Additional Comments - Senator David Pocock
1.1The Terms of Reference for this Inquiry go to the governance of the National Energy Market (NEM) – the institutional and legal frameworks that govern its operations. That task is well beyond the capacity of a short Senate inquiry of this nature. NEM governance is founded in a complex of Commonwealth-State arrangements involving a Commonwealth-State Energy Market Agreement, a Commonwealth-State National Energy Transformation Partnership, three national laws, a daunting and unstable body of thousands of pages of rules, the Energy and Climate Change Ministers Council (ECMC), three regulatory bodies, and a consumer advisory panel. Four inquiries over the last two decades, each expert-led and enabled with appropriate reporting timeframes and resources, have advised governments on reform of the NEM – with quite varying levels of acceptance of their recommendations.[1] The field of NEM governance is fraught with political and inter-jurisdictional tensions, and is mired in a world of technical complexity very much exacerbated by an intense pace of technical evolution.
1.2In these circumstances, it would be irresponsible of this Committee – acutely limited in its time and its resources - to venture recommendations on the governance of the NEM, and I shall not do so in these additional comments.
1.3I shall focus on a number of key issues emerging from submissions to the Inquiry and suggest ways in which these could be progressed, in some cases through the existing patchwork of NEM-related inquiries and work programs currently on foot.These themes are:
the need for a new market paradigm articulated into NEM strategy;
the need to harness demand-side energy resources as part of the new paradigm;
the need to expedite utility-scale investment, addressing social licence and approvals;
aligning institutions to the new paradigm;
reforming national energy law to make it an efficient enabler of the energy transition; and
addressing energy poverty as an emerging consequence of the energy transition.
1.4I commend individuals and organisations on the quality of their submissions, which in so many cases reflect deep consideration of what NEM reform should look like. I cannot do justice in these short additional comments to the quality of those submissions. I do, however, propose more appropriate channels of inquiry which could more appropriately and deeply consider these submissions.
1.5I do not, in these additional comments, speak to the issues raised by the gas industry. I acknowledge that natural gas will have a small continued role in firming the NEM for some time, and I note the potential for hydrogen and biomethane drawing on a repurposed gas network to feed the hard-to-abate industrial sectors. I am confident the gas sector can address its concerns in these matters independently of this inquiry.
1.6I do not agree with the significant number of submissions that do not accept the necessity of decarbonizing the NEM, or which argue for technology agnosticism in designing the NEM. I place faith in the climate science community – a community whose discipline is founded on the same rules of evidence that have yielded all that we value in, for example, medicine, transport, communications, engineering and so much else. Climate science shows that we will exceed 1.5℃, if we have not already done so in 2024, with no sign that the burning of fossil fuels has yet peaked.[2] The path to breaching the Paris Agreement goal of limiting global warming to 2.0℃ is shortening every year, beyond which lies dire consequences for all of us, for our children and for future generations.
1.7Following a decade of climate denial, Australia now faces the task of reining in its emissions in a very short time to achieve its 2030 target of a 43 per cent reduction on its 2005 emissions.The Climate Change Authority has identified the enormity of the task:
After emissions fell by 3 Mt CO2-e in 2023-24, they will need to fall by an average of 15 Mt CO2-eeach year for the next 6 years to reach Australia’s 2030 target.[3]
1.8Central to achieving that target is transitioning the grid to 82 per cent renewables by 2030.
