Why we need the post 2025 project

The National Electricity Market (NEM) has been in place since 1998. It brought together electricity industries in Queensland, New South Wales, the Australian Capital Territory, Victoria, South Australia, and Tasmania to drive greater efficiencies and a better utilisation of resources. It has served the nation well. But much has changed in the way we generate, consume and share energy that has implications for the way our energy services are supplied.

Addressing these implications is the core of the post 2025 project.

Penetration of variable renewable energy resources is increasing


Source: ESB June 2020

What’s changed

Families and businesses were considered as just ‘consumers’ of electricity. Except for large industrial loads, customer relationships with energy retailers or local network businesses was limited.Consumers concerned about affordability, responding to new tech opportunities to take control of energy consumption and bills, driving rapid uptake of distributed energy resources like rooftop solar, smart appliances, and metering.
  • Value for money is paramount in any change.
  • Focus on integrating customer-owned resources into the energy system in ways that are fair for all.
  • Accommodate different customer needs and wants.
  • Need a better mix of cost reflective price signals, enhanced communications and complementary regulatory measures to help incentivize investments and support system needs.
  • Future-proof regulatory design to allow for new models such as virtual power plants through a two-sided market while relevant consumer protections remain in place.
Relatively few, predominantly large thermal generating unitsIncreasing decentralisation of generators with more energy produced by variable renewable or small scale resources which have potential to drive down both emissions and generation costs.
  • Need to enable development and integration of new system services to manage the impacts of thermal generation exit and increased uncertainty and complexity associated with weather-driven generation.
  • Ensure dispatch mechanisms can be optimised for delivery of energy and system services.
  • Create sharper price signals for providing all services needed for reliable, secure supply to provide forward price signals for investment
  • Put in place any backstops needed to support reliability and security if the market does not deliver within operating standards.
  • Create price signals so new generators locate in places that better use existing and future transmission, helping reduce grid congestion.
A mostly established transmission network.New transmission needed to connect the new generation as the mix changes along with fast response storage and other technologies to come.
  • create price signals so new generators and batteries locate in places that better use existing and future transmission, helping reduce grid congestion and support timely and efficient capital investment.
  • Providing market participants tools to manage the risk of congestion.
Established distribution networks that were one directional with very few behind the meter, distributed energy resources in homes or businesses.Rapid uptake of distributed energy resources and other behind-the-meter services by consumers of all types.
  • Increased collaboration is required at the interfaces of local and wholesale systems, to ensure the system operator can balance resources at the wholesale level, and distribution networks can coordinate and optimise the use of local resources and flexibility on their networks.

What happens next

The post 2025 market design project is seen as a pathway to a fit-for-purpose market design for the NEM and, rather than having an entirely new design introduced at a single point in time, we are planning for the transition to happen through timed phases. 

Final recommendations on all reforms will be made by mid-2021 and required legislation and rules then developed and introduced over time.