The 'fantasy' underpinning Australia's rosy power supply forecasts
By energy reporter Daniel Mercer
Posted about 11h agoFri 2 Oct 2026 at 3:51pm, updated about 10h agoFri 2 Oct 2026 at 5:06pm
Experts fear the way Australia's energy operator assesses future power reliability obscures problems.(ABC News)
In the chaos and complexity of energy in Australia, one topic has always cut through the noise: blackouts.
Or, more precisely, the need to avoid blackouts at seemingly any cost, so untenable are the political consequences.
It is for this reason that so much of Australia's energy planning goes towards making sure there is always enough capacity to keep the lights on.
"When people say, 'Oh, we've breached the reliability standard, therefore blackouts', the reliability standard that we have is incredibly, incredibly tight," Tristan Edis of Green Energy Markets says.
Powerlines are a much bigger source of outages than lack of energy.(ABC News: Keana Naughton)
To be exact, Australia's "reliability standard" prescribes that consumers should expect their electricity needs to be met 99.998 per cent of the time.
In other, albeit simplified, words, no more than 0.002 per cent — or 10 minutes — of their demand should go unserved across an entire year.
This does not include power lost because of outages on the poles-and-wires network, a much more common occurrence.
For more than two decades now, one document has been central to ensuring Australia's onerous reliability standards are maintained.
It's called the "electricity statement of opportunities" and it's handled by the body that runs the country's biggest electricity system — the Australian Energy Market Operator.
When guidance goes wrong
Dylan McConnell from the University of New South Wales says it's called a statement of opportunities for a reason.
He says it shows where there are likely to be supply gaps in the decade ahead, thereby signalling where new energy projects would be most needed.
"It says everything will be fine if we do these things," McConnell says.
"It's essentially supposed to provide guidance to the market on where reliability issues may emerge in the future.
"I guess it's to suggest where new projects would be valuable to ensure that system reliability is maintained."
The cost of building wind projects has ballooned in the past five years.(ABC News: Daniel Mercer)
There's just one problem, according to McConnell, Edis and several other respected energy market observers canvassed by the ABC.
The statement of opportunities is now counting on projects that may not be built on time.
Many, they say, may never be built at all.
And they warn that fundamental changes to the way the reliability assessment is carried out are hiding major problems with Australia's energy transition.
"At the moment, it's probably the case that we're downplaying some pretty significant risks and challenges ahead of us, and that has consequences," McConnell says.
Start of reliability gaps for committed developments only
Start of reliability gaps for committed developments only
Removing anticipated developments from the forecast, NEM regions will experience periods of unserved energy above the .002 per cent reliability threshold sooner.
NSW
2030
2029
QLD
2032
2029
VIC
2030
2030
SA
2031
2030
TAS
2033
Committed only |
Including anticipated |
Source:AEMO, Electricity Statement of Opportunities
Reliability gaps begin to appear from 2029 onwards
Reliability gaps begin to appear from 2029 onwards
Unserved energy, as a percentage of demand, in "committed" versus "committed and anticipated" assessments.
Committed
only
Committed
and anticipated
NSW
QLD
SA
TAS
VIC
Chart explorer. Use arrow keys ↑ ↓ ← → to navigate.
.000%.002%.004%.006%.008%.010%.012%
Meets standard
Does not meet standard
Source:AEMO, Electricity Statement of Opportunities
Among those consequences, he says, are higher wholesale energy costs in the event forecast generation and storage does not arrive in time or is simply not built.
Partly, he says this is a function of supply and demand.
If there's less supply than was forecast by the end of the decade, McConnell says prices will inevitably increase to reflect that scarcity.
Equally, he says the market operator will turn to emergency measures to ensure supply is sufficient.
These measures could include paying big energy users a premium to turn down or turn off their use at times of stress on the system.
Or it could be shelling out small fortunes to the operators of diesel-fired generators to provide critical back-up power.
Either way, McConnell says, the measures are not cheap.
One extreme to another
On top of this, he says governments themselves would step into the breach to stave off any shortfalls in supply.
The lever most likely to be pulled would be the extension of ageing coal-fired power plants such as Yallourn in Victoria and Eraring in New South Wales.
Powering down
Powering down
Australia's fleet of coal plants, for so long the backbone of the power system, is progressively due to retire in coming years.
Yallourn
2028
Eraring
2029
Gladstone
2029
Callide B
2031
Bayswater
2033
Vales Point B
2033
Loy Yang A
2035
Tarong
2037
Tarong North
2037
Callide C
2037
Mt Piper
2040
Kogan Creek
2042
Stanwell
2046
Loy Yang B
2047
Millmerran
2051
Present |
Scheduled closure year |
Closure dates as announced for the national electricity market.
Source:AEMO
"At the end of the day, blackouts and unreliable electricity is politically untenable," he says.
AEMO did not always publish such a rose-tinted view of reliability.
If anything, Edis of Green Energy Markets says the agency used to take a much harder line that was arguably too conservative in its assumptions.
He says it effectively underestimated forecast supply because of "silly rules".
The next coal-fired domino to fall will be Victoria's Yallourn in 2028.(ABC News: Freya Michie)
"And now it's probably gone too far the other way," Edis says.
Key to the change is the way AEMO includes projects in the reliability outlook.
Historically, he says it was only those projects which were either existing or committed that got a guernsey.
Put another way, the plants had to be in the ground already or under construction to be used in the forecast.
