Australia's AEMO Draft 2026 ISP: Coal Until 2049 as $128b Grid Overhaul Backs Solar and Batteries

Australia’s energy market operator has released a sweeping new roadmap for the electricity grid that locks in coal-fired power plants until 2049, even as it doubles down on massive new investment in solar, batteries and transmission to hit net zero targets.

On 10 December 2025, the Australian Energy Market Operator (AEMO) published its Draft 2026 Integrated System Plan (ISP) – a 25‑year blueprint for the National Electricity Market (NEM) that will shape how homes and businesses are powered through to mid‑century. ^[1]

The draft plan recalibrates Australia’s transition in several striking ways:

Total grid capacity must roughly triple by 2050
The cost of the transition is now put at $128 billion , up from the 2024 ISP
Forecasts for new wind farms and long transmission lines are sharply cut
Solar, batteries and household “bring‑your‑own power” take center stage
Coal plants stay in the system longer, with all not expected to retire until 2049

Below is a detailed breakdown of what changed, why it matters, and how today’s announcements are being framed across the media and political landscape.

What is the Draft 2026 Integrated System Plan?

The ISP is AEMO’s flagship planning document – a detailed, model-heavy roadmap that identifies the “optimal development path” (ODP) of generation, storage and networks needed to keep the lights on, meet government climate targets and do it all at least cost for consumers. ^[2]

The Draft 2026 ISP , released on 10 December 2025, draws on:

More than 18 months of consultation
Thousands of modeled system development pathways
Updated inputs for technology costs, demand growth, state and federal policy, and community attitudes to new infrastructure ^[3]

AEMO again finds that its “Step Change” scenario – a rapid but orderly transition to renewables consistent with net‑zero by 2050 – is the most likely future and the basis for the least‑cost pathway. ^[4]

A Grid That Must Triple in Capacity and Nearly Double in Demand

One of the starkest messages from today’s documents is just how much bigger the electricity system must become.

According to the draft ISP and independent summaries, the NEM’s total generation and storage capacity :

It sits at roughly 92 GW today
Must climb to about 190 GW by 2035
Reaches around 297 GW by 2050 – more than a three‑fold increase on today’s system ^[5]

At the same time, electricity consumption in the main grid:

Is about 205 TWh (terawatt hours) today
Is forecast to rise to 389 TWh by 2050 , driven by:
- Electrification of transport
- Industrial fuel‑switching from gas to electricity
- Rapid growth in data centers and new electricity‑intensive industries ^[6]

In short: AEMO is telling governments and investors that the grid has to become much bigger, much cleaner and much smarter, all at once .

Wind Pullback, Solar and Batteries Surging – and Less New Transmission

Perhaps the biggest structural change in the Draft 2026 ISP is the rebalancing between wind, solar, storage and long‑distance transmission lines .

Wind forecasts slashed

In its previous plan, AEMO assumed that Australia would need to build about 5 GW of wind capacity every year between 2024 and 2030 , a pace the country has never come close to reaching. ^[7]

Faced with high project costs, community opposition and a real-world pipeline where no new wind farm has started construction in 2025 , the operator has dramatically trimmed its expectations: ^[8]

Required wind capacity by 2030 is revised down from 42.6 GW to 26 GW
By 2050, wind rises to about 57 GW , down from earlier expectations near 69 GW ^[9]

That’s still a big buildout – but far less than previously assumed, acknowledging that “the market is moving faster than the systems plan” and in a different direction than earlier models projected. ^[10]

Solar and batteries pick up the slack

The new blueprint leans heavily on solar and batteries to close the gap:

Grid‑scale solar capacity is upgraded from a 2030 target of 21 GW to 32 GW , rising to 63 GW by 2050 ^[11]
Grid‑scale wind and solar combined reach 58 GW by 2030 and 120 GW by 2050 ^[12]
Utility‑scale storage (big batteries and pumped hydro) reaches 33–40 GW by 2050 , supported by the existing ~7 GW of hydro ^[13]

AEMO’s modeling reflects huge recent falls in the cost of battery systems (some estimates put grid‑scale lithium‑ion prices down by almost 45% in the last year alone), and ongoing declines in solar module prices. ^[14]

Less steel in the ground for transmission

In its 2024 ISP, AEMO said the grid needed 10,000 km of new high‑voltage transmission lines by 2050. That figure is now cut to roughly 6,000 km , thanks to: ^[15]

