Reality for ALP as coal will be needed until 2049, says AEMO report
Coal will be needed as an on-demand source to stabilise the energy grid until 2049 in an extraordinary 12-year-long extension threatening Labor’s 2050 net-zero target.
Coal will be needed to stabilise the energy grid until 2049 under an extraordinary 12-year extension of the fossil fuel that threatens Labor’s net-zero target, as the green-energy revolution leads to a 100 per cent explosion in power transmission costs.
In a 115-page document that mentions “net zero” just once, the Australian Energy Market Operator has warned that wind is increasingly becoming too expensive and there is a risk the nation is overbuilding transmission lines through rural and regional Australia.
The AEMO 2026 draft Integrated System Plan, to be released on Wednesday, declares that coal will remain in the grid until the penultimate year of the nation’s path to net-zero emissions by 2050, moving from a 24-hour provider of power to switching on and off to fill gaps in a system that will be dominated by renewables.
AEMO’s warning of rising transmission costs will stoke concerns that it will flow to households and businesses’ power bills, despite $20bn in Labor’s Powering the Nation Fund that is supposed to offset price hikes.
Energy Minister Chris Bowen faces trying to convince developing countries they should sign up to more stringent emissions targets in his role as COP president of negotiations for next year’s UN climate change summit, while overseeing a power system at home that will need coal more than a decade longer than AEMO last predicted.
Despite the radical shifts in AEMO’s projections, Mr Bowen focused on the regulator’s projection of a further boom in home batteries and rooftop solar, rather than the coal forecasts in the ISP.
“Under the former Coalition government, 24 out of 28 coal-fired stations announced their closure – but the decade of Coalition energy chaos meant there was no plan for replacing this and modernising Australia’s grid,” he said. “AEMO has today confirmed Australian households are leading the charge with rooftop solar, batteries and electric vehicles – delivering a lower-cost power system for everyone.”
As the government prepares to release a major gas plan within a week amid rising questions about the reliability and cost of power under its net-zero policy, AEMO’s Optimal Development Path said grid-scale wind and solar capacity would need to rise from 23GW to 58GW by 2030, and double to 120GW by 2050, to replace coal. Additional gas and hydro-powered generation must be brought online, the market regulator said.
Amid fears that data centres powering the new AI economy will need more power than renewables can give, AEMO predicts that business use of electricity will rise by 90 per cent.
AEMO says Queensland’s policy shift to keep coal-fired power stations open until the 2040s has boosted the sector’s life expectancy by more than a decade compared with earlier modelling, which assumed the final unit would exit in 2037. Two-thirds of the remaining fleet is still expected to bow out by 2035, but the remaining plants will linger.
By the 2040s, coal’s role will shift from its traditional place as 24-hour baseload to a flexible, on-demand source used sparingly to stabilise the system during extended renewable shortfalls.
The ISP draws on modelling of more than 2000 potential investment combinations. It reaffirms the operator’s central view of the least-cost transition: “renewables firmed with storage, backed by gas and connected with upgraded networks”.
The extension of coal’s role in electricity generation will be welcomed in parts of the country and among industry groups that have long cautioned against a rapid coal exit, warning of price shocks and reliability risks if renewables fail to keep pace.
But the extended life of coal poses political challenges for a federal government facing mounting pressure over slow progress towards its 2030 climate goals. Australia remains one of the world’s largest per-capita emitters due to its entrenched reliance on coal and gas.
The market operator projects renewable energy could supply 82 per cent of national electricity demand by 2030 – a figure heavily dependent on timely completion of new transmission and generation projects. But numerous new solar and wind projects have been delayed or shelved due to local opposition, planning bottlenecks and spiralling capital costs, placing more pressure on the remaining coal-fired power plants to carry system stability through the decade.
Rising capital costs and supply-chain constraints have pushed developers more firmly toward solar rather than wind, a tilt that has implications for storage requirements given the daily generation profile of each technology.
Amid concerns that the build out of replacements is failing to keep pace with the closure of coal, AEMO last month sought a rule change that would require the operators of coal power stations to give a five-year notice period, up from the current 3½ years.
AEMO estimates the transition will require $128bn in annualised capital investment through to 2050 – about 3 per cent higher than its 2023 estimate – due to elevated infrastructure and financing costs.
AEMO’s modelling shows the reliability of the ageing coal fleet will deteriorate sharply. Between 2027 and 2035, units are expected to suffer full unplanned outages roughly 7 per cent of the time, with partial outages at 17 per cent.
Those levels of volatility will leave the grid vulnerable to price spikes if large outages coincide with heatwaves or cold snaps, a pattern that has already pushed wholesale prices sharply higher in recent years.
Officials argue those problems magnify the consequences of a slow renewables rollout.
Battery investment, meanwhile, is accelerating faster than AEMO had anticipated. Connection applications have jumped from 3GW in 2022 to 26GW today, though medium and long-duration storage remain critical to withstanding prolonged renewables lulls.
Transmission, always the most publicly controversial plank of the energy transition, looms larger in the draft plan. AEMO estimates about 6000km of new transmission lines will be required by 2050 – roughly a 13 per cent increase in the grid’s footprint. But rising land-use conflicts and cost blowouts have forced the operator to incorporate far more conservative assumptions around community acceptance.
Transmission cost estimates have risen by up to 100 per cent in real terms, and AEMO warns that unnecessary overbuilding remains a risk if emerging technologies such as virtual power plants come on line more quickly than expected. VPPs, which allow household batteries to operate collectively as a grid resource, could shave as much as $7.2bn from future storage needs, the operator said.
Yet enthusiasm among households remains uneven. While the federal government’s battery subsidy has proven popular among affluent homeowners able to absorb upfront costs, far fewer have opted into VPP schemes, limiting the ability to orchestrate distributed storage at meaningful scale.
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