Australia will need to triple the volume of installed capacity in energy generation and storage if the nation is to deliver a secure and reliable net zero grid by 2050, according to the latest roadmap.

And the nation will need a fivefold increase in utility-scale renewable generation capacity, a fourfold increase in storage capacity and an additional 6,000 kilometers in new transmission lines.

The Australian Energy Market Operator has published the draft edition of its 2026 Integrated Systems Plan (ISP).

Published every two years, the ISP outlines what AEMO says is the ‘least cost pathway’ for Australia to deliver secure and reliable electricity whilst also delivering upon national climate targets, including net zero by 2050.

As noted below, the ISP considers only potential pathways which are allowed by current Commonwealth and state law and which are consistent with current Commonwealth/state government policies.

Consistent with previous reports, the latest draft ISP predicts that the nation’s energy consumption will almost double by 2050.

This will be driven by electrification of transport, expansion of data centres and industry shifting from gas to electricity.

At the same time, the report says that two-thirds of the remaining fleet of coal-fired power plants are expected to retire by 2035, with all remaining coal-fired generation expected to exit the system entirely by 2049.

In light of this, the roadmap calls for a tripling in the amount of installed capacity in the national energy market.

This would take the overall amount of installed capacity from just over 100 GW now to almost 300 GW by 2050.

Of this, the roadmap says that 174 GW will be supplied by large, utility-scale assets.

These assets will include:

• 120 GW of grid-scale wind and solar generation. This represents a more than fivefold increase on current capacity of 23 GW.
• 40 GW of grid-scale storage. This includes 7 GW which is provided by existing hydro-electric power stations as well as 33 GW of grid-scale battery and pumped hydro. This represents a more than fourfold increase on the current 11GW of current grid-scale storage capacity.
• 14 GW of flexible gas; and
• An additional 6,000 km of new transmission lines. These will be added to the existing 44,000 km network and will increase the network’s overall transmission length by around one-seventh.

Supporting these grid-scale assets will be 122 GW of installed capacity in localised business and household assets.

This includes 87 GW of rooftop and other small scale solar, 27 GW of household and commercial batteries and 9GW of storage from electric vehicles.

(Note: in its plan, AEMO does not consider nuclear energy.

The agency is required by law to align its ISP with existing Federal and state government laws and policies. Since nuclear generation is currently prohibited under Australian law, AEMO is unable to consider this as part of the plan.

It should be noted, however, that the CSIRO GenCost report has consistently found that nuclear would be the nation’s most expensive form of energy generation. This remains the case even after costs associated with storage and additional transmission are factored into the cost of renewable generation.

As a result, nuclear would be unlikely to be included in the lowest cost pathway even if this were considered.)

AEMO CEO Daniel Westerman said this year’s roadmap is consistent with previous reports.

Westerman added that the report reflects investments and momentum which is underway in addition to what is needed as Australia’s remaining coal power stations become less reliable and withdraw.

“Extensive stakeholder consultation and modelling of thousands of potential investment combinations has identified the least-cost option,” Westerman said.

“Renewable energy, firmed with storage, backed up by gas and connected with upgraded networks remains the least-cost roadmap to meet Australia’s energy needs. This aligns with consumer, industry and government investments already underway.”

Challenge ahead

Asked for his opinion on the plan, Tony Wood, Energy Program Director at the Grattan Institute, said that it is important to understand its history.

The Integrated System Plan began from the Finkel Review of system security following the South Australia blackout in 2016.

It built on the previous role of AEMO as transmission system planner. However, it expanded that to consider planning for transmission, generation and renewable energy zones. It also included actionable projects.

Now published every two years, Wood said that the plan was embraced by ministers but has never been seriously followed.

As a result of this history, Wood says two important characteristics of the ISP need to be understood.

First, the nature of its history means that no serious consideration has even been given to the relationship between the ISP and Commonwealth/State government policy and whether or not these operate independently of each other or one drives the other.

As noted above, however, the ISP is constrained by government policy. It includes an assumption that all government policies should be followed and that all government targets should be met at lowest cost.

This has several implications.

As mentioned above, the current ban on nuclear energy in Australia means that the plan is not able to consider nuclear energy as an option.

(As for his personal opinion, Wood would like to see the ban on nuclear energy lifted at both federal and state level.

As things stand, he says that nuclear is unlikely to be part of the lowest cost plan on account of its economics as referred to above. However, he notes that this could change in the future.)

Another implication is that the latest draft includes the decisions of the LNP Government in Queensland that cancels their renewable electricity targets and delays the closure of coal plants such that the only coal generators operating in the 2040s are in Queensland.

On this score, Wood stresses that AEMO is NOT saying that those coal plants are needed beyond 2040 as has been reported in some media outlets.

Second, Wood says that it is important to understand that the ISP is not implemented by AEMO.

Rather, the plan is designed to inform the policy decision of governments along with the investment decisions which are taken by industry.

This, he says, leads to a general lack of coordination across the market – a situation which is not helped by the inconsistent approaches taken by governments.

(Source: draft 2026 Intergrated Systems Report, Australian Energy Market Operator)

Key challenges

According to Wood, challenges associated with the plan and its implementation involve:

• Addressing the lack of alignment between the ISP, broader net zero plans of the economy as a whole and for various sectors, and government policies.
• The diversity of approaches being taken by governments to support renewables, transmission, and storage.
• Ongoing involvement by governments in the market – something which Wood says creates unpredictable risks for investment.
• The need to effectively plan for the system when coal is gone and renewables (solar and wind) are more than about 90 percent of generation.
• Sorting out the wholesale market design beyond 2030 and the current review of the national electricity market.

He says that the key action to address all of the above would be for the Energy Ministerial Council to either have these strategic issues on their agenda, possible with revisions to the Australian Energy Market Agreement (AEMA),  or set up an entity, similar to the Energy Security Board with the role and resources of policy and market development adviser.

He says that the current AEMA identifies market development as a role of the Australian Energy Market Commission (AEMC). However, that has not been what they have been able to do for a while, and the ESB was never given the clear remit and resources.

Delivery must proceed

In its report, AEMO warns that delivery of the nation’s energy transition needs to continue.

Should this not occur, the market operator warns that the transition will be more expensive compared with what need be the case and could potentially lead to reliability gaps.

As noted above, the ISP is updated every two years.

As part of the current updating process, AEMO has formally engaged with more than 1,400 stakeholders including 1,160 webinar attendees and 241 written submissions.

All up, the report is underpinned by detailed analysis of around 2,000 potential development paths.

Of these, detailed calculations were performed on 23 candidate development paths that were shortlisted from the initial 2000 potential paths.

Feedback on the draft will inform the final ISP that will be published in June next year.

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