Looking ahead to 2025
In March 2019, the COAG Energy Council requested that the Energy Security Board (ESB) assess the existing National Electricity Market (NEM) framework and develop recommendations for reform to facilitate the current transition towards a lower emissions electricity system.
The generation mix in the NEM has moved away from traditional dispatchable energy sources (coal and gas), with a significant uptake of small and large-scale renewables, as well as distributed energy resources (DER) and demand-side technologies. This shift towards decarbonisation of the NEM has necessitated a new, fit‑for‑purpose model, that is adapted to the changing energy landscape.
The ESB has set a 2025 timeframe to redesign the NEM to ensure it is fit for the following purposes:
- meeting consumer needs;
- managing market variability and uncertainty;
- appreciating the need for capital replacement; and
- recognising demand flexibility and integrating DER.
The ESB 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 that commenced in February 2021; consultation paper on REZ implementation rules published on 5 January 2021.
- ISP Rule Changes – new rules commenced on 1 July 2020.
- Intermediate deliverables – relates to substantial reforms to be implemented, 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.
On 27 July 2021, the ESB handed its final advice on the redesign of the NEM to the Energy National Cabinet Reform Committee, and on 26 August 2021, this advice was publicly released. The ESB's final advice is comprised of three parts, detailing a package of reforms across four interrelated pathways designed to deliver more reliable, affordable and lower emissions electricity to consumers. Following a meeting in September 2021, Energy Ministers have agreed on a final package of reforms based on the ESB's recommendations, which will be provided to National Cabinet in October 2021.
For further information on the ESB's final advice, please see our Insight article here.
Further information is available in the following resources:
- Final Advice to Energy Ministers – Part A (27 July 2021)
- Final Advice to Energy Ministers – Part B (27 July 2021)
- Final Advice to Energy Ministers – Part C (27 July 2021)
- Post 2025 Market Design – Options Paper (30 April 2021) (Part A and Part B)
- Post 2025 Market Design – Directions Paper (5 January 2021)
- Post 2025 Market Design – Consultation Paper (7 September 2020)
- Post 2025 Market Design – Issues Paper (2 September 2019)
- Post 2025 Design for the National Electricity Market (NEM) (22 March 2019)