The Australian Energy Market Operator (AEMO) has conducted a consultation on the narratives and parameters of the scenarios that will underpin the 2025 Inputs, Assumptions, Scenarios Report (IASR). 

In 2023, AEMO 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.

The recommendations in this submission draw on insights from that process and will contribute to a robust and optimised Integrated System Plan (ISP). 

The 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.

The adoption of renewables will reduce emissions by approximately one-third (CSIRO 2023) and will have powerful flow-on effects for other sectors of the economy.

However, the transformation is complex.

It requires forecasting and planning that considers evolving energy generation, transmission and storage technologies, changing market and regulatory conditions, and emerging opportunities in renewable energy and resource exports.

AEMO must also ensure the electricity supply contributes to increasingly ambitious jurisdictional emissions reduction targets and remains 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 (Commonwealth of Australia 2024).

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 a Paris-aligned least-cost pathway for limiting warming to 1.5°C reaches emissions reductions of 68 per cent below 2005 levels by 2030 and net zero before 2040.

In our 1.5^oC-aligned scenario, renewables make up 83 per cent of total electricity generation by 2030 and close to 100 per cent by 2050.

Clean electricity generation 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 generation would be reduced by 69 per cent by 2030 and 96 percent by 2050. 

Submission summary 

Climateworks suggests AEMO consider the following recommendations as they develop the  2025 IASR and prepare to deliver the 2026 ISP:

• integrate key findings from the Multi-sector energy modelling 2022: Methodology and results Final report into the 2025 IASR scenario parameters and narratives
  
• revise its 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
  
• expand the IASR multi-sector modelling to include an additional 1.5°C-aligned scenario or additional sensitivity analysis on the Green Energy Exports scenario
• expand IASR multi-sector modelling to include analysis of a broader range of sensitivities across all scenarios
  
• outline contingency pathways that offer alternate responses where there is low confidence in the pace and characteristics of change within scenarios
  
• broaden the scope of the IASR analysis, particularly for gas and consumer energy resources (CER), to fully align with the ECMC’s directive and intention
  
• design an energy system that will enable Australia to become a ‘renewable energy superpower’, including analysis to enable forecasting and planning supply, storage and transmission solutions for ‘regional ISPs’. 

Specific details on each of these recommendations can be found in the submission [PDF 0.4mb].