INSIGHT

Post 2025 National Electricity Market Design

Energy

Looking ahead to 2025

In March 2019, the COAG Energy Council requested that the Energy Security Board (ESB) consider whether any changes were required to the core National Electricity Market (NEM) framework in order to facilitate the technological shift towards a lower emissions electricity system.

The reforms represent a generational shift in the operation of the NEM, which was originally designed in the 1990s to cater for traditional dispatchable energy sources (coal and gas). The uptake of small and large-scale renewable energy and the growth of demand-side technologies has necessitated a new, fit-for-purpose model which can recognise and respond to the changing energy landscape.

The ESB has set a 2025 timeframe to redesign the NEM so that it is fit for the following purposes:

  • meeting consumer needs;
  • managing variability and uncertainty;
  • appreciating the need for capital replacement; and
  • recognising demand flexibility and integrating Distributed Energy Resources (DER).

Deliverables

The ESB has adopted a phased implementation for development and delivery of the post-2025 market design, involving three key phases:

  • Short-term (12-18 month) deliverables – relates to interim reforms to be implemented as soon as practicable, including:
    • Interim Reliability Measures – new rules establishing an out of market capacity reserve commenced on 21 August 2020; Interim Retailer Reliability Obligation Trigger rules commenced on 26 November 2020.
    • Interim Security Measures – first stage of improvements to be implemented ahead of the 2020/21 summer and the balance of measures by the end of June 2021.
    • Renewable Energy Zones (REZs) – REZ planning rules expected to commence in February 2021; consultation paper on REZ implementation rules published on 5 January 2021.
    • ISP Rule Changes – new rules commenced on 1 July 2020.
    • DER – DER Integration Roadmap and Workplan released in September 2020, setting out the overarching objectives and milestones for DER integration.
  • Intermediate deliverables – relates to substantial reforms to be designed by December 2020 with implementation, in full or in part, before 2025:
    • Essential System Services, Scheduling and Ahead Markets – consultation paper published in April 2020.
    • Two-Sided Markets – consultation paper published in April 2020.
    • Transmission Access Reform through the Coordination of Generation and Transmission Investment - after receiving stakeholder feedback on its September 2020 interim report, the AEMC has paused preparation of the final report to focus on developing the REZ framework as a first priority.
  • Longer term deliverables – relates to the development of actions for implementation after 2025, including:
    • investment signals for reliability;
    • aging thermal generator strategy; and
    • initiatives relating to the development of DER markets.

Post-2025 program key deliverables

Final recommendations on all aspects of the program delivery are expected to be made in mid-2021, with the development of legislation and rules to follow.

Completed:

  • September 2019 – Post-2025 Issues Paper
  • March 2020 – COAG Papers Ahead Markets and System Services Two-sided Markets
  • September 2020 – Post-2025 Program Consultation Paper
  • January 2021 - Market Design Directions Paper (no public consultation)

To be completed*:

  • March 2021 – Market Design Options Paper
  • June 2021 – Market Design Recommendations

*Indicative timeline only.

Resources

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