How do you see the reality of 2030 targets aligning with current delivery pathways?

Janul Hernandez: My view from a North American Grid perspective is that the 2030 targets are still the right direction, but the delivery pathway is not yet moving fast enough.

The lesson we are learning in the North America is that demand can move much faster than the grid and major Transmission build-out is required to support these new loads. The needs are moving faster than planning, permitting, interconnection, and equipment supply chains can respond, and Australia has its own version of the same issues.

Net Zero Australia finds that under current policies, Australia reaches only about 59% renewable electricity by 2030, while its Net Zero 2050 pathway reaches 82% renewables around 2033, later than the Commonwealth’s 2030 ambition.¹ Australia will need around twice today’s transmission network to meet this demand.

To me, this means we need to find new innovative ways to accelerate timelines across technology, process, and re-tooling our networks and teams.

Tarandeep S. Ahuja: As Janul mentioned, Australia is facing similar challenges in relation to speed of delivery. Rooftop solar and batteries are real bright spots here, but large-scale renewables, firming, and transmission are not scaling at the required pace.

We see this in the speed of final investment decisions (FID) for new large-scale renewables, which decreased from 4.3 GW committed in 2024 to 2.23 GW in 2025, well behind the 6-7 GW of new generation Australia needs annually to reach 82% renewables by 2030.²

“Upwards of 80% of projects are delayed and running over budget, putting both the pace and the affordability of our transition at risk.”

Compounding this is the execution reality on the ground: upwards of 80% of projects are delayed and running over budget, putting both the pace and the affordability of our transition at risk.

What are some common misconceptions about the transition, and how do they compare with reality?

Janul: One misconception is that the transition is mostly about swapping coal for wind and solar. That is part of it, but it is far from the whole story.

“What we are really talking about is rebuilding the energy system while keeping it reliable and most importantly affordable.”

What we are really talking about is rebuilding the energy system while keeping it reliable and most importantly affordable. Australia will need a lot of renewables, but it will also need batteries, gas peaking, transmission, distribution upgrades, and demand flexibility with the upskilled workforce needed to deliver.

Another misconception is that gas simply disappears from the generation mix in a high-renewables system. In reality, the role of gas evolves. It becomes less of an energy source and more of a reliability backstop, used less often but still important when renewable output is low for extended periods.

Tarandeep: A major misconception I hear is the idea that there is a choice in making these investments. The reality is that our legacy coal plants are rapidly ageing and reaching the end of their technical lives.

To simply keep meeting our growing power demand and keep the system reliable, we need to make the capital investments into building new renewables, firming capacity, and the supporting grid infrastructure.

Along with this, there is a misconception that the transition alone is the main reason bills are rising. The reality is more complicated and nuanced, but to the public it is focused on the capital need to put renewable loads in service.

What about the energy transition keeps you up at night?

Janul: What keeps me up is not whether Australia can technically build a net-zero energy system. I think it can.

What worries me is whether the country can deploy the capital quickly enough, in the right places, without turning the transition into an affordability problem. It is estimated that roughly $1.6 trillion of capital investment must be unlocked to reach net zero by 2050.³

This deployment can look affordable for the economy overall and still feel very expensive for households, communities, or industrial customers if costs land unevenly or before benefits show up. Australia is already seeing some warning signs: industrial energy costs per unit are estimated to be up about 31% since 2015, residential and commercial energy costs about 11%, and road transport energy costs about 13%.⁴

In North America, we see the same tension. Retail electricity prices have already accelerated since the pandemic and share of wallet impact plus affordability is a very real consideration.

“Can we finance it, permit it, connect it, and provide and equitable service to ALL our customers?”

So, the question is not just, “Can we build it?” It is, “Can we finance it, permit it, connect it, and provide and equitable service to ALL our customers?” This question is what keeps me up at night the most!

Tarandeep: The other dynamic that keeps me up at night is the timing of the transition coinciding with rapid growth in power demand. This demand surge is being driven by broader economic electrification, such as the uptake of EVs, and the growth of data centres fuelled by AI.

Our firm’s analysis shows that Australia's data centre capacity will need to grow from 1.5 GW to 3.9 GW by 2030 just to meet domestic needs, and up to 5.0 GW if we are to capture the opportunity of regional AI spillover.

“Data centres could consume 6 percent of our national grid demand by 2030”

To power this expansion, we estimate data centres could consume 6 percent of our national grid demand by 2030, up from just 2 percent today, based on current utilisation. Under higher utilisation, that number could grow.⁵

This increasing demand adds immense pressure to build replacement generation and build it rapidly enough to avoid reliability shortfalls.

Janul Hernandez is a Partner and North American leader of the grid service line at McKinsey & Company. Tarandeep Singh is a leader of McKinsey & Company's Energy Practice in Australia and New Zealand.

References:

1. Net Zero Australia, September 2025, Updated Net Zero Pathways for Australia

2. Clean Energy Council, 2024–2025, Quarterly Reports

3. Net Zero Australia, September 2025, Updated Net Zero Pathways for Australia

4. Net Zero Australia, December 2025, Australia's Progress to Net Zero by 2050

5. McKinsey & Company, April 2026, Australia’s AI moment: Building Asia–Pacific’s compute hub