AEMO’s heroic renewables call

There is a big caveat at the heart of the Australian Energy Market Operator’s latest declaration that reliability standards in the national electricity grid can be met. The big “if” is that all of the planned renewable energy projects currently on the drawing board will be delivered in full and on time.

AEMO says “continuing to increase the pace of new infrastructure delivery ahead of closures (of existing coal-fired generation) will be essential to meet both reliability and system security requirements, and avoid operability challenges associated with co-ordinating planned maintenance”. AEMO chief executive Daniel Westerman said that considering the large volume of generation requirements over the next decade, the timely delivery of new generation, storage and transmission, along with the operation of consumer energy resources to support reliability, remain “critical”.

Recent history underscores the heroic nature of AEMO’s call. According to the Clean Energy Council, for the second consecutive quarter in 2025 Australia saw weaker investment in new renewable energy and storage projects. The CEC said only 615MW ($520m) of new large-scale solar, and no new wind farms, reached financial closure in the second quarter, falling well short of the pace required to hit Australia’s 2030 renewable energy target.

The total amount of renewable energy generation financially committed in the first half of 2025 was 1.17GW – a long way short of the 6-7GW annual pace required to replace ageing coal and meet the nation’s 82 per cent renewable energy target.

Of these projects, no new wind farms were committed in the first half of 2025. Many of the projects that are under construction, such as Snowy 2.0, are behind schedule and over budget. And many of the projects that exist on paper, notably large-scale offshore wind developments, are unlikely ever to make it to reality.

The cost of major transmission infrastructure projects is blowing out and the new approach is to favour investment in residential-scale batteries and virtual grids. The complexity of this approach is yet to be fully appreciated by politicians or in the public mind.

But as coal-fired power plants career to closure, AEMO expects a 21 per cent increase in operational electricity consumption from 178 terawatt hours in 2024-25 to around 229TWh by 2034-35. AEMO says this forecast growth is predominantly driven by the rapid expansion of data centres, accelerating business electrification, and the broader inclusion of prospective industrial energy users.

To meet demand over the next five years, additional investment between 5.2GW and 10.1GW will be needed annually, often supported by government schemes. This will help offset the notified retirement of 11GW of predominantly coal power stations over the next 10 years, including Eraring, Bayswater and Vales Point (NSW), Yallourn (Victoria) and Callide B (Queensland). AEMO has effectively thrown the challenge to government to deliver on its big promises for renewable energy deployment. Taxpayers have a lot to worry about.

Discussions at the productivity roundtable have zeroed in on the net zero transition, and ways to fund it and clear the regulatory path. The latest idea is to revise the investment mandate for superannuation funds to enable them to invest in “social good” projects in energy and housing.

The danger is that as things get more desperate, the usual rules of probity, fiduciary obligation and fair process will quickly be pushed aside. Superannuation account holders, in particular, should be wary of the rules being changed to lessen the requirement for commercial returns.