The CIS. What Is It?, Why Was It Increased? and What Does It Mean for Investors?
We know that Australia’s path to decarbonisation is a present-day undertaking. On 29 July 2025, the Australian Government lifted its target for the Capacity Investment Scheme (CIS) from 32 GW to 40 GW of new clean energy projects nationally. This includes 26 GW of renewable generation and 14 GW of dispatchable storage, all to be rolled out between now and 2027 (1)
It is a significant move for a country whose energy market is undergoing the most transformative shift in its history. As ageing coal plants retire and demand for electricity intensifies, new investment — and lots of it — is not optional. The expanded CIS is the government’s flagship solution to ensuring that capacity is built, risks are shared, and the market remains investable.
Understanding the Capacity Investment Scheme
The CIS is a federal underwriting mechanism that provides long-term revenue certainty to developers of renewable generation (like wind and solar) and clean dispatchable projects (such as battery storage). In effect, it reduces the commercial risk associated with new projects by offering price guarantees over time.
As per the Government’s own brief, the aim is to:
Help achieve the national target of 82% renewable electricity by 2030
Add 40 GW of generation and firming capacity by that same year
Support energy reliability as demand increases and legacy coal exits the system
Place downward pressure on electricity prices
Deliver local employment and First Nations participation in project development250801 Capacity Investm…
Importantly, the CIS is part of a broader framework, complementing policies like Rewiring the Nation and Renewable Energy Transformation Agreements (RETAs). According to it, there are bilateral deals between the Commonwealth and states to support regional rollout, workforce planning, and infrastructure synchronisation.
Why the Expansion of the CIS Matters
The July uplift is a recognition of two critical market forces: growing investor appetite for clean energy, and the urgent need for reliability as the grid evolves.
Australia’s Energy Minister Chris Bowen made this clear when confirming the expansion. He described the CIS as delivering “critical certainty to investors,” stating it would ensure the clean energy build-out continues at pace while addressing system stability and affordability. (2)
Bowen’s message to investors was direct: this is a government not only committed to clean energy, but willing to backstop it. And it appears the market has taken notice. Industry groups, including the Clean Energy Council, have called the move “transformational,” arguing it provides the scale and clarity long called for by renewable developers and financiers alike.
With $73 billion in expected investment between now and 2027, the scale of opportunity is substantial.
Investment Case and Policy Certainty
From an investment perspective, according to it, there are three features of the CIS make it particularly attractive:
Revenue Stability – Underwriting lowers price volatility, making projects more bankable and appealing to institutional capital.
Streamlined Procurement – A recent reform has converted the previous two-stage tender process into a single-stage format, reducing the time and cost for project proponents.
Social Licence Embedded – Proponents must demonstrate meaningful engagement with First Nations communities and local stakeholders. This de-risks projects by requiring consensus-building up front, rather than in reaction to backlash later.
Moreover, with AEMO Services running the competitive tenders, projects are being assessed on commercial merit, deliverability, community engagement and grid benefits — criteria designed to safeguard public value and long-term reliability.
Key Considerations for Investors
While the CIS expansion is broadly positive for the clean energy sector, it does not come without policy and delivery risks. These are important for any investor — particularly those considering long-duration exposure — to monitor.
Fiscal Exposure As Ross Garnaut, former Government climate advisor, recently warned, “subsidies done badly can blow out public budgets.” The CIS underwriting model exposes the Commonwealth to contingent liabilities should market prices fall below the contracted floor prices. With 40 GW now covered by the scheme, the potential scale of this exposure cannot be ignored. (3)
Delivery Bottlenecks. A ramp-up of this magnitude assumes there is sufficient labour, materials, and transmission infrastructure to deliver. Past experience suggests this is optimistic. Delays in permitting, community pushback, and transmission congestion could stall progress — and erode the financial assumptions underpinning some investments.
Market Distortion Risk. By guaranteeing floor prices, there is always a risk that the market becomes reliant on subsidy rather than innovation. Over time, this could disincentivise efficiency and crowd out non-underwritten projects that might otherwise succeed on their own merit.
Execution Accountability. The quality of project selection under the CIS is now pivotal. If politically expedient or underdeveloped proposals are approved at the expense of genuinely transformative ones, the scheme’s reputation and effectiveness may suffer. Investors should watch the transparency and track record of AEMO Services closely.
The Bottom Line
The expansion of the Capacity Investment Scheme is a landmark development in Australia's clean energy journey. It offers clear benefits: investment certainty, policy clarity, and a pipeline of large-scale projects to meet rising electricity demand.
For investors, this translates into an actionable opportunity. Whether through direct infrastructure investment, participation in listed clean energy stocks, or allocation to funds with dedicated energy transition strategies, the path ahead is now clearer and better supported by policy.
As with any large-scale government initiative, the devil lies in the detail. Strong governance, fiscal prudence and delivery discipline will be essential. But for long-term investors willing to align with structural change, the expanded CIS marks one of the most investable frameworks Australia has ever introduced.
References
1. Australian Government. “Capacity Investment Scheme Overview.” 28 July 2025. https://www.dcceew.gov.au/energy/renewable/capacity-investment-scheme
2. Cropp, R, and Macdonald-Smith, A. The Australian Financial Review “Labour supersixes renewables sunsidy sheme.” 28 July 2025.https://www.afr.com/policy/energy-and-climate/labor-supersizes-renewables-subsidy-scheme-20250728-p5midf
3. Cropp, R, and Macdonald-Smith, A. The Australian Financial Review “Labour risks ‘buying failure’ with supersized renewables subsidies.” 29 July 2025. https://www.afr.com/policy/energy-and-climate/labor-risks-buying-failure-with-supersized-renewables-subsidies-20250729-p5mip5
Important Information
EnviroInvest Pty Ltd ACN 685 107 957 (“EnviroInvest”) is an Authorised Representative of Daylight Financial Group Pty Ltd ACN 633 984 773 (“DFGPL”) which is the holder of an Australian Financial Services Licence (AFS Licence No. 521404).
Information in this commentary is current as at date prepared unless otherwise stated. However, please bear in mind that investments can go up or down in value, and that past performance is not a reliable indicator of future performance. For more Important Information please refer to the Disclaimer section of this website.
This communication may contain general financial product advice. It has been prepared without taking into account your personal circumstances, and you should therefore consider its appropriateness in light of your objectives, financial circumstances and needs before acting on it.
If our advice relates to the acquisition or possible acquisition of a particular financial product, you should obtain a copy of and consider the Product Disclosure Statement (PDS) before making any decision.