1.9The departure point for many submissions to this inquiry was a call for a paradigm shift in design of the NEM.Submissions consistently argued that governance could not be addressed without first articulating a paradigm shift into strategic guidance. The Grattan Institute articulated the views of many submissions:
…a system designed in the 1990s is now creaking under strain.The key assumptions that underpinned that design – generators that consume fuel, slow and predictable demand patterns, and passive consumers – have been invalidated by technology change.[4]
1.10Engineers Australia and AATSE underscored the risks inherent in perpetuating the current incrementalism:
We are currently focused on incremental rather than transformational strategic change…This situation risks ad hoc interventions to address immediate problems rather than long-term planning.[5]
1.11In similar vein, the Clean Energy Investor Group stated:
CEIG advocates for a deep, coordinated rethink of the NEM and associated governance frameworks to provide a clear pathway for investment in clean energy technologies, transmission, and storage.[6]
1.12Erne Energy captured the view of other submitters in pointing to the deadweight of incumbent advantage in resisting reforms to the NEM, observing that:
…the market bodies, the market operator, market participants (retailers and gentailers) and electricity network service providers (NSPs, both distribution and transmission) are very comfortable with the governance regime that has been in place since the start of the NEM. These incumbents are in direct competition with Australians who are generating their own electricity through their rooftop solar PV.[7]
1.13A new paradigm is only as good as its stability in guiding long-term investment.The Australian Financial Markets Association argued:
….the greatest regulatory challenge remains a lack of clear policy intent over the medium and longer-term resulting in a lack of clear market signals to participants.[8]
1.14The new paradigm should also be clear in its endpoint: to sustain the energy needs of the Australian economy as we know it, or to enable expansion to a renewable energy superpower. The choice bears heavily on intended capacity. The Superpower Institute captured the issue as follows:
It is imperative that the legal frameworks and institutions responsible for the energy transition keep pace with the scale of change required for Australia’s energy needs, including the needs of the superpower opportunity.[9]
1.15The market design of the NEM is a work in progress and a partial one at that.Two projects on foot – the recently released Consumer Energy Resources (CER) Roadmap[10] work program and the forthcoming review of NEM wholesale market settings (Post-2030 Review)[11] – address core issues for the future NEM, yet together they do not make for an integral, coherent blueprint. Where utility-scale capacity is driven by targets which in turn drive fiscal and regulatory interventions to achieve those targets, CER and the broader demand side, are not.
1.16The CER Roadmap is directed at enabling the market rather than driving or unleashing the market. This inevitably leads to imbalance in how policy shapes the emerging market, biasing signals to investors, consumers and regulators alike. At its worst, it leads to over-investment in utility-scale projects and failure to mobilise the demand side.
1.17In ordinary circumstances, market design of the NEM could well have been referred to the Productivity Commission for advice, as suggested by several submissions.[12] The Commission, in a broad ranging inquiry, could also have taken in the broader suite of issues address in submissions. That opportunity has passed with commissioning of the Post-2030 Review which would have occupied a central part of a PC inquiry.
1.18The appropriate way forward now is to have the Post-2030 Review broadened to address the market design of the NEM as a whole. This would likely require an extension of the review’s time and resources. Conscious of the Government’s long lead time for advice on post-2030 arrangements to be considered through the ECMC, it may be necessary to limit an extension to, say, 18 months.
Recommendation 1
1.19Extend the scope of the Post-2030 Review to address the design of the National Electricity Market as a whole. Without limiting its scope, it should:
design for a market that will deliver a rapid transition to renewable energy and allows for rapid technology shifts, including to technologies not yet contemplated;
design for both utility-scale supply and the active participation of demand-side actors;
articulate this design into long-term, strategic guidance for investors and consumers alike;
advise the implications for strategic level regulatory reform, including inter-governmental agreements, the three national energy laws and the three market bodies;
advise on post-2030 arrangements as per the existing Terms of Reference; and
advise on higher-level adjustments required of policy for other components of the market, including the demand side.
1.20The review shall report no later than June 2026, with the option for the Minister to extend its term should staged reporting be necessary.
1.21The emerging potential of CER is the most important factor demanding a paradigm shift for the NEM and its significance is difficult to overstate. The Australian Energy Market Operator (AEMO), in designing its Optimal Development Path to net-zero by 2050, estimates CER will account for almost half the NEM’s capacity, around a fifth of energy consumption, and two thirds of energy storage by 2050.[13] The Energy Efficiency Council cites ARENA in estimating that demand flexibility could save consumers up to $18 billion in net present value.[14]
1.22Of comparable importance is the potential for mobilising Commercial and Industrial Energy Resources (C&I), particularly rooftop solar and storage.This offers a relatively cheap and rapid pathway to installing up to 28 GW of solar generation on C&I rooftops in the short to medium term and is a specific focus of the Climate Change Authority’s 2024 Annual Progress Report.[15]
1.23The importance of CER and C&I within the NEM extends beyond their potential for generation and storage. The localisaton of generation and storage with consumption can alleviate demand for new utility-scale generation, storage and transmission – reducing not just investment costs but the strain on social licence amongst affected regional communities.
