A report by the nation's energy regulator has recommended a multi-billion-dollar investment in electricity infrastructure — such as a second interconnector with South Australia — to help secure the stability of Australia's power grid.

Key points: Report said additional infrastructure, safeguards needed to be put in place

Report said additional infrastructure, safeguards needed to be put in place Implementing recommendations could generate $300m in net profit

Implementing recommendations could generate $300m in net profit But Josh Frydenberg questioned who was going to foot the bill

The Australian Energy Market Operator (AEMO) report argued the investment would help save money in the long run, amid the growing use of renewable energy generation.

But Federal Energy Minister Josh Frydenberg has questioned who will pay for the upgrades and said the report highlighted the impact of ambitious renewable energy sources in several states.

The newly released National Transmission Network Development Plan (NTNDP) said additional infrastructure and safeguards needed to be put in place across Australia.

It cited the shift away from coal-fired power stations and the rise of renewable energy, with an additional 22 gigawatts of new wind and solar generation to be connected by 2036.

Among the recommendations in the NTNDP is a second interconnector linking the power grids of South Australia and New South Wales from 2021.

It also called for a second Basslink — an interconnector between Tasmania and the mainland from 2025 — as well as improved connections between Victoria, New South Wales and Queensland.

The AEMO has said up to 12 gigawatts of new gas-powered generation may be required to replace coal-fired generators that could close in the next 20 years if technology does not improve.

AEMO chief operating officer Mike Cleary said big changes would be needed for transmission networks, which were historically designed for transporting energy from coal and gas generators.

"While noting that there may be many different combinations of strategies to meet future balancing requirements, AEMO's NTNDP modelling reveals positive net benefits for potential transmission developments to help facilitate the diversity of the future generation mix and to improve system resilience," Mr Cleary said in a statement.

The AEMO estimated that if its recommendations were adopted, there would be a positive net benefit of up to $300 million.

"Given the range of potential developments in consideration, and the interdependencies between them, a coordinated, national approach to plan for the energy transformation is imperative to enable optimal solutions to be implemented in the long-term interest of National Electricity Market (NEM) consumers."

'A question of who pays': Frydenberg

Mr Frydenberg said the AEMO's report was "further evidence" that the renewable energy targets adopted by South Australia, Queensland and Victoria were "putting at risk energy security".

He also highlighted the multi-billion-dollar cost of putting additional power infrastructure in place.

"Greater connectivity between states with interconnectors is a good thing, but it's always been a question of who pays," Mr Frydenberg said in a statement.

"The report also emphasises the importance of more gas supply as it is a critical transition fuel which can help stabilise the system."

The AEMO report suggested that the strength of the system was "projected to materially decline", particularly in areas of South Australia, Western Victoria and Tasmania.

"Emerging local areas of poor network strength [are] in New South Wales and Queensland, where a high concentration of renewables is anticipated by 2035-36," it said.

"To counteract the decline in system strength, improvements to either inverter-connected devices or supporting plant will become essential for these generators to operate reliably."

The report singled out Victoria's Renewable Energy Target (VRET), which aimed to have 40 per cent of the state's electricity to originate from renewable sources by 2025.

"Major transmission development [approximately $1 billion to $3 billion] is likely to be required to facilitate the connection of renewable generation to meet the VRET," the report said.

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