Australia’s transition to a predominantly renewable electricity system is expected to cost significantly more than previously forecast, with the Australian Energy Market Operator’s (AEMO) new draft Integrated System Plan revealing a revised estimate of $128 billion by 2050. The figure has risen by $3 billion since the last official assessment in mid-2024.
AEMO’s updated blueprint – the key national roadmap outlining how Australia will shift from coal to renewables while maintaining reliability and affordability – identifies several factors driving the increase. Chief among them are rising capital costs for large-scale infrastructure projects and a reassessment of how much rooftop solar will contribute to the future grid.
While higher construction costs would ordinarily mean higher electricity bills for consumers, the draft report projects that the total cost of new transmission infrastructure – the backbone of the national grid – will actually fall by half to $9 billion. The shift is mainly due to two developments: a reduction in the estimated kilometres of new power lines required, and a sharp cut in the assumed interest rate developers will pay, from 7% to 3%.
A major saving comes from scrapping a planned 750km high-voltage line connecting North Queensland renewable zones to a pumped-hydro project near Mackay. The Queensland government cancelled the hydro project after budget overruns, making the transmission line unnecessary. South Australia’s 126km Northern Transmission Project has also been removed from the plan, saving an additional $620 million.
Despite these savings, AEMO cautions that delays to transmission infrastructure threaten the economic benefits of the energy transition. Nationally significant projects – including Victoria’s Western Renewables Link, the Sydney Ring, and Queensland’s CopperString development – are all running years behind schedule. AEMO CEO Daniel Westerman warned that “slower progress will erode benefits to consumers and present risks to reliability”.
The report also reflects shifts in state and federal policy. Due to changes introduced by Queensland’s new government, coal-fired power stations in the state – the youngest coal fleet in the National Electricity Market – will remain online longer than previously assumed. Even so, two-thirds of Australia’s coal capacity is expected to retire within the next decade, requiring billions in new grid-stability equipment to replace the “synchronous generation’’ coal plants provide.
Households are expected to play a major role in the transition, with AEMO forecasting $50 billion in private spending on rooftop solar, home batteries and electric vehicles by 2050 – a cost not included in the $128 billion estimate.
Despite the rising price tag, the draft plan maintains that Australia still stands to gain a net economic benefit of $24 billion, although that figure is down from $30 billion last year. To help households manage rising prices, AEMO and energy experts encourage consumers to shop around for cheaper plans, consider home battery rebates, improve insulation, and explore off-peak energy use.