1.24There is growing risk that CER and C&I will not be mobilised to realise their potential in supplying NEM generation and storage, and it is reported that AEMO is adjusting down its projected uptake of CER in its assumptions for the 2026 Integrated System Plan.[16] While the Commonwealth and States are implementing policies to incentivise the uptake of electric vehicles, it is less clear that there has been adequate response in pricing and regulation to incentivise the uptake of CER more generally and the uptake of C&I.
1.25The CER Roadmap released by the Energy and Climate Change Ministers’ Council (ECMC) earlier this year is intended to address the CER component of this policy gap. The CER Roadmap is comprehensive and scheduled in a detailed workplan. The Clean Energy Council considers the development of a new CER Technical regulator under the Roadmap to be critically important.The Clean Energy Council also notes the significance of establishing a Distribution System Operator under the Roadmap.[17]
1.26The Roadmap does not appear, however, to drive towards a capacity target, in contrast to the outcomes-driven approach of the Capacity Investment Scheme (CIS). In a similar vein, the Roadmap, unlike the CIS, does not appear to envision incentives – pricing signals, fiscal measures, taxation measures – directed at compensating consumers for their capital outlays and easing their path to participation in orchestration. It allows for market offers to this effect, but stops short of direct incentives.
1.27There does not appear to be an equivalent of the CER Roadmap for the C&I sector. The Climate Change Authority notes this sector falls beneath the generation threshold for assistance under the CIS and that no other incentives are on offer.[18] The Authority recommends policy development to mobilise the C&I sector.
1.28Specific concerns regarding CER raised in submissions included:
the role and performance of distribution networks in facilitating uptake of CER, and including consumers in decision making to secure social licence for orchestration of CER;[19]
establishing national technical standards, enhancing consumer protection frameworks, removing distribution network barriers, and providing investment support for low-income households.[20]
1.29A pervasive concern was to give consumers a voice in policy and rulemaking for the NEM. This matter is considered under institutional reform below.
1.30The submissions of ACOSS and the Energy Efficiency Council referenced a paper entitled Demanding Better sponsored by these two organisations together with the AiGroup and The Property Council. Demanding Better mounts a compelling argument for consolidating demand-side policy in the dimensions of both energy resources and energy efficiency. The paper argues for a unitary approach driven by a stand-alone agency.[21]
1.31My Recommendation 1 above proposes dialing demand-side participation into the design of a reformed NEM and issuing strategic guidance for the demand-side in consequence.There are tasks, however, that should proceed in parallel with the high-level market design proposed in Recommendation 1. There is urgent need to commission development of a C&I Roadmap equivalent to the CER Roadmap – indeed, particular urgency attaches to this because mobilizing C&I is seen by the Climate Change Authority as a cost-efficient means to rapidly develop a significant part of the capacity required to meet the 2030 target of 82per cent renewables. Development of a C&I roadmap should be expedited for consideration by ECMC no later than December 2025.
1.32The CER Roadmap schedules implementation over the six years to 2030. It would be timely to undertake an interim review of the Roadmap to report to ECMC no later than June 2026, for consideration jointly with the outcomes of the expanded Post-2030 Review. The interim review should assess progress in implementing the Roadmap as approved by ECMC, but it should also assess its efficacy in mobilizing CER for its full potential within the NEM and advise on policies – regulatory, taxation and fiscal – required for this end.
Recommendation 2
1.33Commission development of a C&I Roadmap for consideration by ECMC no later than December 2025. The Roadmap should include proposed measures, as appropriate, in the regulatory, fiscal and taxation domains, to mobilise the potential of C&I to help meet the capacity gaps in achieving the 2030 target of 82 per cent renewables.
Recommendation 3
1.34Commission an interim review of progress in implementing the CER Roadmap for consideration by ECMC no later than June 2026, in conjunction with consideration of the expanded Post-2030 Review. The interim review should assess the efficacy of the CER Roadmap in mobilising CER and identify key areas that should be prioritised in order for CER to reach its full potential with the NEM and advise on policy – regulatory, fiscal and taxation – required for achieving this end.
1.35In the context of inhibiting the participation of CER in the NEM, Distributed Network Service Providers (DNSPs) attracted comment from a range of submissions.
