New battery storage and gas-powered generators have helped bring more reliability to the electricity grid on Australia's east coast, with no issues for electricity supply forecast over the next five years.

Previously, the Australian Energy Market Operator (AEMO) had identified a shortfall in electricity generation and possible blackouts in New South Wales following the closure of coal-fired power stations over the next five years.

But the company, which oversees Australia's power markets, found in its latest report on electricity supply "the previously identified reliability gap in NSW is no longer forecast."

The AEMO report shows adequate electricity supply for the coming summer and following years, though it does warn extreme weather events could disrupt the operations of ageing coal-fired power stations.

"An additional 2,245 megawatts (MW) of new capacity is forecast to be operational this summer, compared to what was available last summer. This includes 470 MW of dispatchable battery storage capacity, " the report found.

The improved forecast diminishes the case put by some Coalition MPs that a new coal-fired power station needs to be constructed. 

Hydro, gas and batteries powering new supply

The CEO of AEMO, Daniel Westerman, attributed the more positive outlook for the electricity grid to a range of factors.

Mr Westerman said new wind and solar farms, combined with plans for 'dispatchable' power (which incudes pumped hydro, gas plants, and battery storage), "will all help replace retiring coal and gas plant".

"No reliability gaps are forecast for the next five years, primarily due to more than 4.4 gigawatts (GW) of new generation and storage capacity, as well as transmission investment and reduced peak demand forecasts," he said.

Beyond the next five years, the outlook was a little more cautious, noting some coal-fired power stations in Victoria and New South Wales will close earlier than previously expected.

But the AEMO report found there were enough projects either planned or already underway to make up for the closures.

"There are well-progressed generation, storage and transmission projects, which, once operational, will maintain reliability as coal plants start to close earlier," Mr Westerman said.

The biggest short-term risk to electricity supply? Rain

The main risk to electricity supply over summer is further flooding at the Yallourn power station in Victoria.

In June, flooding in Gippsland led to cracks in the coal mine adjacent to the power station, limiting its operations.

Futher flooding could again limit Yallourn's power output, which could cause significant supply issues given the plant accounts for one-fifth of Victoria's electricity supply.

Similarly, Queensland's Callide power station still has limited capacity to generate electricity following an explosion at one of its units in May.

The AEMO report identified the reliability of coal-fired plants as remaining at "historically poor levels" and noted most generators "are anticipating a trend of decreased reliability" over the longer term.

The long-term risk to supply is falling demand

The biggest risk to the electricity grid over the next 10 years isn't the lack of supply, but rather, the lack of demand.

With households and businesses continuing to install roof-top solar power, demand for electricity is falling, particularly through the day.

That reduces the minimum amount of electricity needed in the network, causing issues for coal and gas-fired power stations that have minimum operating restrictions.

In five years' time, roof-top solar could supply up to 77 per cent of electricity demands at some points in the day, which would cause the minimum operating demand for the National Electricity Market (NEM) to drop by two-thirds.

"Without additional operational tools, we may no longer be able to operate the mainland NEM securely in all periods from 2025 due to a lack of security services when demand from the grid is so low," Mr Westerman said.

Managing this is further complicated by uncertainty around how quickly the transport sector and heavy industry turn electric and the advancement of hydrogen technology.

Federal, state and territory ministers are currently considering a range of options to ensure the stability of the electricity grid in the long-term, such as a Retailer Reliability Obligation.

Their decisions wil be critical, given AEMO expects that by 2025, there will be times renewables could supply 100 per cent of electricity demand.