2 Small-Cap Renewable Energy Stocks to Track on the ASX
When people think of renewable energy on the ASX, the big names often come to mind—large solar developers, listed utilities, or wind farm operators. But beneath those headline giants lies a busy layer of small-cap companies doing the real work of wiring, fueling, and enabling the clean energy transition. These smaller players often fly under the radar, yet they offer investors an interesting blend of growth potential and exposure to the megatrends of decarbonisation and energy security.
Two such companies are Southern Cross Electrical Engineering (ASX: SXE) and Delorean Corporation (ASX: DEL). Though very different in business models—one builds and maintains the electrical backbone for renewables and digital infrastructure, while the other turns organic waste into renewable gas—they both stand at the forefront of Australia’s energy transformation.
Southern Cross Electrical Engineering (SXE): Wiring the Energy Transition
If renewable energy is the heart of the clean economy, SXE is one of the arteries. The company specialises in the design, construction, and maintenance of electrical systems that power batteries, wind farms, solar farms, airports, and increasingly, data centres. In many ways, SXE is a “picks and shovels” business for the energy transition: it doesn’t own the mines of electrons, but it builds the backbone that makes them flow.
The company’s FY25 results show clear momentum:
Revenue: $801.5 million, up 45% year on year.
Net Profit After Tax (NPAT): $31.7 million, also up 45%.
Profit margin: 4.0%, with EPS at 12.0 cents.
This strong growth was driven by large infrastructure programs, particularly in batteries and data centres. SXE played a central role in the Collie battery energy storage system (BESS) project, one of the most significant grid projects in Western Australia. It also continues to win work in airport upgrades and digital infrastructure, sectors benefiting from broader trends like travel recovery and artificial intelligence.
Momentum is also supported by recent contract awards: in August 2025, SXE announced $110 million in new services and manufacturing work, providing clear revenue visibility into FY26. The company exited the year with a solid balance sheet—no net debt, strong cash reserves, and an active dividend policy.
Strategically, SXE is broadening into higher-margin, recurring revenue streams through acquisitions such as Force Fire, while leaning further into secular demand from renewables and electrified infrastructure. For investors, this makes SXE not just a project contractor but also a business with recurring cash flow ambitions.
Why it matters: SXE is positioned at the very centre of the electrification boom. As batteries, solar, and wind projects expand, and as data centres demand more power, SXE’s expertise in building and maintaining large-scale electrical systems becomes indispensable.
Delorean Corporation (DEL): Turning Waste Into Renewable Gas
While SXE focuses on wiring electrons, Delorean focuses on cleaner molecules. The company converts organic waste into biomethane and renewable power—essentially transforming food scraps, agricultural residues, and wastewater into pipeline-grade gas and electricity.
FY25 was a year of transition for Delorean. The company reported $19.8 million in revenue, with total assets of $48.3 million and cash and cash guarantees of $10.7 million. Management described FY25 as a “pivot year” as Delorean shifts from delivering projects under engineering contracts to owning and operating bioenergy facilities. This build-own-operate (BOO) model is crucial because it sets up recurring revenue streams for the long term.
Key project milestones include:
- SA1 Salisbury (South Australia): Construction is progressing, with first biomethane revenues expected by April 2026. Financing has been secured through a $37 million corporate debt facility and a $6.1 million ARENA grant.
- Yarra Valley Water Food Waste-to-Energy (Victoria): Construction delays pushed revenue recognition into FY26, but multi-year operation and maintenance (O&M) revenues will follow.
- NSW1 (with Brickworks, Horsley Park): Development approval was granted in July 2025, with the project set to supply biomethane directly to industrial users.
- VIC1: Expected to begin construction in FY26.
Policy support is strengthening the outlook. Recent government reforms now recognise biomethane as a natural gas equivalent, paving the way for Renewable Gas Guarantee of Origin (RGGO) certificates. These certificates improve project bankability and provide a clearer framework for monetising renewable gas.
At the end of FY25, Delorean still had $10.6 million in cash and a development pipeline stacked with BOO projects. If execution goes as planned, FY26 will be a turning point as its first owned projects start generating cash.
