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Taking the middle of five scenarios modelled between a slow pace of a change and one based on aggressive efforts to exit fossil-fuel plants, AEMO predicts consumers will be a net $11 billion better off by 2040 if the government pursue the most efficient policies.

Investments in new generation capacity will almost entirely be renewable energy, particularly from solar. For all but the Slow Change scenario, the grid will need to add at least 26 gigawatts of large-scale renewables to replace almost two-thirds, or 15GW, of coal-fired plants that will be shut by 2040.

Should governments opt for a more ambitious decarbonisation pace, the needed increase in large solar and wind farms would reach 50GW. Most of that would be in new renewable energy zones, such as those being promoted by NSW and Victoria.

"We don't see [new] baseload coal as a competitive option," AEMO chief executive Audrey Zibelman said.

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To provide so-called firming to smooth out the variable nature of wind and solar, the grid will also need 6-19GW of new so-called dispatchable capacity that can be rapidly switched on off.

Provided gas prices remain below $6 per gigajoule, that fuel will provide some of that firming capacity but its share will fall as battery and pumped storage supplies enter the market.

"[F]urther investment in [gas generation] is less likely based on the assumptions used in this ISP, particularly in scenarios that have carbon budgets to meet," the report said, noting that current battery prices were competitive with gas at even as low as $4 per GJ in all regions except NSW.

Ms Zibelman said the forecasts assume batteries will enjoy "the same sort of price declines as we have seen for solar and wind over the past 15 years".

AEMO chief system design and engineering officer Alex Wonhas said the transformation of the electricity system would cost in the order of $100 billion. At times, renewables' share of power could reach 90 per cent by 2035.

Compared with the draft ISP of a year ago, forecast transmission costs have increased by 30 per cent, reflecting higher equipment, labour and other expenses, a change highlighted by federal Energy Minister Angus Taylor.

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“It is critical to avoid over-investment and ‘gold plating’ of the network, because it is consumers who have to pay for this as part of their electricity bills," Mr Taylor said.

“The government will continue working with its state colleagues to progress transmission projects that offer value for money,” he said

Committed projects to address grid security include the Western Victoria Transmission Network Project to support generation from the Western Victoria renewable energy zone. It will be commissioned in full by 2025.

Another is a grid upgrade to support one of NSW's three zones, the Central-West Orana one around Dubbo.

NSW Energy Minister Matt Kean said he welcomed the ISP as "a strong tick of expert approval for the NSW government’s plans to build Renewable Energy Zones and fast-track our connection to Snowy 2.0”.

Victoria's Energy Minister Lily D'Ambrosio said she welcomed AEMO's report that "recognises our energy future is about a decarbonised system".

The transmission proposed would help unlocked zones that would bring Victoria's renewable energy share of Victoria's power supply to 50 per cent by 2030, creating tens of thousands of jobs in the process, she said.