An Engineering Roadmap Ain’t Sexy… It’s Essential
While it may not be the sexiest part of the energy transition, engineering the grid is arguably the most important. Without it, all the wind, solar and battery investments in the world won’t deliver a stable, secure electricity supply. That’s why the Engineering Roadmap FY2026 Priority Actions report from the Australian Energy Market Operator (AEMO) deserves serious investor attention. (1)
The report outlines 29 priority actions across the National Electricity Market (NEM) and Western Australia's South West Interconnected System (SWIS), focusing on operational readiness, grid stability, consumer energy resources, and technology integration. For investors, it signals where the market is heading, what barriers remain, and, importantly, how capital can accelerate the transition.
What Is the Engineering Roadmap?
The Engineering Roadmap is AEMO’s blueprint for preparing Australia’s electricity systems for operation at times of 100% renewable penetration. While technically possible in small systems, achieving this at scale requires replacing the ‘invisible glue’ — system strength, inertia, and frequency control — historically provided by coal and gas. The roadmap is designed to ensure these capabilities are engineered back in using new technologies like batteries, virtual power plants, and inverter-based resources.
Key Progress and Achievements
According to the report, in FY2025, AEMO completed 33 of 37 priority actions for the NEM. These included technical guidance on grid-forming (GFM) batteries, implementing minimum system load frameworks for Victoria and South Australia, and supporting governance for integrating consumer energy resources (CER). The work was significantly funded by a $15m grant from the Australian Renewable Energy Agency (ARENA), which has helped accelerate deployment and systems thinking.
In the SWIS, 2025 saw the inaugural Engineering Roadmap launched with a targeted set of actions, including system strength assessments with Western Power, managing voltage at low demand periods, and implementing non-co-optimised services to keep the grid stable when demand plummets.
One clear sign of progress: the NEM hit a record 75.6% renewable contribution in November 2024, and the SWIS achieved an 85.1% peak just days later.
FY2026: The Year Ahead
The 29 priority actions for FY2026 focus on four themes:
Uplifting operational capabilities – including real-time visibility of under-frequency load shedding schemes, improving outage management, and training grid operators.
Preparing for transition points – such as the retirement of coal-fired power stations like Eraring, Yallourn and Collie, and scenarios involving 100% renewable operation.
Integrating consumer energy resources (CER) – by enhancing forecasts, onboarding dynamic export limits from networks like SA Power Networks and Energy Queensland, and examining DER behaviour during restarts.
Enabling new technologies – through trials and technical validation of grid-forming batteries, inverter-based loads, and synthetic inertia contributions.
The grid is no longer about turning a switch. Managing two-way flows from households, virtual plants, and industrial DER means every new rooftop solar system and EV charger becomes part of the solution—and part of the risk.
One of the more significant actions this year is analysis of fault current contributions from grid-forming battery energy storage systems. These systems may allow big batteries to provide services once thought exclusive to coal plants. For investors, this is the bridge to capitalising on battery arbitrage, frequency control, and system strength services all in one asset class.
What About WA?
Western Australia’s SWIS continues to emerge as a laboratory for the rest of the country. With state-owned coal-fired power to be retired by 2030, WA faces the challenge — and opportunity — of a fast-tracked energy transformation.
Actions in the SWIS include reviewing Rate of Change of Frequency (RoCoF) limits, improving weather forecasting, and expanding AEMO’s modelling capability to reflect declining system strength — especially in areas like Shotts Terminal near Collie, where over 650MW of GFL (grid-following) batteries are due by 2027.
Project Jupiter, WA’s flagship distributed energy program, is also gathering pace. Backed by $20.8m in ARENA funding, it will enable virtual power plants that aggregate household solar and batteries to provide grid-scale services. For investors, this means the next big opportunity may be decentralised and sitting behind the meter.
Streamlining the Road Ahead
This year’s report is likely the last standalone Engineering Roadmap update. From 2026, AEMO plans to consolidate reporting through its Transition Plan for System Security, aligning operational priorities with technology trials and stakeholder guidance in a single annual publication.
This streamlining is timely. Investors need clarity, not fragmentation, when determining how and where to deploy capital. For instance, markets like system strength and synthetic inertia services are complex, but AEMO is now flagging where private capital is needed to replace synchronous machines — without waiting for regulators to catch up.
Why This Report Matters for Investors
This report isn’t just an engineering exercise. It’s a map of where capital will be needed and where regulatory change is likely. Key opportunities include:
Grid-forming batteries: Already delivering frequency and inertia services. Now being assessed for system strength. If AEMO gives the green light at scale, expect a step-change in battery deployment economics.
Consumer energy resources: Integration of rooftop solar, smart appliances, and EVs into grid operations will require digital infrastructure, interoperability, and aggregation. It’s a long-term structural shift.
Virtual power plants: With Project Jupiter leading the charge, aggregation platforms and software-based grid orchestration are poised for growth.
System strength investments: As coal exits, new methods of maintaining voltage and fault levels are needed. That’s not just a technical problem—it’s an investable market.
The Bottom Line
The Engineering Roadmap FY2026 Priority Actions Report shows that Australia’s power system is moving from theory to execution. Transition points—like coal closures, 100% renewable periods, and DER integration—are no longer distant possibilities. They’re deadlines.
The investor takeaway is this: system security is becoming a services market, and the engineering certainty AEMO is providing gives the private sector a seat at the table. Whether you're backing batteries, building VPPs, or deploying enabling infrastructure, the roadmap is becoming clearer. And there’s no shortage of opportunity along the way.
References
AEMO Engineering Roadmap FY2026 Priority Actions Report. 17 July 2025. https://aemo.com.au/initiatives/major-programs/engineering-roadmap
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