Since 2023, however, he notes AEMO has been including "anticipated" projects in its central assessments.
To qualify as anticipated, he says projects need to satisfy at least three of five criteria: land, contracts, planning, finance and construction.
But he says meeting that requirement is too low a hurdle and does not guarantee that a development will go ahead.
"If people are assuming that those anticipated projects will materialise … they're going end up with a rude shock," he says.
"And so we do have a problem on our hands."
Forecasts 'in fantasy land'
It's a viewed echoed by Paul McArdle, a respected electricity market analyst at Global Roam.
In a series of reports, McArdle wrote the changes to the reliability forecasting process were tantamount to "a sleight of hand trick".
He said the shift away from sober planning to a "rose coloured glasses" alternative had gone largely unnoticed.
A prime example concerned financing, which almost always involved borrowing money to ensure a project can be built.
Along with solar power, wind energy is supposed to be a mainstay of Australia's future grid.(ABC News: Daniel Mercer)
Typically, he said projects needed to have a long-term sales deal with an electricity user to secure funding from banks and other lenders.
McArdle said many of the "anticipated developments" had no such deals in place and, therefore, insufficient financial backing.
Despite this, he said projects appeared to be meeting the finance test because they had limited backing under the Commonwealth's flagship green energy policy — the capacity investment scheme.
And he was even more critical of the move by AEMO from 2024 to give serious weighting to "government schemes and actionable projects", saying it was a fantasy.
Market operator banks on fast-paced renewable energy growth
Market operator banks on fast-paced renewable energy growth
AEMO forecasts in the next ten years there will be between 3-and 5-times the amount of renewable energy in the market.
Fossil
fuels
Battery
storage
Renewables
Hydro
Chart explorer. Use arrow keys ↑ ↓ ← → to navigate.
0 GW25 GW50 GW75 GW100 GW125 GW14.16 GW125.05 GW58.78 GW19.03 GW
Forecast scenarios
Solid line: committed and anticipated scenario
Dotted line: government schemes and actionable developments scenario for the National Electricity Market (NEM).
ABC News Source:AEMO
"I get that there is a desire to avoid the headlines of 'blackouts'," McArdle wrote.
"But my sense is that a far more important perspective is that the purpose of AEMO forecasts is (or at least used to be) to elicit a market response.
"Starting off the [statement of opportunities] by giving … highest ranking to the Fantasy Land Scenario surely can't be helpful in doing this?"
McConnell says the problems with the reliability outlook are wrapped up in problems that are bedevilling the capacity investment scheme itself.
The scheme works by underwriting the revenues of projects that successfully "bid" to receive government support, chiefly by offering their power at the lowest viable price.
Australia is betting on batteries to help replace coal, for so long the mainstay of power supply.(ABC News: Daniel Mercer)
According to McConnell, the cost of building projects had increased since the scheme was first designed, while they had soared for wind farms.
The upshot is projects that had been awarded contracts through the program — and assessed as anticipated by AEMO — are now languishing.
Only a fraction of the selected projects have gotten final sign-off
Only a fraction of the selected projects have gotten final sign-off
The gap between selection for the Capital Investment Scheme and realisation is largest for onshore wind projects.
Battery
Onshore
wind
Solar
PV
Solar
PV + Battery
0 GW5 GW10 GW15 GW
Chart explorer. Use arrow keys ← → to navigate.
28.68 Gigawatt
5.72 Gigawatt
7.59 GW
12.88 GW
1.54 GW
6.67 GW
3.53 GW
0.81 GW
0.78 GW
0.6 GW
Projects selected
Projects realised
ABC NewsSource:RystadGet the data
Without customers to buy their power or lenders to provide them money, he says many are in limbo.
Similarly, McConnell questions the wisdom of AEMO relying on the availability of the giant Snowy 2.0 pumped storage facility from late 2028 despite growing expectations the troubled project will be delayed — again.
He says the credibility of the forecast was being undermined by overly optimistic assumptions and warns of similar risks to AEMO's central plan for the energy transition — the "integrated system plan".
AEMO is counting on the trouble-plagued Snowy 2.0 project to be ready by 2028.(ABC South East NSW: Floss Adams)
"This is where the politics or the discourse around what this report says matters," McConnell says.
"If we don't build out this capacity as required to meet these challenges, then that invariably results in costs appearing elsewhere or interventions that do ensure that the system is reliable."
The politics and the pedestal
For McConnell, the reliability outlook is one more victim of Australia's energy politics.
Edis agrees.
From a straightforward piece of industry guidance, Edis says the statement of opportunities has become a overtly political tool used by the major parties to suit their interests and beat their opponents.
He says the transformation has undermined the credibility of the outlook to the extent that most serious players largely ignore its headline conclusions.
Meanwhile, he says, AEMO's reputation is suffering.
"[AEMO] has been put on the pedestal as the ultimate arbiter of what is and isn't right," Edis says.
"And that has, I think, made politicians very sensitive to wanting to make sure that whatever they say reflects their political priorities to some degree.
"But that has been an ongoing problem."
One technology showing few signs of slowing down is rooftop solar.(ABC News: Kenith Png)
Climate Change and Energy Minister Chris Bowen is standing by AEMO.
In a statement, a spokesman said the Minister had confidence in the agency's work and the experts behind it.
"The latest ESOO identifies no reliability gaps in 2027-28 or 2029-30, making [it] clear continued investment and timely delivery will be needed as electricity demand grows and more ageing coal generation retires," the spokesman said.
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