Recently, the Australian Energy Market Operator (AEMO) released its 2025 System Security Transition Plan, highlighting that Australia’s National Electricity Market (NEM) is undergoing a fundamental transformation driven by coal-fired power plant retirements and the shift toward renewable energy, with solar photovoltaics and battery storage at the core of this transition. AEMO CEO Daniel Westerman described the plan as the “most comprehensive approach” to addressing system security and consumer needs during the transition period.
The report outlines an explosive growth trajectory for renewables: rooftop solar capacity is projected to increase from 25.1 GW in 2026 to 42.5 GW by 2036, while non-scheduled solar systems (ranging from 100 kW to 30 MW) are expected to grow from 1.9 GW to 4.8 GW over the same period. Westerman emphasized that Australian households and businesses are adopting distributed energy resources at a “world-leading pace,” driven by policy incentives, declining technology costs, and the desire for energy independence. Solar power, he noted, has become a cornerstone of Australia’s renewable energy strategy.
The visibility and predictability of distributed energy resources have become critical for grid stability. In response, battery storage equipped with grid-forming inverters has been identified as a key solution. Currently, the NEM has 10 operational grid-forming storage sites with a total capacity of 1,070 MW, with an additional 94 projects in the pipeline. This technology can provide essential services traditionally delivered by synchronous generators, such as synthetic inertia and system strength, thereby filling the functional gap left by retiring coal-fired power plants.
The retirement of coal-fired plants is intensifying the transition pressure. AEMO has identified eight critical transition points, including the planned retirement of the 1,680 MW Gladstone coal-fired power plant in 2029. Measures such as deploying synchronous condensers are being planned to ensure grid stability in Queensland. Meanwhile, embedded storage is projected to grow from 2.2 GW in 2026 to 9.8 GW by 2036. The coordination between embedded storage and solar requires more robust technical standards and regulatory mechanisms. AEMO is collaborating with service providers to enhance data quality for distributed energy resources and ensure inverter compliance.
Policy and technological innovations are being pursued simultaneously to address challenges. In November 2025, AEMO submitted a rule change request to the Energy Market Commission. The System Strength Impact Assessment Guidelines have already spurred the development of numerous grid-forming storage projects, with transmission service providers planning to contract over 8 GW of such capacity by 2034. To address the inadequacy of existing grid connection standards, the Grid-Forming Technology Access Standards Review is underway, with trial data set to inform future standards.
Industry experts believe this transition plan provides a clear roadmap for Australia’s energy transformation. With advancements in grid-forming technology and policy refinements, the NEM has the potential to become a global benchmark for high-penetration renewable energy integration. The success of technological breakthroughs and investment coordination will ultimately determine the pace of achieving its decarbonization goals.