1.36The Smart Energy Council stated:
Some distributed network service providers (DNSPs) are using their monopoly powers with a lack of transparency, leading to adverse outcomes for the renewable industry and energy consumers, particularly in the consumer energy space. As a result, we are calling for an independent review of the role they play in the distribution network…[22]
1.37The Clean Energy Council noted the importance of the CER Roadmap committing to work on establishing a Distribution System Operator. The Council remarked that:
The DSO work may result in changing responsibilities of the market bodies within the scope of this review…The Select Committee should consider expanding the scope to include expanding functions of these other bodies – particularly in respect of DNSPs who may ultimately absorb functions more similar to the existing market bodies, as the DSO work progresses.[23]
1.38Rewiring Australia recommended that:
The role and economic regulation of DNSPs should be a particular area of reform and improvement.[24]
1.39Nexa Advisory went further to recommend:
...an independent review of the role and performance of electricity distribution networks, considering: their role in facilitating the transition; their ability to adapt their business models to facilitate the integration of CER; and how existing governance arrangements and regulatory oversight ensure value for energy consumers.[25]
Recommendation 4
1.40Commission an independent review, to be considered by ECMC no later than December 2025, of the role and performance of DNSPs, considering their role in facilitating the energy transition, their ability to adapt their business models to facilitate the integration of CER, and how existing governance arrangements and regulatory oversight ensure value for energy consumers.
1.41Alongside CER and C&I, utility scale investment will remain a central plank in decarbonizing the NEM. AEMO estimates an annualised capital cost of $122billion to 2050 for its Optimal Development Path.[26] The key stimulant to this investment is the Commonwealth’s expanded CIS targeting an additional 32 GW of new capacity nationally by 2030.[27]
1.42The Post-2030 Review announced by Minister Bowen on 26 November 2024 will:
…recommend future market settings to promote investment in firmed, renewable generation and storage capacity in the NEM following conclusion of CIS tenders in 2027’ and will focus on ‘staged implementation of reforms to the NEM wholesale market…[28]
1.43The expanded CIS has been significantly over-subscribed in its initial tender, reflecting a very great deal of market interest in decarbonising the NEM. Yet the pace of investment has been significantly held back by the pace of planning and environmental approvals. This in turn reflects, in large measure, resistance on the part of regional communities to granting social licence. It may also reflect a lack of priority on the part of Commonwealth and State environmental and development approvals. The brake on investment poses serious risk to Australia meeting its 2030 target of 82 per cent renewables – a major concern flagged by the Climate Change Authority in its 2024 Progress Report where it recommends:
Through the National Cabinet, task relevant ministers to work together to overcome barriers to the energy transition.[29]
1.44In like vein, The Grattan Institute recommends that:
State Governments should improve the planning and permitting processes for transmission and generation projects.[30]
1.45The Smart Energy Council noted that the delayed reforms to the Commonwealth’s own Environmental Protection and Biodiversity Conservation Act 1999 is contributing to the deadweight on environmental approvals for renewables projects.[31]
1.46The brake on investment may jeopardise Australia’s ability to maintain major investments in high value-adding, vertically integrated, energy-intensive industries – a major concern of the Australian Aluminium Council:
The fundamental pillar of global competitiveness is low-cost renewable energy, firming and transmission. Despite recent announcements, such as the expansion of the Capacity Investment Scheme (CIS), the scale of the investment at this stage does not match the scale of investment of Australia’s competitors.[32]
1.47The absence of social licence amongst regional communities is reflected in a number of submissions to this inquiry. This is, in some submissions, coupled with a rejection of climate science and/or a rejection of AEMO’s modelling of the Optimal Development Path and/or a rejection of the cost/benefit analyses justifying specific projects. The generic issue of social licence, however, independent of these other agendas, is captured by the Energy Grid Alliance:
Key criticisms of AEMO reveal systemic failures in community engagement and transparency. Its approach to social licence is superficial, reducing community concerns to mere checkboxes in project planning processes. The operator's lack of accountability breeds mistrust, leading to public opposition that jeopardises Australia's energy transition.[33]
1.48Rainforest Reserves Australia add the concern for environmental balance in pressing the pace of utility-scale renewables investment:
The energy transition in Australia is essential for achieving carbon neutrality and mitigating climate change. However, the current regulatory frameworks governing renewable energy projects are insufficient to ensure that these developments are environmentally, socially, and economically sustainable. Addressing the gaps in governance, carbon accounting, and environmental impact assessments is critical to creating a regulatory environment that fosters responsible and sustainable renewable energy development.[34]
