Every year, the Australian Energy Market Operator, known as AEMO, releases its Electricity Statement of Opportunities (ESOO). It provides a 10-year outlook on the investment needed to maintain reliability in the National Electricity Market (NEM).
The ESOO is a good snapshot of the electricity system and market. To keep our customers up to date with market movements, each year Flow Power’s energy specialists break down the key points and explain how it could impact your business – here’s a look at last year’s summary.
2026 key takeaways: a 10-year outlook
- 9.1 GW of new generation and storage was commissioned in FY 2026
- 40 GW of committed and anticipated projects in the pipeline
- 33 GW of publicly announced projects awarded government investment support
- ~15 GW of coal and gas scheduled to retire
- 50% increase in underlying electricity consumption forecast by 2035/36
- 2.4 GW/7.4 GWh of household batteries added through the Cheaper Home Batteries Program
Scenarios in the 2026 ESOO
Similar to last year, this year’s ESOO considered two main scenarios:
- A base assessment, that considers committed and anticipated new supply. In this scenario, AEMO looks at the reliability of the power system as this supply enters the system compared to forecasts of electricity consumption.
- A government schemes scenario, which is similar to the base scenario, but with greater certainty around the new supply brought on through government schemes.
Reliability outlook is mostly positive
The key output of the ESOO is an assessment of the reliability of the power system. In the 2026 edition, that story was quite positive. Under both scenarios, reliability looks good for the next four years (with the government looking reliable until 2032).
However, while the immediate risks are well managed, the risks in a 5+ year timeframe paint a different picture. AEMO is highlighting that the reliability challenges will grow substantially as coal-fired power stations retire and underlying electricity consumption grows.
Before getting too worried, it is worth noting that this dynamic is quite common in ESOO projections. The methodology combines a growing demand for electricity with a static pipeline of committed and anticipated projects. This will generally result in reliability risks in the back half of the projection that can be addressed by new investment. This is actually the purpose of the ESOO – to highlight the opportunities for new investment.
Energy consumption is forecast to grow
One of the key contributors to reliability risks in the back half of the ESOO projection is is rising electricity demand.
Underlying electricity consumption throughout the NEM is forecast to increase by 40% by 2035/36. Operational consumption (the electricity consumption excluding rooftop solar) is expected to become more variable and increasingly sensitive to seasonal and weather-related conditions.
The topical story in the demand growth is data centres. There has been a lot of attention paid to the role that data centres will play in Australia, including driving up electricity demand, AEMO is forecasting data centre demand will increase seven-fold in the next decade, to reach ~13% of total operational demand. There is a lot to play out with data centres though. Time will tell how realistic these forecasts are, as well as the impact of new government policies requiring data centres to bring capacity with them.
New investment will be needed
As the market evolves, the assessment of system reliability will shift from looking at the available firm capacity to whether we have the right mix of resources, particularly renewables and storage to support the system.
In a market where we have growing demand, driven by electrification and growth in industries like data centres, there will be pressure on the speed at which new supply can be brought to market. It also emphasises the importance of demand response and behind-the-meter solutions like solar and batteries to help maintain the reliability of the power system.
Why is this important for businesses?
The predicted growth in residential and commercial electrification, plus large industrial developments and data centres will increase both peak demand and the total amount of energy that will be required on a day-to-day basis.
As the market changes, the way businesses buy, use and manage electricity becomes more important. Greater demand, more variable generation and tighter timing between supply and usage can all influence cost, risk and resilience.
What this means for your business electricity strategy
For large electricity users, the ESOO signals that energy flexibility is becoming increasingly more valuable. Businesses that can shift load, invest in on-site assets, or actively manage wholesale exposure may be better placed as the market evolves.
Energy is something your business needs to think about more strategically. Not just as a cost on your bill, but as something that can affect resilience, planning and long-term competitiveness. That means considering:
- When your business is most exposed to high prices;
- Whether you could be shifting energy intense operations or managing energy differently;
- And if your current energy contract is still the right fit.
As the electricity market continues to evolve, businesses that take a more active approach to energy are likely to be in a stronger position. Understanding your usage, reviewing your exposure and identifying where flexibility exists can help you make more informed decisions for the future.
Whether your business is looking to manage wholesale exposure, improve visibility over energy use, explore demand response, or assess on-site generation and storage opportunities, having the right strategy in place can make a real difference.
Want to understand what the changing market means for your business?
Speak to Flow Power’s energy specialists about your current electricity strategy and where there may be opportunities to improve flexibility, resilience and long-term value.
