Curtailment: a growing feature of Australia’s renewable grid
Curtailment has quickly moved from an academic concept to a commercial reality for renewable energy investors. As Australia’s electricity system absorbs ever larger volumes of wind and solar generation, the amount of energy that is generated but cannot be dispatched into the grid is rising sharply. This is not a failure of renewables, nor a sign the transition has stalled. It is instead a signal that the grid is changing faster than the infrastructure designed to support it.
Recent data shows record levels of large scale wind and solar output being curtailed across the National Electricity Market, particularly in Victoria and South Australia, where renewable penetration is highest. According to analysis reported by the Australian Financial Review, around 7.2 terawatt hours of renewable energy was available but unused in 2025, almost double the prior year (1). That scale matters because it directly affects project revenues, investor confidence, and the pace of future development.
What is curtailment?
Curtailment refers to the deliberate reduction in output from a wind or solar asset below what it could otherwise produce under prevailing weather conditions. In practical terms, turbines are feathered or solar inverters are turned down, even though the wind is blowing or the sun is shining.
As outlined by Dr Dylan McConnell, a senior researcher at the University of New South Wales, curtailment can occur for several overlapping reasons. These include economic curtailment when wholesale prices fall to zero or negative levels, network based curtailment when transmission lines are congested, and operator intervention to maintain system security (2). The distinction between these categories is often blurred, but the outcome is the same. Energy that could have been generated and sold is instead spilled.
According to his presentation, curtailment is not inherently inefficient. International planning studies and AEMO modelling suggest that some level of curtailment is optimal in a least cost renewable dominated system. Curtailment levels are expected to rise from roughly 5 per cent today to closer to 20 per cent by mid century. The issue facing Australia now is not that curtailment exists, but that it is occurring earlier and at higher levels than anticipated.
Why curtailment is rising across the grid
The primary driver of curtailment is timing. Solar generation peaks during the middle of the day, precisely when demand is often lowest outside of summer heatwaves. At the same time, rooftop solar continues to flood the grid with inflexible supply that cannot be centrally dispatched. Add to this the operational inflexibility of coal fired generators, which often continue producing even when prices are negative due to the cost of shutting down and restarting, and the system becomes saturated.
Physical constraints also play a major role. Transmission infrastructure was not built to move large volumes of renewable energy from regional generation zones to urban demand centres. When transmission lines reach capacity, renewable generators are the first to be curtailed because they can ramp output down quickly.
Seasonality compounds the problem. Curtailment is most pronounced in spring and autumn, when mild temperatures reduce heating and cooling demand while solar and wind output remains strong. Data compiled by McConnell shows that during peak spring periods, up to 25 per cent of utility scale solar output and more than 10 per cent of wind generation can be curtailed in some regions. This data was published in the Energy (3).
The risks curtailment creates
For project owners, curtailment directly reduces revenue and undermines confidence in future cash flows. As the Clean Energy Council has noted, higher curtailment increases financing costs and complicates investment decisions, particularly for merchant exposed projects.
For the broader system, unmanaged curtailment can slow the energy transition. Rising curtailment is one reason new wind and solar investment has lagged what is required to meet national clean energy targets, despite strong policy intent and abundant resources.
There is also a risk of misinterpretation. Curtailment figures are sometimes cited as evidence that Australia has too much renewable energy. In reality, the problem is not excess generation capacity but insufficient flexibility and inadequate transmission. Without addressing those bottlenecks, curtailment will continue to rise even as demand electrification accelerates.
What needs to be done to manage curtailment
The solution to curtailment is not eliminating it entirely. As McConnell notes, not every electron is sacred, and some congestion is economically efficient. The challenge is keeping curtailment within manageable bounds while ensuring developers and investors are appropriately compensated for the risk.
Transmission investment is essential. According to the AFR article, projects such as EnergyConnect and VNI West are designed to unlock renewable energy zones and reduce regional congestion, although they will take years to deliver meaningful relief.
Energy storage is equally critical. In the same article it mentions that grid scale batteries and hybrid solar and storage facilities allow excess daytime generation to be shifted into evening peaks when prices and demand are higher. AEMO estimates that around half of new projects in the pipeline now include battery components, reflecting how central storage has become to managing curtailment.
Demand side participation also has an important role. Flexible industrial loads, smart charging, and time shifted consumption can absorb surplus renewable energy that would otherwise be spilled. Over time, this will become an increasingly valuable part of the system.
How investors should benefit
For investors, curtailment is not simply a risk to be avoided. It is also a signal pointing to where capital is most needed. Assets that improve grid flexibility, including batteries, pumped hydro, transmission infrastructure, and demand response platforms, are direct beneficiaries of rising curtailment.
Well structured renewable portfolios that combine generation with storage are also better positioned to withstand curtailment impacts and capture higher value pricing windows. In many cases, curtailment is accelerating the evolution of renewable assets from simple generators into integrated energy businesses.
The key is selectivity. Curtailment will remain a feature of the renewable grid, but it will not affect all assets equally. Investors who understand where, when, and why curtailment occurs can position capital accordingly and benefit from the solutions rather than the constraint.
The Bottom Line
Curtailment is not a failure of the energy transition. It is a growing pain of a system changing faster than its physical foundations. Managed well, it drives investment into the next phase of the transition and rewards those who understand the grid, not just the technology. Managed poorly, it slows progress and erodes confidence. For investors, the opportunity lies firmly in the response.
References
Cropp R, Australian Financial Review. “Large scale wind and solar wasting record amounts of power.” 13 January 2026.
https://www.afr.com/policy/energy-and-climate/large-scale-wind-and-solar-wasting-record-amounts-of-power-20260112-p5ntdxMcConnell D. Understanding renewable curtailment in the National Electricity Market. Asia Pacific Solar Research Conference, December 2023.
https://aemo.com.au/en/energy-systems/major-publications/integrated-system-plan-isp/2022-integrated-system-plan-ispPotter B, The Energy. “Learning to live with curtailment.” 8 October 2025.
https://theenergy.co/article/learning-to-live-with-curtailment
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