In a week where National Party senator Matt Canavan staged a one-man productivity picnic-table outside federal parliament, sipping from a mug that declared “I heart fossil fuels”, and calling for a return to the coal age, the findings of the latest energy market reliability forecast are a sweet dose of reality.
The 2025 Electricity Statement of Opportunities (ESOO), published by the Australian Energy Market Operator on Thursday, find that a record 12 months of investment in solar, wind and storage has left Australia’s energy system even more reliable, not less, than this time last year.
And this trend is expected to repeat, says AEMO CEO Daniel Westerman, thanks to the pipeline of new generation, storage, transmission projects, alongside continued integration of consumer energy resources.
“The 10-year investment pipeline to manage energy reliability is healthy,” Westerman says, and should stay that way as long as governments, investors and developers keep doing what they’re doing.”
What results is one of the most benign forecasts issued by AEMO in a while. Taking into account the various tenders being operated by federal and state governments, including the Capacity Investment Scheme, AEMO suggests unserved energy will be well within reliability standards over the next decade.
“AEMO forecasts sufficient generation capacity to meet growing electricity demand within the relevant reliability standards in most regions and years in the next decade,” the report says, with the caveat that those tender-winning projects do have to be built, and connected to the grid.
And that’s even with a big jump in expected demand. The ESOO forecasts a 21% increase in operational electricity consumption from 178 terawatt-hours (TWh) in 2024-25 to around 229 TWh by 2034-35, mostly thanks to data centre growth, the shift to electrification and the broader inclusion of prospective industrial energy users.
But AEMO says this increase in demand, and the retirement of 11 GW of fossil capacity – mostly coal plants, including Eraring, Bayswater and Vales Point in New South Wales, Yallourn in Victoria and Callide B in Queensland – will be offset by investment in 5-10 GW a year of new renewable capacity over the next five years.
AEMO, however, has produced two different forecasts, with another based on what it describes as “committed and anticipated” developments. Many of the projects planned in the CIS tenders, for instance, don’t qualify for this rating because the tenders have not yet been held.
On this basis, the outlook is slightly different, with most states forecast to breach the reliability standard between 2029 and 2033, assuming of course that none of the projects awarded underwriting agreements in those tenders gets built – which is unlikely.
The one immediate and notable exception is Matt Canavan’s home state of Queensland.
There, AEMO has warned that a supply shortfall of around 80 MW could crop up as soon as this summer, due to increasingly unreliable coal plants, higher peak demand and delayed new project commissioning, after the LNP government hit the brakes on the transition to renewables since taking power in late 2024.
A bit further down the track, in 2026-27, on the “committed and anticipated basis”, AEMO flags a potential 390 MW reliability gap in 2026-27 in South Australia, when AGL Energy’s Torrens Island B gas plant is due to retire and with the Project EnergyConnect transmission link with Victoria not yet fully commissioned.
But the ESOO also notes that there is an in-principle agreement between AGL and the SA government to extend the operation of Torrens Island B for two years, in which case there would be no reliability gaps forecast in those years, at all.
As for New South Wales and Victoria, AEMO says reliability gaps previously identified for those states – including following the retirement of Eraring in NSW and Yallourn in Victoria – are no longer forecast, “highlighting that in-train developments are now likely sufficient to provide for reliability.”
Nationals senator Matt Canavan outside Parliament House, August 19, 2025. (AAP Image/Mick Tsikas)
In terms of generation sources, it is Canavan’s favourite fossil fuel that poses the biggest threat to reliability. AEMO expects coal power have the highest unplanned outage rates (UOR) of all scheduled generation technologies over the coming decade, although it notes that this rate will decline as more of the oldest and least reliable plants retire.
“In Queensland, some black coal units have experienced extended long duration unplanned outages in recent years, which has significantly increased the historical UORs for the fleet,” the ESOO report says.
“These prolonged outages are not expected to occur as frequently in the future; hence these are less evident over the forecast horizon,” it adds, noting also that the Crisafulli government’s planned spend on propping up old coal in the state could also work to reduce outages.
Ultimately, the main message from AEMO’s 2025 ESOO is to keep up the good renewable energy work – and don’t let the turkeys get you down.
“Considering the large volume of generation retirements over the next decade, the timely delivery of new generation, storage and transmission, along with the operation of consumer energy resources to support reliability, remain critical,” Westerman says.
“Today the market operator has again reminded Australians that ageing, unreliable coal poses a real risk to our energy system, but increasing investment in reliable renewables, backed by clear government policy, is securing our energy future,” said federal energy minister Chris Bowen on Thursday.
“Australians can have confidence that our plan is working: we are making the system cleaner, fairer and more reliable while ensuring we replace retiring coal with the firmed renewables of the future.
“The energy market operator is clear our energy security relies on our sensible policy certainty. The Coalition should heed this warning – ripping up targets and derailing the transition will cost Australian billpayers and hurt reliability.”
