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Call for network regulation inquiry
Market operator flags WA gas shortage
PC inquiry builds on NEM review

Why electricity distribution needs its own Nelson review

The Australian Energy Market Commission (AEMC) has taken the first step in a self-initiated review of how the nation’s electricity networks are regulated.

Network costs make up the largest component of power bills and the rule-maker has acknowledged that ensuring regulation remains fit for purpose is essential to protecting consumers.

The draft terms of reference make a genuine first‑principles review of the economic regulation of distribution networks impossible, despite mounting evidence and international practice, writes Distributed Energy Resources (DER) expert Gabrielle Kuiper.

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Expert view

“Underestimating DER's role in energy planning is to make the transition slower, more expensive and less democratic. The Draft 2026 Integrated System Plan has made the role more visible and transparent, but it is still not sufficiently ambitious or optimised.

We have proven the technology. What's more, the Australian Government is now forecasting around two million batteries in homes and businesses by 2030 — a massive fleet of potential network support services substituting for expensive infrastructure spend. Yet the economic regulation needed to unlock procurement of non‑network solutions at scale remains missing.”

Gabrielle Kuiper
Strategic energy, sustainability and climate change professional

Surplus of gas exports sounds familiar

Western Australia will be short of gas under every scenario modelled by the market operator, even after the forecast period was doubled to 20 years and recalibrated for decarbonisation and electrification.

Annual supply gaps are forecast to surge from 11 terajoules per day (TJ/day) in 2030 to 82TJ/day in 2035, and to 478 TJ/day in 2045, according to the Australian Energy Market Operator (AEMO) 2025 WA Gas Statement of Opportunities (GSOO), mainly driven by declining production from existing, committed and anticipated gas fields.

But, perversely, the gas-rich and gas-dependent state has a surplus of exports, not a shortage of gas, as Boiling Cold reported.

Forecast growth in consumption is boldly expected by AEMO to be partially met by new supply from Woodside Energy’s (ASX: WDS) Scarborough project, which is expected to come online in the second half of 2026, even as critics say the state has been short-changed by the company’s foundational Pluto project.

“The starting point for action is ensuring the social contract at the heart of WA’s domestic gas reservation policy is met.

If planned Perth Basin projects don’t deliver as modelled, which you have to think there is a reasonable likelihood of occurring, the shortfall could be upon us sooner. What that is likely to mean is higher energy prices for consumers, increased volatility as the state transitions from coal-fired power, a risk that new investment goes interstate or offshore and job losses in industries that rely on affordable and reliable gas for their viability.”

Domgas Alliance spokeswoman Mia Davies

The ability for substantial variable renewable energy (VRE) to connect before 2030 will depend on whether transmission is available in time, AEMO said, with any delay in coal retirements or new major gas-consuming projects also affecting domestic gas consumption.

Gas price-sensitive industries may reduce or cease operations if gas or alternatives are not available at competitive prices, AEMO warned, putting the “Made in WA” quest at risk.

Tenor of PC inquiry builds on NEM review

The Productivity Commission has called for a national, market-based emissions reduction policy, which would change how electricity is tallied under the Safeguard Mechanism, and warns of the need for guardrails for any Electricity Services Entry Mechanism (ESEM).

“This is especially important against the backdrop of the ambitious emissions reduction target range of 62-70% by 2035 that the government has announced earlier in the year. Australia will be held to its commitment at next year’s COP.

Recognising the potential to strengthen our existing market-based mechanisms is a welcome perspective in the national climate policy debate. This will facilitate policy certainty for business investment while accelerating the pace of change towards Australia's higher ambition 2035 target.”

Carbon Market Institute Director of Corporate Transition, Kurt Winter

In-principle, the PC inquiry report supports the NEM Review’s push for a more market-based approach to wooing investment with a proposed ESEM, which is intended to address the ‘tenor gap’ or mismatch between suppliers who need multi-decade commitments to get a project financed and retailers who don’t want to be locked for more than a couple of years.

But the PC warns the value of positions taken under the mechanism would be significant and strong governance arrangements are needed. Procurement based on state-level renewables targets are also likely to raise costs and should be phased out as the ESEM matures, it says.

But even if a baseline-and-credit scheme is greenlit, potentially reducing system-wide costs, it may be better to keep this separate from an expanded Safeguard Mechanism, at least at first, to limit uncertainty and disruption in carbon credit markets, the PC recommends.

The lack of a national emissions-reduction policy post-2030 — with the Renewable Energy Target (RET) expiring in 2030 and the last auctions under the Capacity Investment Scheme (CIS) in 2027 — will also affect non-NEM grids.

Catch Up

Capital

The Electrical Trades Union wants one multi-employer agreement covering the entire NSW electrical contracting industry, threatening to blow up construction costs and hand the union unprecedented bargaining power, AFR reported, prompting 11 major contractors to apply for their own multi-employer bargaining orders that would limit any agreement to just Sydney and only projects valued at more than $125 million.

Lithium-ion battery prices dropped again in 2025, with average prices coming down 8% to $108 per kilowatt-hour, according to BloombergNEF’s annual price survey.