Completed lines already under construction
The cancellation of major projects, including the Pioneer-Burdekin pumped hydro scheme in Queensland, which removed the need for a 750 km line to connect it
A re‑assessment of how much battery storage and distributed energy can reduce the need for new long‑distance “poles and wires”

Transmission projects have also become two to three times more expensive to build in some cases, making them harder to justify when cheaper batteries can solve similar reliability problems closer to load. ^[16]

Controversial backbone projects like VNI West and HumeLink remain in the plan, but AEMO is clearly signaling a leaner, more targeted transmission build , with batteries and smarter distribution networks doing more of the heavy lifting. ^[17]

Coal’s Lifeline to 2049 – and the Risk That It Fails Before Then

The headline grabbing number from the financial press is that coal‑fired power is now expected to survive in the NEM until 2049 , a roughly 12‑year extension compared with the “coal cliff” implied in the 2024 plan. ^[18]

Several factors sit behind this shift:

A change of government in Queensland and the state’s “coal‑keeper” policy settings, which encourages its relatively young coal fleet to keep running well into the 2040s
Slower‑than‑hoped construction of new wind and solar projects, dragging out the timing of coal closures in AEMO’s modeling
A growing focus on system strength and reliability services, which coal plants historically provided, and which batteries and inverters are only now beginning to replace at scale ^[19]

Under the Step Change scenario, AEMO still expects:

Two‑thirds of remaining coal capacity to retire by 2035
The last coal units to exit by 2049 , after operating more flexibly – including “two‑shifting” (shutting during the day when solar is abundant and restarting in evening peaks) and seasonal operation in summer and winter only ^[20]

Yet the ISP itself sounds increasingly skeptic about coal’s real‑world resilience. AEMO’s modeling suggests that as aging units push deeper into the 2030s:

Full unplanned coal plant outages could occur around 7% of the time
Partial loss of capacity could occur another 17% of the time
Meaning coal plants may be fully available only about three‑quarters of the time in that period ^[21]

The operator even warns that coal retirements may happen faster than these forecasts , given rising maintenance costs, fuel supply issues and intense competition from renewables in the wholesale market. ^[22]

So while some media outlets have seized on “coal until 2049” as a sign of retreat from decarbonization, AEMO’s own language points to coal as a risky crutch – not a comfortable long‑term solution .

Households and Small Businesses Move to the Center of the Energy System

Across today’s coverage, one theme comes through clearly: the future grid is as much about rooftops, driveways and distribution networks as it is about big power stations.

AEMO now expects consumers to invest in:

87 GW of rooftop solar by 2050 (roughly four times today’s level)
27 GW of behind‑the‑meter batteries in homes and businesses
Around 9 GW of storage in electric vehicles (EVs) , with about 80% of electric vehicles by 2050 ^[23]

That consumer energy resource (CER) fleet will be enormous. AEMO estimates:

Households and small firms could supply about 116 TWh of their own energy in 2050 , around 30% of total demand
Household grid demand could fall from 33 TWh today to around 20 TWh , as homes become more efficient and self-supplied with rooftop solar, batteries and EV charging ^[24]

Distribution networks – the lower‑voltage “last mile” of the grid – also get more attention than ever before in this ISP. AEMO finds that:

Smart voltage management and low‑cost upgrades could unlock up to 4 GW of latent CER capacity
Doing so could avoid about $7.2 billion in extra grid‑scale storage investment
An additional 2 GW of grid‑scale generation and storage could be hosted within the distribution network itself ^[25]

Consumer advocates quoted in coverage today warn that while this is good news for efficiency, it raises acute questions of fairness: if more affluent households can go solar‑and‑battery heavy, who is left paying for the shared poles, wires and backup generation ? They argue that tariffs and cost‑allocation will need careful redesign so vulnerable customers are not left subsidizing everyone else’s transition. ^[26]

The $128 Billion Price Tag – and the Promise of Net Benefits

The number that will drive headlines and political talking points is the revised cost of delivering the ODP.

