42.5GW Solar & 9.8GW Storage to Reshape Australia’s Grid

According to the "System Security Transition Plan 2025" released by the Australian Energy Market Operator (AEMO), the Australian National Electricity Market (NEM) is facing fundamental changes as solar photovoltaic (PV) power and battery energy storage systems (BESS) drive Australia's transition to a low-emission energy system.

AEMO CEO Daniel Westerman stated that this plan is "the most comprehensive plan to meet NEM system security requirements and consumer needs" at a time when Australia's energy system is rapidly changing due to the retirement of coal-fired power plants and the replacement by renewable energy, energy storage, and gas turbines.

The report indicates that rooftop PV capacity will increase from 25.1 GW in 2026 to 42.5 GW in 2036, while non-dispatchable PV capacity between 100 kW and 30 MW will increase from 1.9 GW to 4.8 GW during the same period.

This growth reflects the rapid adoption of distributed energy resources (DERs) by Australian households and businesses, driven by factors including policy incentives, declining technology costs, and consumer demand for energy independence.

Westerman emphasized that Australian consumers continue to invest in rooftop solar at a "world-leading pace," and are now adding residential battery storage systems and electric vehicles (EVs) to their energy systems.

However, the increasing adoption of solar photovoltaic (PV) presents challenges to grid management, particularly due to the volatility of solar power generation during peak hours and its rapid decline in the evening.

The Necessity of Grid-Based Inverters

With the increasing adoption of renewable energy, battery storage systems equipped with grid-based inverters have become a key component for maintaining system stability.

AEMO states that NEM currently operates 10 grid-based battery storage sites with a total installed capacity of 1070 MW, while its development pipeline includes 94 projects, comprising 78 stand-alone battery systems and 16 hybrid systems.

Grid-based technologies provide essential system services, including synthetic inertia, system strength, and frequency control capabilities traditionally provided by synchronous generators.

AEMO's analysis highlights the importance of grid-based inverters in stabilizing the grid, although current technologies contribute less to fault current than synchronous generators.

This limitation underscores the necessity for continuous technological advancements to fully replace traditional power generation capacity.

As coal-fired power plants retire, the transition to high renewable energy penetration presents challenges in maintaining system strength and inertia. AEMO has identified eight key transition points related to coal-fired power plant retirement, requiring targeted investments in system strength solutions.

The 1680MW Gladstone coal-fired power plant, scheduled for decommissioning in 2029, exemplifies these challenges, necessitating the deployment of synchronous condensers and other system strength measures to ensure the stability of the Central Queensland grid.

Grid-based battery storage is a key component of AEMO's strategy to meet these requirements through advanced inverter technology.

The Category 2 transition service trial evaluated the performance of grid-based inverters under various system conditions, including assessments of protection-level fault currents, system restart capabilities under high distributed photovoltaic conditions, and asynchronous generation operation.

The test results will provide a basis for future standards and procurement strategies, ensuring that battery systems can contribute to system safety.

Driven by the adoption of residential and commercial battery systems, embedded energy storage capacity is projected to increase from 2.2 GW in 2026 to 9.8 GW in 2036. These distributed energy resources support the grid during peak demand periods or when renewable energy generation is low; however, their integration requires robust technical standards and effective coordination mechanisms.

AEMO is collaborating with distribution network service providers to develop functional requirements for the operation of highly distributed energy power systems, focusing on areas such as improving data quality in the distributed energy registry, strengthening inverter standards compliance, and implementing emergency backup mechanisms for distributed photovoltaic (PV) reductions.

The increasing prevalence of distributed energy resources necessitates improved visibility and predictability to ensure long-term planning and real-time operational stability.

As the volatility of solar power generation impacts system operation, advanced forecasting tools and flexible grid management strategies become crucial. Integrating distributed energy resources into the grid requires coordinated mechanisms that can effectively utilize their potential while maintaining system safety.

Policy Reforms Drive Efficient Deployment

The rapid growth of solar photovoltaic and battery systems necessitates reforms to the National Electricity Regulations (NERD) to facilitate efficient deployment of system strength and inertia resources.

In November 2025, the Australian Energy Markets Commission (AEMO) submitted a request for rule changes to address gaps in the current planning and procurement framework.

The System Strength Impact Assessment Guidelines allow market participants to self-remedy using grid-based technologies, spurring a wave of grid-based battery storage projects.

Transmission network service providers plan to contract for over 8 GW of grid-based battery capacity by 2034, although the AEMO warns that poorly coordinated investments could lead to inefficiencies such as infrastructure duplication or project delivery delays.

The proposed rule changes aim to provide market participants with greater flexibility and certainty, enabling them to invest confidently in system security solutions, while advocating for a comprehensive approach to planning and investment coordination.

The development of grid-based technologies requires continuous improvement in technical standards and testing frameworks to fully realize their potential for widespread deployment.

AEMO's voluntary grid-connected inverter specifications set a performance benchmark for system security contributions; however, gaps remain in current access standards, which are primarily designed for grid-connected systems.

The ongoing Review of Grid-Connected Technology Access Standards aims to address these gaps to facilitate the delivery of grid-connected services.

Parameter tuning studies indicate that grid-connected battery storage has enhanced performance potential, particularly under weak grid conditions where advanced inverter capabilities are most valuable.

Protection system design is complicated by changes in inverter-based resource behavior, and surveys of transmission network service providers reveal inconsistencies in relay misoperation and fault current delivery.

As inverter-based generation increases, improved modeling techniques and dynamic protection assessments become crucial for maintaining grid reliability.

Australia's energy transition highlights the critical role of integrating solar photovoltaic and battery storage in achieving sustainability and reliability goals.

The Transition Plan 2025 provides a roadmap for addressing the technical, operational, and policy challenges associated with this transition. With a strong project pipeline and a focus on innovation, NEM is positioning itself as a global leader in renewable energy integration.

As Australia moves toward its decarbonization goals, technological advancements in grid-connected inverters, combined with an appropriate policy framework, will determine the speed and effectiveness of its renewable energy transition.