functions by: 

• Downside protection (floor): If revenue falls below the bid floor, the government tops it up. 

• Upside sharing (ceiling): If revenue exceeds the ceiling, the project pays the surplus back.

In principle, this structure should de-risk merchant revenue and facilitate the project attracting debt and equity finance. In practice, two design flaws undermine these aims: 

1. The Low-Bid Trap: Given the competitive nature of the bidding process, which we will explain later, projects are structurally incentivised to bid an absolute minimum floor price to secure a CISA. There is a high risk that the winning revenue floor is actually set too low to make the project attractive to both debt and equity investors (eg a form of winner’s curse from auction theory). In Infradebt’s view, the biggest gap for the CIS is for equity investors.  That is, the CIS isn’t delivering a material improvement in risk/return outcomes for equity investors. Hence, project proponents are struggling to raise the equity required to fund projects.  In a macro environment where construction costs are surprising to the upside, there is a real risk that many existing CIS winners have CIS revenue floors that just don’t make economic sense for equity investors. 

   
   

2. Lack of Price Discovery: The winning floor prices are confidential meaning competing bidders and the public have zero visibility into winning (market clearing) prices. This opaqueness prevents price discovery, further making it difficult for projects to optimise bid strategy. While the CIS likely adopted non-disclosure to protect commercial confidentiality and avoid signalling effects among bidders, the unintended consequence is the risk that there may be a large stock of undisclosed “zombie” CIS projects.  That is, projects where the CIS floor is too low relative to today’s construction costs and the project is unlikely to ever proceed to FID.  However, from the perspective of potential equity investors in other projects, they don’t know whether these zombie projects will proceed and, hence, what the overall level of supply will be.  Public disclosure of CIS outcomes would let proponents form their own view of whether existing CIS winners are zombie projects or not and, hence, have a much more sensible framework for assessing the overall buildout resulting from the CIS. 

Consequence 

Outside of BESS – that is for wind/solar projects that actually generate electricity – there is a severe FID drought.   Given that it takes two to three years to build projects, this means that the NEM is locked into relatively slow generation growth in 2027 and 2028 and, hence, achieving the 82% target by 2030 will be extremely difficult.

For example, AEMO data at end November shows that of the 39 CIS-awarded wind and solar projects in the NEM, only two solar projects had reached FID as of October 2025. Put differently, 0.5 GW out of 13 GW awarded generation has reached FID. That's 4%!  Or even if you exclude the most recent tender round – where there has been limited time for projects to get to financial close, for Tender 1 which was awarded approximately a year ago, only 8% of projects have got to FID.

While no CIS backed wind projects have announced FID in the first 11 months of this year, two South Australian wind projects are now progressing meaningfully toward financial close. Carmody’s Hill (247 MW) recently secured its critical 5.3.4 grid connection approval, while the Willogoleche 2 extension (108 MW) is also advancing with the benefit of existing site infrastructure. 

Despite the likely FID of these additional projects, the persistent lack of momentum across the broader wind pipeline is deeply concerning because wind is critical for delivering night time power (the sun never shines at night 😊) and, hence, wind is critical to displace coal from night generation.  While solar and 2-4 hour BESS will make a big difference to the evening peak, the system requires wind, and lots of it, to provide renewable electricity through the whole night.

Source: NEM Generation Information Oct 2025 

What to Watch in 2026 

The coming year will be defined by one key metric: FID. It’s good to keep watch of the following: 

• The Risk: Given that large-scale wind projects take between two to three years from the start of construction to operations, any further delays in 2026 will make the 82% by 2030 target difficult to achieve. 

• The Metric: Ignore CIS award announcements. The true measure of the CIS's effectiveness will be the number of CIS-awarded projects that proceed to FID and construction. 

• The Policy Pivot: If the FID drought persists past H2 2026, the government will face pressure for a structural review. This could result in revision of the CIS, possibly pivoting toward a fixed-price CfD reverse auction model, similar to the one successfully employed by the ACT Government. The program needs to also prioritise awarding CIS to projects that are actually able to move into construction.  

  
  

Ultimately, Australia’s progress toward 82% RET will depend not on commitments awarded, but on the projects that reach financial close in 2026.