Australia’s Energy Tug-of-War

Australia is at a critical crossroads in its energy journey. On one side lies the global imperative to decarbonise, driven by climate goals and investor pressure. On the other, the need to ensure energy reliability and affordability for households and businesses. And now, layered atop this energy trilemma, is a digital revolution demanding ever more electricity, especially from hyperscale data centres powering AI and cloud infrastructure.

Yet, despite this complex backdrop, Australia is lagging in the one thing that binds it all together: energy infrastructure. Political indecision, policy fragmentation, and a failure to move quickly on transmission, storage, and firming capacity threaten to derail the transition. At TAMIM, we believe this creates a paradoxical investment opportunity. As governments struggle to deliver, private capital can step in where policy fails.

AGL, The Canary in the Decarbonisation Coal Mine

The recent results from AGL Energy (ASX: AGL) offered a sobering view of what happens when ambition outpaces capability. Despite its best efforts to reposition as a renewable energy champion, AGL’s underlying profit dropped 25% to $576 million. Its legacy coal assets remain critical to grid reliability, but they are ageing and costly. Meanwhile, renewable rollout and firming capacity have lagged.

Even with Grok Ventures’ activist pressure and a refreshed board committed to climate targets, AGL is struggling to execute. Its slow and costly pivot highlights the challenge of being a first mover without adequate infrastructure and regulatory support. The company faces the dual burden of maintaining outdated baseload assets while investing in new ones, a capital-intensive balancing act.

For investors, the lesson is clear: the transition cannot be achieved through good intentions alone. Infrastructure must lead ambition, not lag behind it.

Gas Paralysis

Victoria’s recent decision to delay or potentially cancel a critical gas import terminal is another example of infrastructure inertia. As coal retires and renewables ramp up, gas remains essential for peaking and firming power. Yet, instead of supporting this bridge fuel, political risk has led to a vacuum in new investment.

This decision puts added pressure on the east coast gas market, already tight and exposed to global LNG price shocks. It also increases the risk of blackouts during periods of low renewable output. The result? More expensive energy and declining reliability.

This is precisely where infrastructure investors should be paying attention. Players like APA Group, Origin Energy, Santos, and Jemena are positioned to benefit from gas infrastructure buildouts, especially if governments ultimately recognise the need for practical, not ideological, energy solutions.

Power-Hungry AI: Data Centres Are the New Aluminium Smelters

Australia’s energy story isn’t just about decarbonisation; it’s increasingly about digitisation. As AI adoption accelerates, data centres are becoming energy giants. According to recent estimates, data centre power consumption could triple by 2030.

Yet the grid was not designed for this. In places like Western Sydney and Inner Melbourne, where data centre clustering is occurring, the grid is already straining. Major US and Asian tech companies seeking to build in Australia are finding connection times delayed, capacity constrained, and project viability threatened.

This opens up massive opportunity. Companies involved in grid augmentation, storage, and long-duration firming, from listed infrastructure players to global renewables specialists, will be key to enabling this growth. Investors must also look globally for solutions. Japan’s restart of idle nuclear capacity, including Hokkaido Electric and Kansai Electric, offers a case study in how baseload capacity is being reborn.

The Opportunity, Invest Where Governments Are Dragging Their Feet

With government-led projects stalling or bogged down in red tape, listed infrastructure is increasingly where the action is. Investors can tap into companies building the digital backbone (Quanta Services), enabling energy redundancy (Engie, A2A), or developing critical gas, transmission, and storage capacity.

Global capital is flowing into the space. Private equity, sovereign wealth funds, and listed infrastructure vehicles are now hunting for scalable, cash-yielding projects in politically stable jurisdictions. Australia should be a prime target, if only the permitting and approval systems would catch up.

Locally, players like Transgrid, AusNet, and APA Group remain core watchlist names. Internationally, Quanta, Sempra, NextEra, and Japan’s nuclear operators warrant close attention. The shift from 100% renewable narratives to balanced, diversified energy mixes is finally gaining traction, with real implications for asset values.

The TAMIM Takeaway

When governments hesitate and policy drags, private capital steps in to solve the real-world bottlenecks. Whether it’s power to homes or energy for AI workloads, the global trend is clear: infrastructure, particularly energy, is not keeping pace with demand. In Australia, the challenge is especially acute, and for investors, that’s a glaring opportunity.

We continue to look for companies, locally and globally, that are solving infrastructure problems others are still debating. This includes grid operators, gas transporters, storage innovators, and even overlooked Japanese nuclear assets. As the energy transition becomes more complex and capital-intensive, we want to be positioned where investment meets necessity.

Investing in infrastructure isn’t just about bricks and wires. It’s about underwriting resilience, relevance, and return.

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Disclaimer: AGL Energy (ASX: AGL) is held in TAMIM Portfolios as at date of article publication. Holdings can change substantially at any given time.