According to AEMO’s draft and supporting analyses:

The present‑value capital cost of all utility‑scale generation, storage, firming, transmission and distribution needed to 2050 is about $128 billion in today’s dollars under the Step Change pathway ^[27]
That’s around 2.8% higher – or roughly $3 billion more – than the estimate in the 2024 ISP ^[28]

Within that total, transmission investment accounts for only around $9 billion , but delivers: ^[29]

Roughly $22 billion in avoided system costs
About $2 billion in valued emissions reductions
A total net market benefit of about $24 billion

Allowing for delays, AEMO also models a more pessimistic “constrained delivery” case where:

Projects are delivered slowly due to planning, social license and supply chain issues
The net benefits fall to around $17 billion
Total costs to consumers could be up to 30% higher than under the Step Change schedule ^[30]

Importantly, the $128 billion figure excludes about $50 billion in private consumer spending on rooftop solar, home batteries and EVs , which AEMO expects households and small businesses to shoulder directly. ^[31]

Despite the bigger headline cost, AEMO and several analysts stress that the plan still lowers overall energy system costs compared with a slower or fossil-heavy transition , because:

Renewables and storage continue to get cheaper
Coal plants become more expensive and less reliable as they age
Gas is used more sparingly, mainly as flexible backup ^[32]

Targets at Risk: 82% Renewables by 2030 vs a 75% “Constrained” Future

The federal government’s goal is for 82% of electricity in the NEM to come from renewables by 2030 . AEMO’s Step Change pathway still shows that target as achievable – but only if new projects and transmission lines are delivered at an accelerated pace. ^[33]

For the first time, however, AEMO has modeled a “Constrained Delivery” scenario , reflecting hard‑won experience:

If approvals, community consent and supply chains slow projects down, renewables may reach only about 75% of generation by 2030
That would still be a big jump from today, but well short of the 82% target – and closer to some private sector forecasts in the 60–70% range ^[34]

This new scenario is one reason commentators argue that the private sector is running out of excuses : the ISP keeps showing renewables-plus-storage as the cheapest option, but AEMO is now much more explicit about the cost of delay. ^[35]

Coal vs. Renewables: How Different Outlets Are Framing the ISP

Media coverage of today’s release has split along familiar lines:

Financial and conservative outlets have focused on:
- Coal being projected to run until 2049
- The $128b price tag and an apparent “blowout” in net‑zero costs
- Tensions between federal decarbonization goals and state policies that keep coal plants online longer ^[36]
Energy specialists and renewables‑focused publications have emphasized:
- AEMO’s repeated finding that wind, solar and storage – backed by modest gas and new transmission – remain the lowest‑cost pathway
- Plunging battery costs and a huge pipeline of projects now queuing to connect
- The risk that political fights over coal and transmission delay projects and reduce consumer benefits ^[37]
Mainstream outlets such as the ABC and Guardian have zeroed in on:
- The need to roughly triple grid capacity by 2050
- Sharp cuts to wind and transmission forecasts and the rise of solar and batteries
- The growing responsibility on households and small businesses to invest in their own clean tech ^[38]

The result is a public narrative that can sound contradictory – “coal for decades” vs “renewables still cheapest” – but the ISP itself is clearer than the politics: Australia is heading toward a predominantly renewable grid, just not as fast or as smoothly as once hoped.

What Happens Next?

The Draft 2026 ISP is now open for consultation . Key milestones include:

Written submissions on the draft plan are invited until 13 February 2026
AEMO will hold a public webinar on 16 December 2025 to walk stakeholders through the modeling and recommendations
The final 2026 ISP is due in June 2026 , after AEMO has reviewed feedback and refined its modeling ^[39]

For governments, regulators and investors, the message is blunt:

The roadmap is getting clearer – renewables, storage, smarter networks and a shrinking but still‑present role for coal and gas
The cost of inaction or delay is rising – in higher bills, higher emissions and higher reliability risks
And households are no longer passive customers – they are becoming a core part of the power system, with policy needing to catch up quickly.

Key Numbers at a Glance

$128 billion – present‑value investment in grid‑scale generation, storage, transmission and distribution to 2050
$9 billion – transmission share of that investment, delivering $24 billion in net benefits
92 GW → 297 GW – total generation and storage capacity in the NEM today vs 2050
205 TWh → 389 TWh – grid electricity consumption today vs 2050
120 GW – required grid‑scale solar and wind by 2050
87 GW rooftop solar, 27 GW home batteries, 9 GW EV storage – expected consumer energy resources by 2050
All coal retired by 2049 , but increasingly unreliable well before then