The prospects for renewable energy production to contribute to future profitability within the Australian sugar industry are examined. The paper establishes baseline profitability for the current raw sugar industry based on a simple cost-returns framework. This suggests that the industry has been operating with a positive average net cash revenue ($477M p.a.) during much of the 1990’s, but much lower return on total equity (only $207M p.a.) when all on-farm and within-mill depreciation and imputed labour costs are accounted for. Negative returns on resources invested in the industry are associated with world sugar prices dropping below US$0.07 /lb or the $A strengthening above current exchange rates of A$0.52 to the US$. Diversification options within the renewable energy sector are examined initially at the whole industry scale. Cogeneration and ethanol can make positive contributions to industry profitability, although the amounts of capital required are large, some uncertainties exist on critical assumptions, and there is a clear requirement for some form of government incentive. Development budgets are used to examine mill level options for investment in a range of renewable energy projects, with outcomes assessed in terms of net present value and internal rates of return. Cogeneration projects appear viable provided support in the order of A$30/ MWh remains available. This approximates the current value of Renewable Energy Certificates (RECs). Feedstock price and associated transport distances are shown to be critical factors in ethanol projects, and options based on C molasses, B molasses, sweet sorghum and dry grain are examined. Maximising profitability in renewable energy development in the Australian sugar industry will require skilful integration of existing and new activities, R&D to achieve improved efficiency both on-farm and within mills, and government incentives aimed at achieving national goals in economically efficient ways.