Australia needs dozens more renewable energy projects to offset the loss of more than 60 per cent of Australian coal power plants that will close over the next two decades, the energy market operator has forecast.

Key points: The AEMO roadmap says rooftop solar will account for nearly a quarter of all energy consumption by 2040

The AEMO roadmap says rooftop solar will account for nearly a quarter of all energy consumption by 2040 It lists priority projects for investment including a new undersea power link between Victoria and Tasmania

It lists priority projects for investment including a new undersea power link between Victoria and Tasmania The number of energy plants will need to more than triple, the forecast says

A major upgrade of the electricity transmission wires will also be needed to get the new energy generated to homes and businesses, the Australian Market Energy Operator (AEMO) said.

Rooftop solar is set to play a role, with nearly a quarter of all energy consumption to come from residential and business solar panels by 2040.

To offset the decline of coal there would need to be a more-than-tripling of renewable energy plants that are already established or will be installed in the next two years, the forecast said.

In a "roadmap" for the next 20 years, AEMO said renewable energy with dispatchable power would be the lowest cost for consumers.

"To maximise economic benefits, as traditional generators retire, Australia must invest in a modern energy system with significant consumer-led distributed energy resources — such as rooftop solar — and utility-scale variable renewable energy, supported by sufficient dispatchable resources and well-targeted augmentations to the electricity network," AEMO chief executive Audrey Zibelman said.

To get new renewable energy generation from power plants to consumers, AEMO said the current transmission network needed to be upgraded.

Over the next 20 years, 60 per cent of Australia's coal-fired plants will close down. ( AAP: Julian Smith )

The draft report highlights several "priority" projects for investment including:

A new undersea power link between Victoria and Tasmania

A new undersea power link between Victoria and Tasmania A new transmission line from Robertstown in South Australia to Wagga Wagga in NSW

A new transmission line from Robertstown in South Australia to Wagga Wagga in NSW A new connection from Western Victoria where wind plants are being built, to southern NSW and the Snowy 2.0 pumped hydro

A new connection from Western Victoria where wind plants are being built, to southern NSW and the Snowy 2.0 pumped hydro Upgrades of the existing interconnection between Queensland to NSW and Victoria to NSW

Upgrades of the existing interconnection between Queensland to NSW and Victoria to NSW Improvements to the transmission system in Victoria to allow renewable energy to get to homes

The operator forecasts the future National Energy Market will be "a diverse renewable, gas-powered and distributed generation, supported by energy storage and network solutions".

The report said 15 gigawatts (GW) or 63 per cent of Australia's coal-fired generation is likely to retire by 2040.

This will have to be replaced by at least 30 GW of new grid-scale renewables above what is already committed.

"More renewables are required to replace conventional generators because of their naturally lower capacity factor,'' said the report.

Renewable energy development zones are earmarked across the five states.

And to support the transition away from a coal-based market, there needs to be up to 21 GW of dispatchable resources through pumped hydro or battery storage.

Efficient gas plants could be effective, especially if gas prices came down.

Read more about our energy future from our Power Switch series: