The Australian Energy Market Operator (AEMO) has released a Draft Electricity Network Options Report. AEMO has sought feedback on the report which will be used to develop electricity network projections for the Integrated System Plan.

Since 2021, 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 other Climateworks research and analysis – and will contribute to a robust and optimised Electricity Network Options Report. 

Rapidly decarbonising its electricity and energy system is essential for Australia to meet its obligations under the Paris Agreement. As the largest source of greenhouse gas emissions in Australia, electricity generation represents a critical intervention point. The use of fossil fuels to produce electricity and stationary energy for commercial and industrial purposes accounts for 54.9 per cent of Australia’s total emissions (CSIRO 2023). Transitioning to renewable energy will not only reduce these emissions directly but also create powerful ripple effects that drive decarbonisation across other economic sectors.

However, the transformation is complex. It requires forecasting and planning that considers evolving energy generation, transmission and storage technologies, changing market and regulatory conditions, and emerging opportunities in renewable energy and resource exports. The next Integrated System Plan (ISP) will be the first for which AEMO must ensure that the electricity supply supports ambitious jurisdictional emissions reduction targets while remaining reliable, secure and affordable. Our submission aims to assist AEMO to do so more effectively.

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 that to align with the Paris Agreement target of limiting global warming to 1.5°C, Australia reduces emissions by 68 per cent below 2005 levels by 2030 and reaches net zero before 2040 (Climateworks Centre 2023). 

In our 1.5°C-aligned scenario, renewables make up 88 per cent of Australia’s total electricity generation by 2030 and close to 100 per cent by 2034. Clean electricity generation capacity would expand from 55 GW today to around 151 GW by 2030 and 398 GW by 2050. All coal-fired power generation would cease by 2035, and gas-powered generation would be reduced by 61 per cent by 2030, relative to 2024 levels, and near zero by 2050 (Climateworks Centre 2023). 

Submission summary 

The rapid transformation of Australia’s electricity system presents both opportunities and complex planning challenges. As electricity demand grows through electrification, while the grid simultaneously transitions to renewables, AEMO’s planning and forecasting will need to evolve to capture the full value of demand-side resources. 

Climateworks welcomes the increased focus on demand-side measures in the Draft Electricity Network Options Report and supports AEMO’s efforts to enhance demand-side considerations in the ISP by incorporating Distribution Network Service Provider (DNSP) data and proposing a statement of demand-side factors. These are important first steps in a broader reform process.

We also recognise there remain important opportunities to further enhance demand-side integration. To that end, Climateworks suggests AEMO consider the following recommendations as it develops the final 2025 Electricity Network Options Report and the 2026 ISP. The submission body includes specific details on each point. Climateworks recommends AEMO:

  • Increase focus on demand-side aspects within the Draft Electricity Network Options Report through additional analysis, building on the considerable improvements already made to ensure a more effective Integrated System Plan 2026 and successful transition to the future electricity system.
  • Call on the Energy and Climate Change Ministerial Council (ECMC) to accelerate effective integration of demand-side energy management and performance improvements, including optimising value from network assets and potentially reducing new network infrastructure. We recommend a comprehensive demand strategy across system planning; market reforms through the National Electricity Market wholesale market settings review (NEM review); more effective governance of demand-side measures and technologies; and alignment of wider policies driving new investment.
  • Further clarify how average distribution costs and geographic location of consumer energy resources (CER) are used to create the final Electricity Network Options Report. Even allowing for current data limitations, geographic cost variation provided by DNSPs is critical for identifying location-based opportunities and reflecting real-world cost differences.
  • Clarify assumptions about where electricity demand growth will occur within each modelled region. This would integrate with DNSP data and support the development of a statement on demand-side factors. Clear locational assumptions are essential for identifying cost-effective network and non-network solutions, especially given the significant expected growth in electricity demand. 
  • Provide energy users and investors with additional information to help them plan investments to optimise outcomes, including opportunities for cost reductions based on shaping demand activities around time, day, season and location factors. This would extend the demand-side factors statement to a Demand-side Statement of opportunities. 
  • Outline contingency pathways that offer alternate responses where there is low confidence in the pace or characteristics of change within modelled scenarios.
  • Consider how the Electricity Network Options Report could be used as part of a broader effort to design an energy system that will enable Australia to become a ‘renewable energy superpower’, including strengthening analysis that could enable ‘regional ISPs’ and improve understanding of distribution network opportunities.

Read more about our recommendations in the submission [PDF 0.3mb].