The Spill

Australia’s energy market draft roadmap

12 December 2025

Australia’s electricity market is transitioning. The pace is rapid, and the scale of change is large. Coal is retiring faster than expected, solar generation (at domestic and utility scale) is rapidly growing and more wind farm are planned.

Every two years, the Australian Energy Market Operator (AEMO) publishes its roadmap for the energy transition in the Integrated System Plan (ISP), plotting out the ‘optimal development path’. This means the pathway that is lowest cost and most resilient in setting out the size, place and timing of the NEM’s future assets.

The draft 2026 ISP has just been released for further market consultation. Hydro Tasmania welcomes the release which confirms that the least-cost path to deliver secure and reliable electricity supply is renewables, connected by transmission and distribution, firmed with storage and backed up by gas. 

Hydro Tasmania CEO Rachel Watson said the ISP confirmed that long duration storage is essential, with hydro and pumped hydro central to Australia’s grid reliability. 

Ms Watson said the ISP had also identified that extended renewable lulls (when the wind isn’t blowing and the sun isn’t shining) are a reality and harder to predict in duration and intensity. 

“We are planning for this climate variability and modelling for various scenarios. Tasmania’s deep hydro storages are uniquely suited to help firm Australia’s grid through these lulls over days, weeks and seasons,” Ms Watson said. 

Ms Watson said it was pleasing to see Marinus Link and North West Transmission Development identified as playing an essential role in unlocking Tasmania’s potential in firming for the National Electricity Market (NEM). 

“Project Marinus will also allow us to strategically manage water levels in our dams.  We can import surplus low-cost solar and wind from the mainland and export when it benefits Tasmania.” 

Hydro Tasmania is continuing to invest in strengthening its existing deep storage and flexible hydropower assets, while also looking to the future with proposals for the redevelopment of Tarraleah and pumped hydro at Lake Cethana. 

These projects will bring benefits to Tasmania through jobs, local investment, growing industries and greater revenue potential returned as dividends to support the Tasmanian community.

Together, these projects will see Tasmania play an important role in Australia’s decarbonisation ambitions and helping to keep electricity supply reliable for consumers.

What’s on the horizon for Australia’s grid?

• Two-thirds of the remaining coal fleet could retire by 2035

• 120GW of grid-scale wind and solar is needed to replace coal

• 40 GW of dispatchable grid-scale storage and hydro contributes to the optimal development path by 2050
  • 27 GW of grid-scale batteries
  • 6 GW of pumped hydro storage
  • 7 GW already provided by the NEM’s existing hydropower stations

• Around 6,000 km of new transmission needed by 2050, a 13% extension of the current 44,000 km network.

Significant momentum is already underway in delivering investments
in generation, storage and transmission, but challenges remain in
delivering this essential infrastructure at the pace required.
Slower progress will erode benefits to consumers, and present risks to reliability.

Daniel Westerman, CEO of AEMO

You can access the draft ISP overview and full document here.

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