The consultation paper provides an insight into how the energy market operator is grappling to deal with the fast-changing energy grid – which has been swamped by an influx of renewable energy that has challenged reliability – when there is no clear climate policy from the federal government.
It also shows the challenges of negotiating with big energy companies on modelling for its Integrated Systems Plan for the National Electricity Market over the next 20 years.
The market operator was forced to abandon its plans to vary coal plant retirements to meet emission targets, after push back from big energy companies like Origin Energy.
"To address this, AEMO has considered an alternative approach which sees the emission abatement and climate change consequences form part of the scenario input but still avoids directly anchoring it to any particular policy."
Stakeholders have also asked AEMO to look into the possible earlier retirement of coal-fired power plants – an unintended consequence of more renewables being forced onto the grid.
Despite uncertainty about the mechanism to achieve Australia's carbon reduction targets, stakeholders told AEMO it should do more modelling to show how Australia is going to meet its international obligations – not just the federal government's 26 to 28 per cent emissions reduction target by 2030, but the net zero emissions target agreed to at the Paris climate talks.
Pacific nations last week criticised Australia for not doing enough on climate change and for defending the multibillion-dollar coal industry.
The central plank of the Morrison government's climate policy remains the $2.5 billion Emissions Reduction Fund – which pays farmers and companies to reduce their carbon emissions – and the so-called "safeguard mechanism", which is supposed to put limits on big polluters.
But polluters can change their baselines under the scheme, something that critics say shows its ineffectiveness in forcing a change in behaviour.
Despite talking up their climate change credentials, Bill Shorten and Labor went to the May federal election only promising to tighten the Coalition's existing framework.
Federal Energy Minister Angus Taylor remains concerned about the influx of renewables into the NEM, especially in Victoria and Queensland, which have ambitious state-based renewable energy targets. There are also serious concerns about blackouts next summer.
Mr Taylor has also established a taskforce to look into the implications of the closure of AGL Energy's Liddell coal-fired power station in NSW in 2023, wanting to avoid a repeat of the premature closure of Hazelwood power plant in Victoria in 2017.
His department is also conducting a feasibility study into a high-efficiency, low-emissions (HELE) coal-fired power plant in Collinsville in North Queensland.
AEMO has adopted five different scenarios for the pace of introducing renewable energy and meeting Australia's carbon reduction targets.