The Australian Energy Market Operator (AEMO) has outlined key urgent steps to secure the power grid as Australia transitions to renewables and more ageing coal fire plants close.
The AEMO’s 2025 Transition Plan for System Security, a key document that combines numerous other reports, reiterates its strategy is to ensure energy security is a high priority during the transition with closures of major assets like Eraring, scheduled as early as 2027.
It notes that assets aimed at adding system strength will not be operational in time for this retirement.
Options to handle Queenslands minimum system load, due as early as next year, were also unresolved.
The closure of coal fired power station at Yallourn in Victoria in 2028 was listed as in moderate readiness with ViGrid undertaking actions to mitigate the risks from interia deficit as well as overloading risks into Melbourne once it is closed.
The report from the market operator has detailed three key technologies that require investment ahead of the closure of baseload coal plants such as Eraring and Yallourn in the years to come.
AEMO suggests synchronous condensers fitted with flywheels will play a critical role, providing both “system strength and inertia”. Synchronous condensers mimic the grid-stabilising role of coal generators, either absorbing or supplying reactive power to regulate voltage.
The market operator also encourages investment in gas turbines fitted with clutches, enabling them to act as synchronous condensers, while grid-forming BESS (battery energy storage systems) will be increasingly important, providing “frequency control, voltage stability and some aspects of system strength”.
System strength and inertia solutions must be delivered in tandem, AEMO said, and investments are necessary sooner rather than later for various reasons.
“Many assets capable of providing system security services are progressing but have long lead times (five or more years) for approvals, procurement and installation,” the market operator said.
“Readiness is required for when coal generators commercially implement more flexible operating profiles such as going offline during the middle of the day or seasonally, which may occur many years before retirement.”
AEMO said the market must ultimately “decouple” reliance on coal generators for system security to ensure a sustainable grid for years to come.
CER
The market operator also acknowledged the increased role consumer energy resources (CER) but said greater stability measures are required to contain the rise of rooftop solar.
AEMO said it was monitoring minimum system load (MSL) conditions created by higher rooftop solar contributions, with the need to ensure “supply-demand balance across all elements of the power system”, while warning of the potential of emergency backstop situations.
“In the near term, if replacement sources of system security services are delivered on time, the system can continue to support higher contributions of rooftop solar, and emergency backstop capability, which pauses or restricts rooftop solar exports to the grid, will remain rare,” AEMO said.
“If delayed, costs and interventions (including the possibility of using emergency backstop mechanisms) are likely to rise.”
Market response
AEMO said industry and governments were “already acting to resolve risks”, including Transgrid progressing the procurement of new synchronous condensers to provide support once the Eraring coal-fired power station closes in 2027.
The market operator flagged that if synchronous condensers aren’t operational in time, there are circumstances where it could operationally intervene “30 per cent of the time, at significant cost to consumers, to avoid potential consequences of greater severity”.
The New South Wales power system could face “last-resort operational actions” as a result.
Queensland requires increased emergency distributed PV backstop capacity to support system security, while Victoria also requires synchronous condensers with the closure of the Yallourn power station coming in mid-2028.
“If gas generators need to be directed online to maintain system strength (in Victoria), adequate fuel supplies would be essential,” AEMO said.
AEMO’s Transition Plan for System Security clearly details the action points for each state and their respective utilities on page 9, while the market operator has indicated the 2026 edition of the report will include “greater detail on future system restart requirements, grid-forming inverter capability, and integration of CER”.
AEMO is also committed to working with international peers to future-proof the National Electricity Market, acknowledging the importance of coordinated action.
