The highly-anticipated energy market plan for 2026 has been released and highlights how strong a role consumers are playing.
The Australian Energy Market Operator (AEMO), released its 2026 Integrated System Plan (ISP) on Thursday and notes that it is ordinary Australians with rooftop and batteries who are “in many ways” leading the energy transition.
Surging adoption of home batteries – a key consumer energy resource (CER) – has shifted the ISP narrative, even since AEMO released its draft ISP in December 2025.
While the draft ISP suggested 27 gigawatts (GW) of home batteries would be installed by 2050 under a ‘Step Change’ scenario*, the final ISP believes a 35GW home battery fleet can be expected by the same date.
“Earlier, few households may have thought of what lay behind the three-point plugs, or even how much electricity they used,” the ISP states. “Now, there is everyday engagement on how they source electricity and big changes to how, and how much, they use it.”
By 2050, AEMO expects around two-thirds of the dwellings with solar to be fitted with battery storage, and over half of these to be participating in a virtual power plant.
Green future
The report also confirms the progress of the energy transition to renewables, the next steps and highlights that this will have major cost advantages for consumers.
The 2026 ISP reaffirms that renewable energy, connected by transmission and distribution, firmed with storage and backed up by gas, presents the least-cost way to supply secure and reliable electricity to consumers through to 2050, as coal plants retire and while meeting government policies,” it notes in the summary
It notes that renewable energy in the NEM has tripled from a decade ago and was about 45 per cent of energy in the market in 2025.
“Under this least-cost path, renewable energy would achieve the 82 per cent national target by 2030, and deliver 98 per cent by 2050,” it said.
“By then, the ODP would see almost 120 gigawatts (GW) of utility-scale wind and solar (about five times the current level), and almost 50 GW of utility-scale storage and hydro. New gas supply chain assets would be needed to support 17 GW of flexible gas-powered generation.
“To bring this power to industrial demand centres and across cities, the existing 44,000 km transmission network would need to expand by 6,000 km. Most of the NEM’s remaining coal fleet would withdraw by 2038, with all to withdraw by 2049.”
Rooftop solar continues to shine
The National Electricity Market’s (NEM) rooftop solar capacity came down from 25GW in AEMO’s draft ISP to 20GW in the final iteration. Despite this, the market operator expects rooftop solar to continue its ascent under the Step Change scenario, with 36 per cent of suitable homes in NEM regions having rooftop solar today increasing to 47 per cent in 2035 and 56 per cent in 2050.
This would be driven by “ever-falling costs”.
“At that time, with many more dwellings, rooftop and small-scale solar capacity would be 87GW,” AEMO said.
AEMO highlighted how rooftop solar overtook grid-scale solar (11 per cent), wind power (15 per cent) and hydro (5 per cent) in electricity production in the first quarter of 2026, comprising 16 per cent of NEM supply.
The rise of CER is a cost-reducing factor for the optimal development path (ODP), which represents the lowest-cost way of reaching net zero by 2050. If CER adoption continues as it does, it would lead to lower grid-scale investment, AEMO believes.
“Households with solar and battery systems are often able to both meet their own needs and export to the grid during the evening peak,” AEMO said. “This reduces average evening peak grid demand by about 1 kilowatt (kW) per household, compared to solar-only households.”
AEMO said this would reduce wholesale energy prices in peak demand periods and create flow-on benefits for all NEM consumers.
Other inclusions
The net market benefits from transmission rose from $24 billion in the draft 2026 ISP to $28 billion in the final ISP, which maintains its projection that 6000km of transmission would need to be added to the NEM’s existing 44,000km network to support the ODP.
The 2026 ISP factors in distribution development for the first time, with $600 million of distribution network investment needed to meet the ODP. This includes $383 million to connect grid-scale generation and storage within distribution networks, and $214 million to support CER network refinements.
System security costs have also been added for the first time, amounting to $3 billion through to 2050. This relates to technologies needed to stabilise the grid as coal-fired generation retires, such as synchronous condensers fitted with flywheels, and grid-forming BESS that can provide frequency control, voltage stability and system strength services.
Under the Step Change scenario, the ODP requires $106 billion of investment to 2050 across grid-scale, generation, storage, firming and network infrastructure.
Work to do
Endeavour Energy’s General Manager Future Grid and Asset Management, Colin Crisafulli said the ISP got the big picture right, but had more work to do in integrating the distribution level planning.
“The ISP confirms something we see on our network every day. The energy transition isn’t just happening on big transmission lines in the bush, it’s happening on suburban rooftops and in garages across Western Sydney and the Illawarra,” Crisafulli said.
“It’s great to see that AEMO is planning the whole national system around the assumption that customers will be active participants, not passive consumers. That’s the future grid we’re building, one that turns millions of solar panels and batteries into a resource that benefits everyone.”
The company said the ISP’s focus on $6 billion of transmission investment delivering an estimated $30 billion in consumer benefits, now needed to be matched by equal attention to the distribution network that supports every customer across NSW.
“Our Distribution System Plan is the first time we have worked with peer networks, Ausgrid and Essential Energy to deliver NSW-wide view, with independent, postcode-level modelling. It shows smarter use of the existing network could unlock $2 billion to $4.3 billion in value, buy five years of breathing room on major transmission builds, and defer expensive local upgrades by up to 15 years.”
Crisafulli said the ISP’s forecast of demand nearly doubling was already a reality on Endeavour Energy’s network: “The ISP plans for demand to nearly double nationally by 2050. We are living that now – Greater Western Sydney is Australia’s fastest-growing economy with more than 20,000 new customer connections a year, a new international airport, the first new city in Australia in 100 years, and growing industrial, and high energy user demand.”
“Our job is to invest ahead of growth so the network can enable it as efficiently as possible. Stretching the existing network through smarter coordination and building early where genuine growth demands it are two sides of the same job: keeping costs down for customers while keeping the lights on through the biggest change since electrification began.”
*Step Change is the likeliest of three scenarios AEMO has published as part of its 2026 ISP (46 per cent probability), with Slower Growth and Acceleration Transition (both 27 per cent probability) the other two scenarios. Step Change reflects an energy transition consistent with limiting global temperature rise to less than 2°C – higher than the 1.5°C objective.
