Coal-fired power could make up as little as six per cent of Australia's electricity generation by 2040, under a proposed new plan.

The Australian Energy Market Operator says a combination of solar, wind, storage, gas and transmission investment could produce the 90 TWh of energy needed each year to offset power from retiring coal-fired generation.

However, there will still be a role for coal, with 20 existing plants having an average life span of 27 years.

In the immediate term, AEMO says in its "integrated system plan" report released on Tuesday, three things need to happen.

The capacity to transfer power between NSW, Queensland and Victoria must be boosted by up to 460MW, the ability to supply power from renewable plants in western and north-western Victoria must be made easier and system strength in SA improved - all at a cost of around $650 million.

By the mid-2020s, the transfer capacity between NSW and SA must be boosted by 750MW, between Victoria and SA by 100MW and between Queensland and NSW by 378MW.

As well, Snowy 2.0 and Tasmanian storage projects need to be progressed, along with the capacity to transfer an extra 1800MW of power between NSW and Victoria.

"AEMO's modelling confirms that the national energy market is at a critical point, and infrastructure planning decisions made over the next two years will shape the future of the east coast energy systems for decades to come," the report found.

Energy Minister Josh Frydenberg said the report did not preclude a new coal-fired power station being built - as is being advocated by some coalition MPs - but showed the declining cost of renewables and storage.

"It's reflecting what is a reality in the market, which is renewables coming down dramatically in price, and that's led to their increased uptake across the market, and we need to put a greater emphasis on storage and interconnection," Mr Frydenberg said.

Mr Frydenberg, who will meet with his state and territory counterparts in Sydney on August 10 to discuss the government's planned National Energy Guarantee, also said Australia had "turned a corner" on power prices.

Labor climate and energy spokesman Mark Butler, whose party has a 50 per cent renewable energy mix target by 2030, said the key was to ensure an orderly transition away from coal.

"It's not about closing them early - it's the fact that old Father Time, at the end of the day, is driving a very significant transition in our system and how do we make sure that that's orderly, it delivers reliable power to Australian households and businesses and keeps power prices down," Mr Butler said.

Greens MP Adam Bandt said AEMO, by setting out a path to 85 per cent renewable power by 2040, had shown the future of the electricity market.

Prime Minister Malcolm Turnbull has no issue with keeping coal-fired plants open for the "term of their natural life", but the transition to renewables and storage must be properly managed.