1.49Rainforest Reserves Australia recommends amending the National Electricity Law (NEL) and National Gas Law (NGL) to ensure that:
…biodiversity, habitat loss, and carbon emissions are integral factors in decision-making processes.[35]
1.50The Commonwealth commissioned the Australian Energy Infrastructure Commissioner (AEIC) to conduct an independent Community Engagement Review to address the matter of social licence. The review was released in February 2024 with all recommendations accepted in full or in principle by the Australian Government. The review recommended actions directed at better informing communities in their engagement with developers. The review stopped short of recommending regulatory interventions in the relationships between landholders and communities and developers. The Government has funded additional resources to boost the AEIC’s capability, development of a new national developer rating scheme, and research on a regulatory package to support community benefits.[36]
1.51Recent polling by Farmers for Climate Action revealed that 70 per cent of rural Australians living in renewable energy zones (N=1,001) support the energy shift, but many do not realise they are part of the quiet majority. Key findings from farmer focus groups from every state across Australia were that:
clean energy rent is seen as a good way to diversify farm income;
farmers hope renewables can deliver more reliable energy to them and their communities;
the majority of farmers support “renewables done right” on farmland; and
farmers do not trust developers and called for strong regulation from government on decommissioning.[37]
1.52The message is clear: most farmers are open to renewables and transmission projects, but Government needs to address their deep distrust of developers through regulatory intervention and, most particularly responsibility for decommissioning.
Recommendation 5
1.53Submit for consideration by ECMC no later than June 2025 an action plan responding to Recommendation 6 (‘Through the National Cabinet, task relevant ministers to work together to overcome barriers to the energy transition’) of the Climate Change Authority’s 2024 Annual Progress Report.The action plan to address, amongst other things, expediting development and environmental approvals for utility-scale renewables projects (generation, storage and transmission) under strict timescales while balancing the interests of:
biodiversity conservation and the risks to biodiversity of unabated climate change; and
bona fide community concerns with the risks of unabated climate change to regional economies and social wellbeing.
Recommendation 6
1.54Commission for consideration by ECMC no later than June 2025 a rapid review of implementation of the recommendations of the AEIC Review of Community Engagement.The review should identify any gaps in policies that would assist in securing community support for renewables projects, and particularly:
whether government needs to regulate the process of developer consultation and contracting with landholders and communities; and
whether government needs to mandate decommissioning provisions that back legal obligations upon developers with financial provisioning (insurance, trusts, funds in escrow) to ensure those obligations can be met upon cessation of projects.
1.55A number of submissions remarked on the waning role of the Australian Energy Market Commission (AEMC) as the policy lead amongst the three market bodies. Senex Energy, referencing the east coast gas market governance model, put it thus:
…the Australian Energy Market Commission's (AEMC) role in promoting and reviewing regulatory change has reduced due to the influence of other market bodies. This is despite it having the relevant skills and expertise to independently assess market performance against economic and other policy objectives and recommend appropriate action.[38]
1.56Senex recommended that Government:
Develop a plan to consolidate all market design and oversight functions within a single organisation and Senex recommends this be the AEMC given its role under the NGL.[39]
1.57The Smart Energy Council and Nexa Advisory supported:
…the establishment of an independent review of the Boards or commissions of all energy agencies, including the [Australian Energy Regulator] AER, AEMC, AEMO and Energy Consumers Australia - “to ensure alignment with the strategy, clarity of roles, that they have the right mix of skills and knowledge and are appropriately independent and fairly represent the renewable energy industry. (Nexa Advisory Submission)[40]
1.58The Clean Energy Council pressed the case still further:
Acknowledging the historic or potential role of organisations like the Productivity Commission or ACCC to provide impartial advice on market development, ongoing responsibility for systemic market development should therefore sit solely with the AEMC.
‘Furthermore, where the AER or AEMO make changes to their processes or systems that have material impacts on the efficient function of the energy market, this should be done in accordance with the overall reform direction established by the AEMC.[41]
1.59Submissions reflected widely divergent views on AEMO.Some contended that AEMO’s cost estimates and cost/benefit analyses are ill-founded and inaccurate.[42] Other submissions commended AEMO for the quality of its analysis in the Integrated System Plan.
