New renewables and batteries improve grid reliability outlook, but more needs to get built on time, AEMO says

The immediate threat to the reliability of Australia’s main grid has been pushed back into the next decade, provided there is the “timely delivery” of new renewable energy and storage, according to the Australian Energy Market Operator.

A year ago, AEMO’s Electricity Statement of Opportunity (ESOO) had forecast reliability challenges for parts of the National Electricity Market (NEM) as soon as the present financial year.

In 2026’s ESOO, however, the NEM had “a stronger pipeline of grid-scale generation and storage than in recent years” with reliability predicted to be maintained to 2033-34 for the NSW, South Australia and Victoria, and for Tasmania up to the following year.

Still, securing that reliability as demand continues to grow and coal-fired power plants shut down “remains highly dependent on timely delivery, operational availability, and the ability of resources to sustain supply during extended periods of system stress”, AEMO said.

Indeed, to reflect that dependence, AEMO included an additional “Committed and Anticipated Developments” reliability assessment to reflect projects that are “subject to greater delivery uncertainty”.

Applying that qualification, the reliability standard may be exceeded by 2030-31in NSW and Victoria, with South Australia’s breached in 2031-32, the following year in Queensland, and the year after that, 2033-34, in Tasmania.

As with all ESOOs, the aim is to identify the timing of the stresses on the grid in any particular year to help focus governments, developers and regulators to ensure the risk of “unserved” demand – or blackouts – are minimised.

Media commentators often interpret the reliability assessment to imply “lights will go out” by a certain year in the respective jurisdiction.

AEMO chief executive officer Daniel Westerman says this year’s ESOO shows an improved outlook for reliability thanks to record levels of new generation and storage. However, the industry needs continued investment in new generation to meeting rising power demand and fill the supply gap as aging fossil-fuel plants retired.

“There is a clear pathway to maintain reliable electricity supply across the NEM,” Westerman said, in a separate media release, accompanying the ESOO report.

He said the coal and gas plants scheduled to retire over the next decade amounted to 15 gigawatts of generation. Over that time, AEMO estimates electricity consumption will jump by more than 40% as homes, businesses and industry electrify, and data centre demand grows.

While “a significant amount of new capacity is expected to be delivered between now and the
early 2030s”, beyond 2030, “the next wave of investment will be critical to maintaining reliability,” he said.

Data centre investment plans are increasing at a pace that regulators have struggled to keep up with. On Monday, a NSW government webinar noted that centres with demand reaching as much as 13GW were already in advanced discussions to connect to the grid, or more than the present average daily power demand across the entire state grid.

Giving AEMO – and the federal government – some confidence is the fact that a record 9.1GW of new generation and storage were connected to the grid in the financial year just ended, or double the tally during 2024-25.

The pipeline of “committed and anticipated projects” expected to be added by early next decade has also risen by about 24GW in the past year to 40GW.

“This is what getting on with the energy transition looks like, with record amounts of new generation and storage being built and connected, strengthening reliability as ageing coal-fired power stations approach their scheduled retirement dates,” Chris Bowen, federal climate change and energy minister, said, in additional comments provided to journalists.

“Our Capacity Investment Scheme, investment in long overdue transmission upgrades and rolling out over 500,000 Cheaper Home Batteries are just some of the things we’re doing to deliver the power Australia needs, keeping the lights on while putting downward pressure on energy costs,” Bowen said.

“There is more work to do and AEMO is clear we need to keep building, but this report shows the pipeline is strong and reliability is improving.”

That work “to do” list is a long one, not least because of the prospect that a change in government in Victoria in the November elections or in NSW four months later could place major transmission projects in doubt, among others.

A Coalition government in Victoria, for instance, would seek to scrap the VNI West transmission line now planned by Labor. A similar change of government in NSW – a less likely outcome, according to recent polls – would also see throw that state’s largest renewable energy zone – in New England – into doubt.

AEMO identifies VNI West as among “actionable” projects, based on its 2026 grid blueprint, the Integrated System Plan. Similarly, ESOO counts the New England REZ Network Infrastructure Project among the projects within its Retailer Reliability Obligation (RRO) framework.

All up, the assessment used for RRO purposes includes about 26 GW of anticipated projects. “Their inclusion means no forecast reliability gaps are identified that would require AEMO to request the [Australian Energy Regulator] to consider making a reliability instrument,” the report said.

It also retained its assumption from the 2025 ESOO report that the giant Snowy 2.0 pumped hydro project would come online from the end of 2028. That assessment comes even as the government awaits a long-delayed cost review of the scheme which could also include further delays.

Consumer energy resources are likely to play a key role in serving demand in the near term and beyond, the ESOO report noted.

“Consumers are continuing to invest in their own electricity supply through distributed PV systems and reducing their energy use through energy efficiency improvements,” it said.

“Investments in PV systems continue to be a primary driver ofreductions in the operational demand from residential consumers, and particularly of lower minimum demand outcomes
across the NEM,” it said.

The rise of storage – particularly on the home front – has been one of the big changes over the past year, prompting calls to redesign the market.

“Since the start of the [government’s subsidy program], for every 1 megawatt of new rooftop PV capacity, around 2.5MW and almost 8MW-hours of consumer batteries have been installed,” the ESOO report said.

“If effectively coordinated (for example, under a virtual power plant [VPP] arrangement through a retailer or independent aggregator), then greater reductions in utility-scale investment needs may eventuate, as observed and quantified in the 2026 ISP,” it said.

However, “[t]he degree of VPP coordination is highly uncertain, with around 14% of consumer
batteries estimated to be under coordination in the NEM to date”, it said.

To join more than 29,000 others and get the latest clean energy news delivered straight to your inbox, for free, click here to subscribe to our free daily newsletter.

To support independent media, and combat AI slop, you can click here to make a one off donation or become a regular supporter of Renew Economy.

To support independent media, and help combat the spread of deliberate misinformation and disinformation about the energy transition, you can click here to make a one off donation or become a regular supporter of Renew Economy.