As Australia moves towards a new energy future, the debate surrounding the transition continues.
The shift is being driven by the Integrated System Plan (ISP), international commitments, environmental and social pressures, government policy and the need to replace ageing energy infrastructure. Yet there are still major differences of opinion about how quickly the transition should occur and what it will ultimately deliver.
The debate covers many issues:
- Renewables versus fossil fuels
- Local versus overseas investment
- Government policy versus community expectations
- Short-term affordability versus long-term affordability and reliability
- Modelling versus reality
The last point is perhaps the most important. Have we accurately modelled the future energy system, or is there a risk that the reality will not match the plan?
This paper explores that question. It looks at whether the ISP has correctly accounted for the replacement of retiring baseload generation and the risks that could emerge if the transition does not proceed as planned.
What Is the ISP?
For those unfamiliar with it, the ISP is the Integrated System Plan. Developed by AEMO, it is Australia’s roadmap for transitioning from the current electricity system to one increasingly powered by renewable energy.
At its simplest, the ISP is designed to deliver an electricity system that is:
- Reliable
- Affordable
- Secure
- Increasingly renewable
That is the objective.
The question is whether the transition can be delivered without compromising the first three. Can Australia retire large amounts of coal generation and replace it with renewables, storage, transmission and firming quickly enough to keep the lights on?
If supply cannot reliably meet demand, electricity prices could rise significantly. So could the pressure on governments to keep older coal plants operating for longer.
Renewable energy can play a central role in powering the NEM, but wind and solar alone cannot guarantee supply at all times. They need to be supported by storage and other forms of firming, including gas, as well as a stronger and more flexible electricity network.
The good news is that these things are being built, and Australia is moving rapidly. The challenge is whether they can all be delivered at the right scale and at the right time.
Ultimately, the fear that the lights could go out is not primarily about whether a renewable electricity system can work. It is about timing, coordination and execution.
Storage Is Being Built – But Can It Be Delivered Fast Enough?
Energy storage is often described as the silver bullet of the renewable transition. It will play a critical role in storing surplus renewable energy and releasing it when solar and wind generation fall.
Australia is already making significant progress.
While grid-scale batteries may appear to be arriving slowly, Australia has become the world’s third-largest utility-scale battery market, behind the United States and China. As of 2026, more than 7 to 9 GW of large-scale batteries are operating or in final commissioning across the National Electricity Market, with more than 30 to 40 GW in active development.
The batteries are coming.
However, the transition is not simply about building batteries. Storage only works effectively when it is connected to the right parts of the network and supported by sufficient transmission, system strength and other infrastructure.
This is where the real challenges begin.
Persistent Challenges = Persistent Risks
Construction Delays and Supply Chain Bottlenecks
The ISP is a carefully developed plan, but its success depends heavily on projects being delivered when they are needed.
Delays can create a serious problem if retiring coal generation disappears before its replacement infrastructure is ready.
Transmission Lines
Australia needs thousands of kilometres of new high-voltage transmission lines to connect renewable energy zones with consumers.
These projects are expensive and often take years to plan and build. Rising material costs, supply chain constraints, regulatory delays and complex approvals can all slow delivery.
Social Licence
Transmission lines, wind farms and other major energy projects often face strong opposition from regional landowners and local communities.
This creates an important tension: Australia needs new infrastructure, but communities understandably want a meaningful say in where and how that infrastructure is built.
Without stronger community engagement and more effective planning, social licence could continue to slow critical projects.
Major Projects
Large projects such as Snowy 2.0 demonstrate the difficulty of delivering major energy infrastructure on time and within budget.
When a project is delayed, the consequences extend beyond that individual project. Other parts of the system may have been relying on it to provide storage, capacity or reliability.
The Rapid Retirement of Coal
Over the next decade, approximately 13 GW of coal-fired generation is expected to leave the NEM, including major plants such as Yallourn in Victoria and Eraring in New South Wales.
This creates one of the transition’s biggest challenges: replacing coal capacity before it is needed.
The Reliability Gap
Ageing coal plants are becoming more expensive to maintain and increasingly prone to breakdowns, particularly during extreme weather.
Some generators may therefore want to close earlier than originally planned.
If a major coal plant retires before replacement transmission, renewable generation, batteries and pumped hydro are fully operational, a temporary gap in dispatchable supply could emerge.
That does not automatically mean blackouts, but it can create genuine reliability risks.
Demand Is Also Growing Faster
The transition is also being complicated by rapidly growing electricity demand.
Australia is electrifying transport, heating and industry while also experiencing strong growth in electricity-intensive data centres driven by AI and cloud computing.
Data-centre demand, in particular, is creating a significant new challenge because large amounts of electricity demand can emerge in concentrated locations and over relatively short timeframes.
The grid is therefore dealing with two moving targets at once:
- Large amounts of existing coal capacity are retiring.
- Electricity demand is growing in ways that were not previously expected.
