State and territory governments should reaffirm the governance framework for the NEM, SWIS and NWIS. Investment decisions are always made with imperfect information, but certainty about the intent and structure of the market gives participants confidence and enables long-term planning that delivers efficient market outcomes. Governments should avoid unilateral policy that departs from this governance framework.
As well as strengthening market governance, the Australian Government and state and territory governments need to implement a future design for the market. Existing rules were designed for a centralised energy system with large thermal generation, and must evolve to be fit-for-purpose for a decentralised, renewable system where the roles of participants are more flexible.
The Energy Security Board post-2025 future market design program provides a basis for this regulatory transformation, alongside the work programs of the AEMC and other market bodies.
AEMO usually undertakes a comprehensive review of the NEM every two years to produce an Integrated System Plan. Announcements of earlier than anticipated closures of power stations or changes in government policy can in part be addressed through careful selection of scenarios or undertaking sensitivity testing and applying decision rules to assess the impacts on the Integrated System Plan's optimal development path.
Existing rules for the Integrated System Plan require it to be updated where there is a change that could have a material impact on the optimal development path. AEMO may also use its discretion to make out-of-cycle updates to the optimal development path in the Integrated System Plan on the basis of new information, but a broader trigger-based review mechanism would ensure timely and proactive management of electricity reliability and security. For more information on emissions trajectories and the phased transition of infrastructure assets, see the Sustainability and resilience chapter.