1.60A common theme, however, is that AEMO wears too many hats as system operator, system planner, and service provider.
1.61The Smart Energy Council suggests:
AEMO should remain an independent institution as the market operator of the energy grid. Their independence is crucial to a competitive power system.However, AEMO must have transparency and accountability to primarily, the Federal Energy Minister, as well as all State Energy Ministers through the forum of the ECCMC. AEMO should also have a formal process as part of their governance arrangements whereby they must appear before Senate Estimates as well as for any applicable Senate inquiry.[43]
1.62Erne Energy commented:
The NEM should have a dedicated independent transmission system and market operator, who also undertakes NEM-wide transmission planning (but not distribution planning)…Any other functions that sit outside the remit of system and market operation, such as auctioneer for the Capacity Investment Scheme, Customer Trustee (NSW), Planner (Victoria), transmission developer (Victoria) should be overseen by a different entity to provide clear separation between commercial operations and NEM-wide functions.[44]
1.63The Australian Energy Regulator (AER) is presently constituted as a Division of the Australian Competition and Consumer Commission (ACCC). Professor Penelope Crossley observed that:
There is consensus among the States and Territories that the goals of transparency and accountability are best served by the separation of the AER from the ACCC.[45]
1.64The Australian Financial Markets Association points to dysfunctional outcomes resulting from the overlap between the AER and the ACCC:
We particularly want to highlight that there is significant overlap between the AER’s new Wholesale Market Monitoring function and the ACCC’s continuing gas inquiry. These overlaps are costly and burdensome for industry while diverting unnecessary regulatory resources and creating inefficiencies.[46]
1.65Erne Energy argues that the AER has ’lost its way, no longer protecting the interests of consumers,’ and that:
The AER needs to be independent of government and free to act without political interference. Recent decisions…suggest a degree of political influence and this does not serve the needs of consumers.[47]
1.66Nexa Advisory proposed a clean sweep of roles and responsibilities amongst the market bodies, starting with State and Federal Energy Ministers publishing a renewed Strategic Energy Plan (SEP). This should outline the following strategic priorities for the transition and be implemented via:
refreshed Statements of Expectations for the AEMC, AER and AEMO;
an independent review of the Boards of the AER, AEMC, AEMO and Energy Consumers Australia to ensure alignment with the strategy;
a new, independent consumer voice within policy and decision-making;
an independent review of the role and performance of electricity distribution networks; and
improved representation of innovators / investors within the governance of each market and regulatory body.[48]
1.67Many submissions called for effective representation of the consumer voice in NEM governance, with widespread concern that Energy Consumers Australia, while effective in representing vulnerable consumers, was not effective in representing consumers as households and small businesses actively participating in the energy market with Consumer Energy Resources.[49]
1.68Erne Energy captured a common sentiment amongst submissions as follows:
The future electricity system should be co-designed by consumers, empowering them to shape how this essential service is delivered to meet their needs, not the needs of an industry that is outdated and fighting to maintain the status quo.[50]
1.69Nexa Advisory and the Smart Energy Council advocate establishing ‘a new, independent consumer voice representing the interests of new energy consumers within policy and decision-making’.[51] The Smart Energy Council also advocate for the establishment of a national Consumer Energy Office within DCCEEW:
This office will develop policy work to ensure the right incentives and standards for consumer energy. This will ensure that home electrification and helping families to slash their power bills is at the centre of Government policy and carries an appropriate level of weight in energy planning and regulation operations.[52]
1.70Nexa Advisory remarked that:
There is a clear need to consider how governance arrangements enable market bodies to expand their engagement and decision-making beyond consumer advocacy and theoretical long-term consumer outcomes, towards meaningful inclusion of consumers within decision-making in a way which builds social licence.[53]
1.71Erne Energy said the AEMC would benefit from having a specific consumer-only member of the executive team with the role to be the consumers’ voice in all processes.[54]
1.72The Justice and Equity Centre, noting the significant inconsistency amongst statutory frameworks and the challenges faced by consumers in engaging with NEM governance, stated:
Opportunity exists to ensure that all government decision-making processes embed robust and transparent processes for consumer, community and stakeholder engagement…Increased recognition of the importance of engagement has not come with the required support to build and fund capability for consumer and community stakeholders to have the capacity to engage meaningfully.[55]
