Fixing the NEM

It is a truth universally acknowledged that the National Electricity Market (NEM) was built for a different era, without today’s technological advances.

As a result the current NEM is driving up financing costs and power prices, and leaving taxpayers to foot the bill for ad hoc government interventions, according to a paper to be released on Thursday by the Clean Energy Investor Group (CEIG).

The second in a research series developed by Castalia Advisors for CEIG found greater reliance on decisions by a market coordination body combined with measures that give long-term revenue certainty to investors would reduce market risk.

“We can no longer decouple energy generation from storage and we need the right market design in place to genuinely deliver a stable, affordable electricity supply." - Castalia Advisors Executive Director Alex Sundakov

The paper explores a renewable portfolio standard (RPS) paired with a dispatchable capacity requirement; an RPS paired with a Texas-style reserve margin; and coordinated auctions for long-term contracts for the technically efficient mix of renewables, storage, firming and transmission.

Regardless of the option chosen, they warn of the need for a clear and transparent pathway from the end of the Capacity Investment Scheme (CIS) in 2027.
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Electrification requires governments to get on

The report from a Coalition-led Senate inquiry found electrification can improve household energy efficiency, reduce emissions from residential energy use and lower energy costs for consumers.

The manufacture and installation of residential electrification technologies was anticipated to create thousands of new jobs but the supply capacity of the NEM - which delivers 80 per cent of Australia’s electricity - would need to almost triple by 2050.

The benefits were found to be undermined if electricity generated from fossil fuels, rather than renewables, continues to power the stoves, heat pumps and hot water systems that have replaced gas-fired appliances.

However, the upfront costs of purchasing and installing new electric appliances and home battery systems remains prohibitive for many people, many homes would still be poorly insulated and low-income Australians are at risk of being left behind, the Andrew Bragg-chaired committee heard.

Further, independent research by AEMO and CSIRO confirmed nuclear was the most expensive form of energy generation at up to six times more than firmed renewables.

Actionable insights

• Electricians and installers will be at the forefront of residential electrification but Australia will need an additional 35,000 qualified electricians by 2030
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• Training of 70,000 electrical apprentices will need to commence over the next five years
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• The scale of uptake required for electrification requires federal, state and territory governments to continue to work together, particularly on the infrastructure needed.

"While it’s refreshing to see these common-sense findings are supported by a cross partisan committee, we’re yet to see the major parties reflect these permanent solutions to cost-of-living pressures in their election platforms,” advocacy group Parents for Climate CEO Nic Seton said.

Yes Minister

WA-born Resources Minister Madeleine King joined industry friends at the Australian Domestic Gas Outlook 2025 summit for a slapdown of the Coalition’s gas pledge.

“They have voted against bringing gas prices down, securing supply, applying penalties to exporters – and now they want to pursue each of those policies,” King said.

Shell Australia country chair Cecile Wake said in her keynote that caution should be exercised to avoid the risk of unintended consequences when energy and gas policy becomes the subject of election dynamics.

“It is increasingly difficult for international investors to allocate the billions of dollars of private capital that are needed to the Australian market,” Wake said.

“Energy policy inaction, a quagmire of regulatory approval complexity and retail politics are combining to starve Australia of the international investment it desperately needs.”

Even without a formal east coast gas reservation, in the 10 years since LNG exports began in Queensland, she said the Shell QGC LNG project had supplied an average of almost 15% of all available gas produced to the domestic market - equivalent to the WA domestic gas reservation - with much of it sold at a “considerable discount” to LNG netback prices.

Senex Energy CEO Darren Stevenson said the “sensible” centre just needed to allow the industry to deliver supply, with streamlined approvals and unlocked reserves.

Liberal National resources spokesperson Susan McDonald used the conference to announce the Coalition would elevate gas to the same status as a critical mineral.