The Australian Government Department of Climate Change, Energy, the Environment and Water (DCCEEW) has consulted on the draft report on the National Electricity Market (NEM) Wholesale Market Settings Review.

The rapid decarbonisation of the electricity and energy system is essential for Australia to meet its obligations under the Paris Agreement.

Electricity generation is the nation’s largest source of greenhouse gas emissions.

The adoption of renewables will reduce emissions by approximately one-third and enables decarbonisation of other sectors of the economy. 

Since 2018, the Australian Energy Market Operator (AEMO) has engaged CSIRO, supported by Climateworks, to conduct multi-sector modelling to quantify the dynamic influences that would shape electricity demand under different emissions reduction scenarios.

That modelling continues to inform AEMO’s planning and forecasting tools, including the 2026 Integrated System Plan (ISP). 

The recommendations in this submission draw on insights from research, including our modelling to demonstrate the least-cost pathways to decarbonise Australia’s energy system.

Each will enhance the energy system’s operation and ensure it delivers the rapid transformation needed to achieve a net zero economy.

Climateworks will be pleased to provide further analysis in writing or through meetings, where helpful, to the independent panel.

Submission summary 

Climateworks recommends that the NEM Review final report:

  • Ensure that proposed market reforms promote a broad range of energy solutions, including industrial demand flexibility and distributed energy resources (DER), to meet all energy objectives while reducing reliance on gas peaking plants.
  • Set out processes and principles for setting ESEM infrastructure investment targets that integrate jurisdictional policies with national net zero objectives for the economy and ensure cohesive and cost-effective planning across all energy market users. 
  • Accelerate the development of out-of-market reserves, with a focus on demand-side contracts and integrated electricity and gas system planning, to support an orderly transition from fossil fuel baseload generation and avoid overreliance on gas peaking infrastructure.
  • Promote efficient market uptake of demand-response, including through development of a demand-side statement of opportunities (DSOO) and comprehensive demand-side strategy, to improve investment efficiency and outcomes for consumers and the economy.
  • Strengthen locational information and regional planning frameworks, including development of regional ISPs for key industrial precincts, to support targeted infrastructure investment.

More details on these recommendations can be found in our submission [PDF 0.5mb].