AEMO’s draft 2022 integrated system plan shows Australia is set to cut coal-fired power by 2043, meaning SA needs $1bn for powerlines in the South-East

Australia’s energy market is heading towards cutting out coal-fired power in about 20 years – and it means about $1bn will be needed to link up parts of SA.

Massive investment in energy projects – including more than $1bn in South Australia’s South-East – will take place in the next two decades as the national electricity market heads toward coal-fired power closing by 2043, a new report says.

Extensive consultation with industry has led the Australian Energy Market Operator to propose a faster transformation of the power system than expected just two years ago.

“Investment confidence will be important to delivering benefits to consumers,” AEMO chief executive Daniel Westerman says in a draft report published on Friday.

The report, called the integrated system plan, is the formal guide to government and industry “on the best investments to supply affordable and reliable electricity”.

AEMO says coal plants are closing two to three times faster than anticipated but at the same time electricity use will double.

Hazelwood coal-fired power station in Victoria was demolished in 2020. It will not be the last to go.

This will require a nine-fold increase in grid-scale wind and solar farms, a fivefold increase in rooftop solar, three times as much storage from batteries and other technologies and 10,000km of new transmission lines.

The transmission lines will cost about $12.5bn but will deliver $29bn in net market benefits, equivalent to 2.5 times the investment costs, AEMO estimates.

In SA’s South-East, the plan expects about $57m being spent on near-term upgrades and then $949m to increase capacity on transmission to Tailem Bend and Tungkillo by 2035 to accommodate more wind and solar farms.

This is in addition to the $2.3bn Project EnergyConnect link to NSW committed to by transmission companies ElectraNet and Transgrid.

AEMO expects 15 gigawatts of new grid-scale renewables to be built in SA by 2050.

The draft 2022 integrated system plan considers four scenarios – slow change, progressive change, step change and hydrogen superpower – modelled with different inputs.

The step change of consumer-led, rapid transformation is the most likely.

“In this scenario, the national electricity market will operate without coal generation by 2043,” Mr Westerman said.

“This requires a substantial increase in battery and pumped hydro storage, hydrogen or gas-fired generation for peak demand, all complemented by a market that incentivises energy users to adjust demand based on system conditions.”

It was essential consumers and communities be engaged and consulted on the extraordinary investment in projects or they will risk being delayed and more expensive, he said.

The outlook would be even more bullish for renewables if Australia goes down the path of becoming a hydrogen superpower, exporting the fuel.

The plan warns risks include project delays, insufficient energy storage for long-duration supply when solar and wind output is low and even faster coal closure.

Across the national market, it anticipates renewable generation will increase from 28 per cent in 2020-21, to 79 per cent by 2030 and 97 per cent by 2050.

The draft plan is open for public consultation until February 11, with a final plan due to be published by June 30.