Australia’s energy market governance is failing to keep pace with the transition, according to a new report.
The Energy Efficiency Council (EEC) and the RACE for 2030 CRC have released the green paper, NEM Governance Reform: Options for the Future Electricity System, which outlines critical deficiencies in the current National Electricity Market (NEM) governance and proposes broad directions for reform ahead of a white paper due later this year.
The report identifies seven major governance functions – data, strategic advice, decision-making, policy design, implementation, consultation, and evaluation – and finds significant structural and functional gaps across all of them.
It calls for a “whole-of-system” approach to ensure demand-side measures such as energy efficiency, demand response, and distributed energy resources (DERs) are properly integrated into the energy transition.
A key concern is the supply-side bias embedded in NEM institutions. Bodies like AEMO, AER and AEMC were established with narrow technical remits focused on large-scale generation, transmission and retail.
“The market bodies have sometimes interpreted their scope conservatively, exacerbating this problem,” the report notes.
It says strategic advice is fragmented, particularly for demand-side measures. While AEMO provides advice via the Integrated System Plan (ISP), its dual role as market operator and transmission planner raises governance concerns.
The report questions whether AEMO’s current structure is suitable for delivering independent, whole-of-system advice and modelling, given its board composition and expertise skewed toward supply-side incumbents.
Gaps in energy data especially on distribution-level performance and consumer energy behaviour are hampering coordinated policy.
The report recommends a national body be tasked with managing energy data, improving accessibility and enabling open-source modelling across industry, government and researchers.
On decision-making, the paper criticises the over-reliance on multilateral government processes via the Energy and Climate Change Ministerial Council (ECMC) and Senior Energy Officials (SEO).
This results in delayed action, policy gaps, and ad hoc workarounds. Delegating specific demand-side responsibilities to new or existing bodies with appropriate funding is flagged as a priority.
Policy and implementation responsibilities are also fragmented. While various bodies administer incentive schemes or energy standards, no agency leads nationally on demand-side coordination. The report suggests a new institution could be tasked with policy development and delivery, streamlining fragmented responsibilities across the states.
Stakeholders such as the Property Council of Australia welcomed the paper, calling it a “critical step” in shifting governance beyond traditional supply infrastructure.
“The green paper validates what we and our partners have long argued: smarter energy use through efficiency and flexibility is essential to achieving net zero affordably and equitably,” said National Policy Director Frankie Muskovic.
The report urges immediate consultation on reform directions to avoid further delays in unlocking the full value of the energy transition.