Australia’s transition away from coal is accelerating investment in renewable energy, battery storage and transmission, but the extension of the country’s largest coal-fired power station shows that replacement capacity must arrive on time if grid reliability is to be maintained.
Australia is targeting 82 percent renewable electricity by 2030, while GlobalData forecasts renewable generation will exceed 72 percent by 2035. The research company expects Australia’s total installed power capacity to expand at a compound annual growth rate (CAGR) of 6.2 percent between 2025 and 2035, with renewables increasing from just over 51 percent of installed capacity to nearly 79 percent.
But Australia’s energy transition is increasingly becoming a race between retiring coal generation and commissioning enough renewable generation, storage, transmission and flexible capacity to replace it.
The challenge was highlighted in January 2026 when Origin Energy extended the operation of the 2,880 MW Eraring Power Station, Australia’s largest coal-fired power station, from August 2027 until April 30, 2029.
The extension demonstrates that Australia’s coal transition cannot be measured solely by how quickly renewable capacity is built. The electricity system also needs enough dispatchable capacity and grid infrastructure to maintain supply when solar and wind generation is unavailable.
Eraring Coal Plant Extended to 2029 as Replacement Capacity Grows
GlobalData originally identified Eraring’s retirement as one of the major changes reshaping Australia’s generation mix. However, Origin Energy subsequently extended the operation of all four Eraring units until April 2029.
Origin said progress was being made on new transmission infrastructure and large-scale batteries, but Eraring needed to operate longer to support secure and stable electricity supply in New South Wales.
The decision provides a real-world example of the challenge facing Australia’s power market.
Coal plants can provide large amounts of dispatchable electricity when required. Replacing them therefore requires more than installing an equivalent number of megawatts of solar and wind capacity.
Australia needs a combination of renewable generation, batteries, pumped hydro, transmission, demand response and flexible gas capacity.
The Australian Energy Market Operator reaches a similar conclusion in its 2026 Integrated System Plan. AEMO says renewable generation connected through expanded transmission and distribution networks, firmed by storage and backed by gas, represents the least-cost pathway for supplying secure and reliable electricity through 2050 as coal generation retires.
Australia’s Capacity Investment Scheme Target Rises to 40 GW
Government support for replacement capacity is also expanding.
Australia’s Capacity Investment Scheme (CIS) originally targeted 32 GW of new capacity, but the government increased the target to 40 GW in July 2025.
Under the expanded Capacity Investment Scheme, Australia is targeting an additional 26 GW of renewable generation and 14 GW of clean dispatchable capacity by 2030.
The scheme uses long-term revenue underwriting to reduce investment risk for developers of wind, solar and storage projects.
The government expects the expanded CIS to support around $73 billion of electricity-sector investment.
The program has become one of Australia’s principal mechanisms for achieving its 82 percent renewable electricity target while replacing ageing coal generation.
Recent tenders demonstrate the scale of the buildout. CIS Tender 7 selected 19 projects representing 7.8 GW of renewable generation, exceeding the original 5 GW target. Eight projects incorporate batteries providing more than 2 GW / 7.9 GWh of storage.
The projects are expected to attract around $17 billion in private investment and generate enough electricity to supply more than four million households.
Meanwhile, CIS Tender 8 selected 15 dispatchable projects providing 4.2 GW / 16.1 GWh of capacity, illustrating the growing emphasis on batteries alongside renewable generation.
Eraring Battery Reaches 700 MW / 3,160 MWh
One of the clearest examples of Australia’s changing generation mix can be found at Eraring itself.
Origin is developing a large-scale battery at the coal power station site with combined capacity of 700 MW / 3,160 MWh across its approved stages.
The completed battery will provide around 4.5 hours of storage.
Some stages have already commenced commercial operations, while the remaining stages are expected to be operating in 2027.
The project demonstrates how former and existing coal-generation locations can play an important role in Australia’s future electricity system. These sites often have valuable grid connections, transmission infrastructure and skilled workforces that can be reused for batteries and other energy infrastructure.
However, the numbers also illustrate why batteries cannot simply be treated as direct replacements for coal plants.
Eraring’s coal station provides 2,880 MW of generating capacity, while the battery will initially provide 700 MW and must store electricity generated elsewhere before supplying it back to the grid.
Storage therefore needs to operate alongside much larger additions of renewable generation and transmission capacity.
