The Australian Energy Market Operator (AEMO) has conducted a consultation on the ISP methodology which will inform the cost-benefit and modelling approaches used to prepare the 2026 Integrated System Plan. 

In 2023, and in preparation for the forthcoming 2026 ISP, 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.

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

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 directly reduce national 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, increasing industrial, transport and building demand 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°C-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 1.5oC-aligned scenario, renewables make up 90 per cent of total electricity generation in the NEM by 2030 and close to 100 per cent by 2034.

Clean electricity generation capacity would expand from around 62 GW in 2024 to around 116 GW by 2030 and 298 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 per cent by 2050 (Climateworks Centre 2023).

To achieve net zero, renewables, electrification and energy-efficiency measures underpin buildings, industry and transportation decarbonisation.  

Submission summary 

Climateworks suggests AEMO consider the following recommendations as they develop the methodology for the 2026 ISP.

The full submission includes specific details on each point.

Climateworks recommends AEMO:

  • integrate key findings from the Multi-sector energy modelling 2022: Methodology and results Final report on making modelling more robust into the current ISP methodology.
  • 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 its multi-sector modelling to include an additional 1.5°C-aligned scenario or additional sensitivity analysis on its ‘Green Energy Exports’ scenario
  • expand multi-sector modelling to analyse 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 ISP methodology, 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’.