NSW has officially established its first urban renewable energy zone (REZ) in the Illawarra region, marking a significant expansion of the state’s renewable energy infrastructure strategy. This initiative aims to harness local renewable resources, integrate advanced grid technologies, and support the transition to cleaner energy within an urban setting. The announcement came in May 2025, positioning the Illawarra as a pilot zone for urban renewable development.
The urban REZ concept involves creating a concentrated area where renewable energy generation, storage, and transmission upgrades coexist, optimised for high energy demand zones. Unlike traditional regional REZs focused on large-scale generation, the Illawarra urban REZ incorporates a mix of rooftop solar, battery storage, and grid enhancements tailored to the locality’s electricity needs. This integrated approach seeks to improve grid stability, reduce emissions within the urban footprint, and enable residents and businesses to participate actively in the energy market.
Key stakeholders include the NSW Government, AEMO, local councils, and energy providers collaborating to design and implement infrastructure upgrades and regulatory frameworks. The project reflects a strategic response to challenges such as grid congestion in urban areas and the need to decarbonise city energy supply chains. Residents can expect improved energy reliability and potentially lower costs as renewable capacity grows.
Looking ahead, the success of the Illawarra urban REZ could inform similar initiatives across Australia’s major cities, demonstrating a pathway for integrating renewables in high-density environments. It raises important questions about balancing urban growth, energy demand, and clean transition imperatives — all critical to Australia’s energy future.
Context & Background
Renewable Energy Zones (REZs) represent a strategic approach by governments to accelerate the deployment of renewable energy and upgrade grid infrastructure in areas with strong renewable resource potential. NSW has pioneered REZs primarily in regional areas to boost large-scale wind and solar projects, facilitating the transition from fossil fuels. Until now, these zones have largely focused on less populated regions due to the availability of land and suitable conditions.
The introduction of an ‘urban renewable energy zone’ in the Illawarra marks a shift to integrating renewable infrastructure within more densely populated areas. This approach aligns with growing urban energy demands and the imperative to reduce emissions in cities, while managing grid constraints. Urban REZs aim to combine distributed generation, storage, and demand management to enhance reliability and support local energy use.
This development arises amid Australia’s ongoing energy transition challenges, balancing supply security, affordability, and emissions reduction goals. The Australian Energy Market Operator (AEMO) and NSW government have called for innovative solutions to integrate renewables into the grid efficiently, making urban REZs a key experiment in that evolution.
In This Story
New South Wales Government
The state government responsible for energy policy and development of Renewable Energy Zones in NSW.
Australian Energy Market Operator (AEMO)
The independent organisation managing electricity and gas systems, playing a key role in planning and coordinating Renewable Energy Zones.
Illawarra Region
A coastal urban area south of Sydney, chosen as NSW’s first urban renewable energy zone due to its demographic and energy infrastructure characteristics.
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