Why it matters: As electricity grids decarbonise, industries like manufacturing and food processing still need firm, drop-in fuels. Delorean’s model addresses this need by providing renewable gas directly into pipelines and industrial systems. At full scale, its projects generate revenue from multiple streams—gas sales, power sales, certificates, and long-term O&M contracts.
Why These Two Deserve a Spot on a Renewables Watchlist
Tracking SXE and DEL provides exposure to two very different, but complementary, parts of the clean energy transition:
SXE: Short-to-medium term growth from infrastructure rollouts, with consistent earnings visibility from services and construction.
DEL: Medium-to-long term potential, with annuity-like cash flows once bioenergy plants are operational.
For investors, SXE offers leverage to electrification and data centre growth, while DEL offers a unique play on renewable gas—a market with huge potential but still in its early innings in Australia.
Key Risks to Watch
- SXE Risks: Timing and margin pressure on large projects, integration of acquisitions, and cyclical exposure to construction and resources.
- DEL Risks: Execution risk during construction and commissioning, financing hurdles, and policy timing around renewable gas certificates.
Final Thoughts
The Australian clean energy landscape is not just about the big solar and wind players. Small caps like SXE and DEL highlight the depth and diversity of opportunities in the sector. One provides the electrical wiring that keeps renewable electrons flowing; the other monetises waste to produce renewable molecules for industry.
Both companies are on different timelines—SXE is delivering growth now, while DEL’s real cash flows will start materialising in FY26 and beyond. For investors willing to look past the giants, these two names are worth a closer watch as Australia continues its path toward a low-carbon future.
Disclaimer:
General Financial Product Advice and Regulatory Framework: Pristine Gaze Pty Ltd (ABN 66 680 815 678, ACN 680 815 678) operates as Corporate Authorised Representative (CAR No. 001312049) of Alpha Securities Pty Ltd (AFSL 330757), which is licensed and regulated by the Australian Securities and Investments Commission under the Corporations Act 2001 (Cth). This report contains general financial product advice only and has been prepared without consideration of your personal objectives, financial situation, specific needs, circumstances, or investment experience. The information is not tailored to individual circumstances and may not be suitable for your particular situation. Before acting on any information contained herein, you should carefully consider its appropriateness having regard to your personal objectives, financial situation, and needs, and consider seeking personal financial advice from a qualified financial adviser who can assess your individual circumstances and provide tailored recommendations.
Investment Risks and Market Warnings: All investments carry significant risk, and different investment strategies may carry varying levels of risk exposure including total loss of invested capital. The value of investments and income derived from them can fluctuate significantly due to market conditions, economic factors, company-specific events, regulatory changes, commodity price volatility, currency fluctuations, interest rate movements, and other factors beyond our control. Securities markets are subject to market risk from general economic conditions and investor sentiment, liquidity risk affecting the ability to buy or sell securities at desired prices, credit risk from issuer default or deterioration, operational risk from inadequate internal processes, sector-specific risks including industry regulatory changes, technology obsolescence, management changes, competitive pressures, supply chain disruptions, and mining-specific risks including resource estimation uncertainty, operational hazards, environmental compliance, permitting delays, commodity price cycles, geopolitical factors affecting mining operations, and exploration risks. Small-cap and speculative mining stocks carry additional risks including limited liquidity, higher volatility, dependence on key personnel, limited operating history, uncertain cash flows, and potential failure to achieve commercial production.
Information Accuracy and Limitations: While we endeavour to ensure information accuracy and reliability, we make no representations or warranties (express or implied) regarding the accuracy, reliability, completeness, timeliness, or suitability of information provided, except where liability cannot be excluded under applicable law. This report may include information from third-party sources including company announcements, regulatory filings, research reports, market data providers, financial news services, and publicly available information, which we do not independently verify and for which we assume no responsibility. Past performance, examples, historical data, or projections are not indicative of future results, and no guarantee of future returns is provided or implied. To the maximum extent permitted by law, Pristine Gaze Pty Ltd and Alpha Securities Pty Ltd, together with their respective directors, officers, employees, representatives, and related entities, exclude all liability for any errors, omissions, inaccuracies, loss or damage (including direct, indirect, consequential, or special damages) arising from reliance on information provided, investment decisions made based on this report, market losses, opportunity costs, and technical issues or system failures.