Projects

The US House of Representatives voted to speed up permitting reviews for new energy and infrastructure projects as lawmakers seek to meet growing demand for electricity and other forms of energy. The bill, dubbed the SPEED Act and including language wind and solar supporters call unacceptable, would also limit judicial review as Congress seeks to enact the most significant change in decades to the National Environmental Policy Act, a bedrock environmental law. Now it goes to the Senate. (AP) (Reuters) (Politico)

The Australian Energy Regulator (AER) has approved $189.6 million in revenue for Ausgrid's Hunter-Central Coast Renewable Energy Zone network infrastructure project, which will upgrade existing network infrastructure to add 1GW of transfer capacity for renewable energy generation and storage in the region. The approved amount is $14 million (6.9%) less than Ausgrid's original proposal.

VicGrid published a report summarising 162 industry and public submissions received in response to proposed changes to its Victorian Access Regime, which is intended to manage renewable energy projects’ access to the state transmission network. Major industry concerns raised in the report include: the importance of “clear and fair” transitional arrangements for projects already in development; access outside a renewable energy zone; and calls for staged implementation, dynamic access limits and “clear allocation rules to maintain confidence [and] reduce complexity and avoid delays”. The report also surfaced concerns that battery energy storage requirements could limit their ability to deliver system benefits.

Policy

The national 82% renewables target will need to apply to an energy system much larger than what Australia currently has, a policy paper from ClimateWorks explains. With the transition timeframe running out, the Improving renewable energy planning and permitting report calls for clear frameworks and standards to speed renewable energy development through the system, fixing data gaps — spatial, environmental and cultural heritage, and enough funding for the time and staff needed to design and implement changes to the planning system given the speed and urgency of the transition.

Outdated National Electricity Rules are no longer appropriate for revised policy objectives that now include emissions reduction as a core principle, Kerry Burke has argued in lodging a rule change request with the AEMC that would introduce a carbon pricing regime to the NEM. Burke — who until recently led strategy and portfolio at Shell Energy Australia — warned that non-market addition of capacity “creates a feedback loop" where the ESEM proposed by the NEM review, or other government support, becomes needed for all new capacity.

Regulation

AEMO published a preliminary report on the December 13 loss of supply to the Geraldton area that involved pole failures on two 132kV lines in the WEM’s North Country, interrupting approximately 48MW and impacting 23,000 customers.

Victoria's energy regulator said it had imposed a record $24.5 million in fines on energy retailers in 2025 for breaching consumer protections — including a $17.6 million Supreme Court penalty for Origin Energy due to failures including inadequate support for vulnerable customers and family violence victims. The Essential Services Commission (ESC) crackdown targeted a range of violations from illegal telemarketing to billing issues, with companies penalised including AGL, ENGIE, Momentum Energy, EnergyAustralia, Pacific Blue, and CovaU.

Electricity consumers paid the lowest inflation-adjusted network costs since data collection began, the Australian Energy Regulator (AER) said, in releasing its 2025Electricity and gas distribution networks performance report. This was driven by low interest rates and higher inflation from 2015 to 2021, although the AER notes that costs may rise due to current higher rates. Gas distribution costs also reached historic lows in 2024 due to decreased demand from milder weather, appliance electrification, and cost-of-living pressures, though future demand decline remains uncertain. The report highlights increased capital expenditure by electricity distribution networks that exceeded allowances

Technology

After a US$6 billion merger, a Trump-linked company will begin construction next year on the "world’s first utility-scale fusion power plant" to provide the electricity needed for artificial intelligence. The deal has raised eyebrows and ethical concerns regarding the extent to which Trump's personal fortunes are entwined in sectors that his administration is both supporting and overseeing. (AP) (NYT) (WashPo)

People

Lana Stockman stepped down from the Electricity Authority of New Zealand board after almost eight years. “Even as I step away from the Authority, I hope the trans-Tasman relationships between our respective organisations continue to deepen. Both countries are tackling similar challenges, and there is so much opportunity to learn from each other as we navigate the energy transition,” she said.

Lachlan Harris, who has been acting CFO at Santos since the abrupt departure of Sherry Duhe in October, has been permanently appointed to the role.

Research

Increasing levels of atmospheric hydrogen have led to “indirect” warming of 0.02℃ over the past decade, a study published in Nature has found. While hydrogen is not itself a greenhouse gas, rising hydrogen emissions are “supercharging” the warming effect of powerful greenhouse gas methane, the authors say. They note that limiting leaks from future hydrogen fuel projects and rapidly cutting methane emissions will be key to securing benefits from hydrogen as a clean-burning alternative to oil and gas. (Carbon Brief)

Random

Take a look inside the 'mind-blowing' world of competitive spreadsheeting. (RNZ)

What's On

The Energy will be taking a break from our daily schedule from December 25 through to January 12, but we'll be bringing you some helpful and inspiring insights from our expert network during that time. Thanks for your support in 2025 and wishing you a safe and restful holiday season.

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Network regulation under scrutiny