Origin is already examining another major expansion at Eraring that could add 500 MW / 4,000 MWh of eight-hour storage. If developed, total battery capacity at the site could ultimately reach around 1,200 MW / 8,600 MWh.
Yallourn Retirement in 2028 Creates Another Reliability Test
Another major transition will take place in Victoria.
EnergyAustralia plans to retire the Yallourn coal-fired power station in mid-2028.
Rather than abandoning the site after coal generation ends, EnergyAustralia is evaluating a proposed Yallourn Energy Security Precinct that could include gas-fired generation, large-scale battery storage and data-centre infrastructure.
The company plans to take advantage of existing grid connections, gas infrastructure and the site’s skilled workforce.
The strategy reflects a wider opportunity emerging from Australia’s coal transition: coal power station sites themselves can become valuable locations for future energy infrastructure.
Transmission Becomes Critical to Australia’s Coal Exit
Australia’s transition challenge is not limited to building enough wind farms, solar projects and batteries.
New renewable generation frequently needs to be constructed far from existing demand centres, making transmission infrastructure increasingly important.
GlobalData identifies projects including HumeLink, VNI West, Project EnergyConnect and Marinus Link as critical elements of the transition.
These projects are designed to increase electricity transfer capacity between regions, connect Renewable Energy Zones and improve the ability of the National Electricity Market to share generation across states.
Without sufficient transmission capacity, renewable projects can face connection constraints and curtailment even when substantial generation capacity has already been built.
The challenge therefore extends across the entire electricity supply chain:
renewable generation → transmission → storage → dispatchable capacity → electricity demand
A delay at any major point can affect the timetable for retiring coal generation.
Batteries Grow but Gas Retains Reliability Role
Australia’s rapid battery buildout does not mean gas generation disappears from the future electricity mix.
AEMO’s 2026 Integrated System Plan explicitly identifies gas as a backup component of the least-cost transition pathway.
Gas generators can provide electricity during extended periods of low renewable production, particularly when battery storage is insufficient to cover prolonged supply gaps.
Their role may therefore increasingly shift from high-utilisation generation toward flexible capacity that is available during periods of system stress.
Demand response and distributed energy resources can provide additional flexibility.
The result is a fundamentally different power system from Australia’s historical dependence on large thermal power stations.
Instead of relying primarily on coal plants operating continuously, the future grid is expected to combine large amounts of low-cost variable renewable generation with multiple sources of flexibility.
More Than $60 Billion Power Investment Expected by 2030
GlobalData forecasts Australia’s power sector will attract more than $60 billion of investment between 2026 and 2030, with solar PV accounting for the largest share, followed by onshore and offshore wind.
The broader transition could involve considerably greater investment once transmission, storage and supporting infrastructure are included.
Australia’s expanded CIS alone is expected by the government to support around $73 billion of investment, comprising approximately $52 billion associated with solar and wind and around $21 billion related to storage.
GlobalData expects the country’s installed power capacity to increase at a 6.2 percent CAGR between 2025 and 2035.
Renewables’ share of installed capacity is forecast to climb from just above 51 percent to nearly 79 percent, while renewable electricity generation is expected to more than double and exceed 72 percent by 2035.
Australia Faces Delivery Challenge Rather Than Technology Challenge
Australia increasingly has a clear technological pathway for reducing its dependence on coal.
Solar and wind provide the bulk of new generation. Batteries and pumped storage can shift electricity to periods of higher demand. Gas can provide backup during extended supply shortages. Transmission connects Renewable Energy Zones with major electricity markets, while demand response adds another source of flexibility.
The bigger uncertainty is execution.
Major renewable projects require financing, planning approvals, grid connections and community support. Transmission projects can take years to approve and construct, while large batteries and pumped-storage projects must be delivered quickly enough to coincide with coal retirements.
The extension of Eraring from 2027 to April 2029 demonstrates the consequences when the timing of replacement infrastructure and coal retirement does not align.
Australia’s energy transition should therefore not be judged simply by how quickly coal plants close.
The more important measure is whether renewable generation, storage, transmission and flexible capacity are commissioned quickly enough to replace the reliability services those coal plants currently provide.
With the government targeting 40 GW of additional renewable and dispatchable capacity through the CIS by 2030, alongside an 82 percent renewable electricity target, Australia is committing substantial resources to that replacement.
The next several years will determine whether new infrastructure can be delivered fast enough for the country’s coal phase-out to proceed without compromising electricity reliability.
BABURAJAN KIZHAKEDATH