Intermittency and System Strength
Coal and gas plants have traditionally provided more than electricity. Their large spinning turbines also help stabilise the grid’s frequency and voltage.
A renewable system needs alternative ways to provide these services.
Modern batteries equipped with grid-forming inverters, synchronous condensers and other technologies can increasingly perform this role. However, these capabilities need to be built and deployed as the system changes.
Periods of low wind and low solar generation—sometimes referred to as a dunkelflaute—also demonstrate why renewable energy needs storage, firming and sufficient dispatchable backup.
Without them, sudden changes in weather or major technical faults could place the system under significant pressure.
The Grid Was Built for a Different Energy System
Australia’s electricity network is one of the world’s longest linear grids, but it was largely designed for a different era.
The system was built around large, centralised power stations sending electricity in one direction towards major population centres.
The new system is far more complex.
Renewable generation is often located in remote areas, electricity increasingly flows in multiple directions, and batteries and distributed energy resources are changing the way the grid operates.
A large battery or renewable project cannot simply be connected wherever there is available land. The network itself must have sufficient capacity and system strength to support it.
Upgrading transmission infrastructure takes years of planning, approvals and construction.
This means the challenge is not simply building enough renewable generation and storage. It is also building the network needed to connect and operate it effectively.
The Rise of Rooftop Solar and Home Batteries
Australia has one of the highest rates of rooftop solar uptake in the world, and households are increasingly adding batteries to their homes.
Driven partly by government support, more than 600,000 home batteries are now installed across Australia.
This is generally positive for the energy transition. Home batteries can reduce pressure on the grid, store excess solar generation and help manage household electricity demand.
However, the rapid growth of household batteries is also changing the economics of large-scale storage.
More household storage can reduce the price differences that large grid batteries rely on to generate revenue. This can narrow commercial returns and make some large-scale battery investment decisions more difficult.
In other words, Australia needs both large-scale and small-scale storage—but the interaction between them needs to be better understood and managed.
Regulatory and Connection Red Tape
The rules of the NEM were largely developed around traditional coal and gas generators.
The modern system is very different.
Batteries, solar farms and wind farms operate differently and can respond to changes in the system in milliseconds. This requires more complex technical standards, connection studies and coordination between developers, network owners, regulators and AEMO.
Batteries are generally faster to build than major transmission projects, but they can still take considerable time to progress from an announced project to an operating asset.
Reducing unnecessary delays without compromising system security will be critical.
The Technical Evolution of Grid-Forming Batteries
Early grid batteries were largely grid-following. They could store and release energy, but they relied on the existing power system to maintain voltage and frequency.
As coal plants retire, this is no longer sufficient.
Modern batteries increasingly need to provide system strength and help stabilise the electricity system themselves.
This has led to the development of grid-forming inverters, which allow batteries to operate more like traditional power stations and support the stability of the grid.
The technology has matured significantly, with roughly 74% of Australia’s current battery pipeline now incorporating grid-forming capabilities.
This is a major step forward, but it also highlights how rapidly the technology and requirements of the energy system are changing.
Supply Chain and Global Competition
Australia also has to compete internationally for battery cells, specialised equipment and skilled engineering resources.
Global supply constraints, inflation and competition for capital can affect the cost and timing of Australian projects.
Strong government support for clean-energy investment in countries such as the United States and across Europe can also attract capital and equipment that might otherwise have been available to Australia.
This means Australia is not building its new energy system in isolation. It is competing in a global race for the equipment, skills and investment needed to deliver it.
The Outlook
The outlook is more encouraging than the public debate sometimes suggests.
According to AEMO’s recent Electricity Statement of Opportunities, the rapid deployment of large-scale batteries has helped push immediate reliability risks further into the 2030s.
This demonstrates that progress is being made.
The infrastructure required for the transition is being built, but it is also trying to catch up with a major structural change occurring across the entire energy system.
The key challenge is therefore not simply building more infrastructure. It is making sure that generation, storage, transmission, system-strength services and demand growth are all coordinated.
Summary and Conclusion
The central question is not whether a renewable electricity system can be reliable. It can. Wind, solar, batteries, pumped hydro and fast-start gas can work together to provide a reliable and increasingly low-emissions electricity system.
The real risk is execution.
Australia must successfully manage a complicated overlap between:
- Retiring coal-fired power stations
- Rapidly growing electricity demand
- New transmission infrastructure
- Renewable generation
- Large-scale and household batteries
- System strength and grid stability
- Project approvals, supply chains and community acceptance
If new infrastructure is delivered on time, coal can be progressively replaced without compromising reliability. If critical projects are delayed while major coal plants retire, the system could face periods where the margin between available supply and peak demand becomes uncomfortably small.
The lights do not need to go out. But keeping them on requires the transition to be delivered with discipline, coordination and a consistent long-term strategy.
The technologies are increasingly available. The investment is flowing. The real test now is whether Australia can execute the plan effectively enough to ensure that the right infrastructure is built in the right place and, most importantly, at the right time.