The Australian Energy Market Operator (AEMO) has released the 2025 Draft ISP Methodology and has sought public feedback on the document to inform its approach to modelling and cost benefit analysis. 

AEMO has engaged CSIRO, supported by Climateworks, to conduct multi-sector modelling to quantify the dynamic influences that would shape electricity demand under different emissions reduction scenarios for this and previous Integrated System Plans (ISP). The recommendations in this submission draw on insights from that process and will contribute to a robust and optimised ISP Methodology. 

Rapid decarbonisation of the electricity and energy system is essential for Australia to meet its obligations under the Paris Agreement. Electricity generation is the nation’s largest source of greenhouse gas emissions. Adopting renewables will reduce emissions by approximately one-third and have powerful flow-on effects for other sectors of the economy.

This transformation is complex. It requires forecasting and planning that considers evolving energy demand, generation, transmission and storage technologies, changing market and regulatory conditions, and emerging opportunities in renewable energy and resource exports. AEMO must ensure that the electricity supply supports increasingly ambitious jurisdictional emissions reduction targets while remaining reliable, secure, safe and affordable.

In March 2024, the Energy and Climate Change Ministerial Council (ECMC) recognised AEMO’s evolving role and directed it to play a more active part in guiding the energy transformation [PDF 0.7mb]. Climateworks supports this approach, and the recommendations in this submission will help facilitate that shift.

The energy system in Climateworks’ 1.5-degree aligned decarbonisation scenario

In 2023, Climateworks published least-cost emissions reduction pathways for Australia. Our report shows that to align with the Paris Agreement target of limiting global warming to 1.5°C, Australia reduces emissions 68 per cent below 2005 levels by 2030 and reaches net zero before 2040.

In our 1.5oC-aligned scenario, renewables make up 88 per cent of total electricity generation in the National Electricity Market (NEM) by 2030 and close to 100 per cent by 2034. Clean electricity generation and storage capacity would expand from 55 GW today to around 151 GW by 2030 and 398 GW by 2050. All coal-fired power generation would cease by 2035, and gas-powered electricity generation would reduce by 13 per cent by 2030 and 80 per cent by 2050. 

Submission summary 

Climateworks suggests AEMO consider the following recommendations as they develop the  ISP Methodology. The submission body includes specific details on each point.

Climateworks recommends AEMO:

  • Formally request that the Australian Energy Regulator (AER) revise AEMO’s role in system forecasting and planning from responding to trends and transformations to providing evidence that enables governments and energy market operators to shape them in a way that will benefit Australians.
  • Ensure the ISP Methodology plans for broader analysis across all modelled scenarios to enable the ISP to embed robust contingency planning.
  • Include support for timely updates and data services in the ISP Methodology to enhance planning planning and policy responses to uncertainty and rapid change.  
  • Formally request that the ECMC direct the Australian Energy Market Commission (AEMC) to incorporate the energy impacts of industrial decarbonisation and green export targets into the Emissions Target Statement to account for those policies in power system planning and forecasting. 
  • Work with government agencies to conduct place-based modelling to inform the design of an energy system that will enable Australia to become a ‘renewable energy superpower’, providing industrial actors with local forecasting data and optimal infrastructure planning for supply, storage, transmission and demand-side solutions.
  • Provide energy users with more information to help them plan investments effectively, including opportunities for cost reductions based on time, day, season and location factors.
  • Incorporate gas phase-out analysis, including modelling the orderly replacement of gas infrastructure with renewable alternatives.

More detail on these recommendations can be found in the submission [PDF 0.4mb].