Australia Launches Critical Review of National Energy Market to Shape Future of Renewable Integration and Grid Stability

The Albanese Government has initiated a comprehensive review of Australia’s National Energy Market (NEM) to address the future operation of the nation’s largest electricity grid. The review aims to ensure low costs for households and businesses while managing the growing integration of rooftop solar and large-scale renewable energy sources.

An expert independent panel, led by Associate Professor Tim Nelson and joined by Paula Conboy, Ava Hancock, and Philip Hirschhorn, will conduct extensive consultations before delivering final recommendations to Energy and Climate Ministers in late 2025.

The panel will focus on assessing NEM wholesale market settings to encourage investment in firmed renewable energy generation and storage capacity into the 2030s and beyond. This review is crucial as Australia faces rising electricity demand and the gradual exit of aging coal-fired power stations from the grid.

The NEM is one of the world’s largest interconnected electricity networks, stretching across approximately 40,000 km of transmission lines and cables and supplying electricity to more than 23 million people. It spans all Australian states and territories, excluding Western Australia and the Northern Territory, and was originally designed to support a coal-dependent baseload power grid.

With the country’s energy needs growing and the transition to renewables underway, the review seeks to ensure the market settings are optimized for a smooth shift to reliable renewable energy sources.

In response to the need for greater investment in firmed renewables, the government introduced the Capacity Investment Scheme (CIS) in 2023. The scheme is expected to nearly double the amount of clean, reliable renewables and storage capacity in the NEM by 2030.

State and territory governments, along with energy market bodies, were consulted on the review’s terms of reference, which are available on the Department of Climate Change, Energy, the Environment, and Water (DCCEEW) website.

Minister for Climate Change and Energy, Chris Bowen, commented:
“The Albanese Government’s reformed Capacity Investment Scheme has exceeded expectations and demonstrates a strong investment appetite for reliable renewables in Australia. This review will assess the next steps needed to ensure continued investment in the energy market beyond 2027, after the current CIS tenders conclude.”

Bowen also criticized the previous Coalition government’s inaction on preparing for the closure of most of Australia’s coal-fired power plants, adding:
“During its decade of delay and denial, the Coalition failed to address the inevitable closure of 90% of Australia’s coal fleet. Their continued push to extend the life of these increasingly unreliable generators ignores reality.”

The review aims to ensure that Australia’s electricity grid remains stable while meeting the nation’s growing energy needs through clean, affordable, and reliable renewable energy sources.