1.73Submissions did not raise the related issue of C&I participation in policy and decision-making. This may reflect the absence from submissions of the relevant peak councils, such as the AiGroup and the Property Council of Australia. However, these latter two bodies, together with ACOSS and the Energy Efficiency Council, authored the paper ‘Demanding better - A reform agenda for harnessing the power and flexibility of demand side energy resources’, mentioned above. That paper envisages a broader notion of energy consumer encompassing industrial and commercial energy consumers as well as households and small businesses. In addition to recommending establishment of a stand-alone National Energy Performance Agency, the paper calls for a targeted reform agenda to improve representation across relevant organisations, both at board level and within agencies and departments.[56]
1.74The Clean Energy Investor Group recommends establishing an Innovator and Investor Panel, similar to Energy Consumers Australia, to provide formal guidance on legislation and regulation. The Smart Energy Council echoed the concern:
Across all of the covered institutions and energy bodies, the representation of innovators and investors must be strengthened to better reflect the rapidly changing industry.[57]
1.75Nexa Advisory similarly called for improvement to:
…the representation of innovators / investors within the governance of each market and regulatory body, with transparency of how this is included in decision-making.[58]
Recommendation 7
1.76Commission a review of institutional arrangements for governance of the NEM to be conducted in parallel with, and to report to ECMC in conjunction with, the expanded review of post-2030 arrangements. Without limiting the scope of the review, it should have particular regard to:
the roles and responsibilities of the four market bodies;
eliminating overlap amongst the four market bodies;
clarifying the policy lead amongst the four market bodies;
transparency and accountability in the conduct of the four market bodies, including in their collective advice to ECMC via the Energy Advisory Board;
the independence of the AER vis-à-vis the ACCC;
deconflicting the multiple roles of AEMO to restore its independence as market operator and planner;
relocation or spinning off of AEMO’s non-core roles, including its contracted service roles;
establishing independent verification of AEMO’s cost estimates and cost-benefit analyses for actionable investments;
embedding consumer representation in the governance and executive structures of AEMC, AER and AEMO;
reconstituting Energy Consumers Australia to represent consumers as active participants in CER and C&I (in addition to representing vulnerable consumers), embedding AEC in the Energy Advisory Panel to ECMC, and funding a capability development program to equip consumer representatives to participate in policy and decision-making advice on par with that provided by utility-scale investors; and
a roadmap to guide ECMC in the rapid implementation of recommendations.
1.77A number of submissions pointed to the convolution of the law and administrative arrangements governing the NEM. Professor Penelope Crossley captured this complexity as follows:
The National Electricity Rules alone are currently on version 217 and run to 1938 pages. This is the second version of the NER issued within the month of October, and our 14th version thus far in 2024. Over one 12 day period earlier in the year, 4 separate versions of the NER applied, with one version (212) only in force for 3 days. The frequency of these piecemeal changes, coupled with the hundreds of Sate and Territory derogations from the rules, only serves to amplify the problems associated with the complex regulatory and institutional arrangements.[59]
1.78Professor Crossley went on to remark that NER rules are not subject to parliamentary oversight or disallowance.
1.79The Australian Financial Markets Association expressed similar concerns:
It is AFMA’s experience that the energy regulatory framework contains inefficiencies, overlap and redundant elements. It is AFMA’s view that the root cause of this lies in the legislative framework itself.[60]
1.80The Association proposed that the National Energy Rules would benefit from review similar to the Australian Law Reform Commission’s (ALRC) recent review of the complex and inefficient Corporations Act 2001.[61] The ALRC review took three years involving three interim reports before delivering its final report in January 2024.[62]
1.81The Grattan Institute proposed, as a departure point, consolidating the three national energy laws into one:
Energy market governance needs to be fit for a net-zero economy. The three laws governing energy markets should be merged into one, to best serve the interests of consumers. And governments must give better policy direction so that market bodies can make better, faster decisions.[63]
1.82Administration of the convoluted NEM laws and rules is glacial in its pace and in no manner fit for the urgent task of the energy transition. Tilt renewables gave force to this reality as follows:
Tilt Renewables considers that the rule change process timeframes are incompatible with the rapid transition of the electricity market.Most rule changes drift on for years by which time the problems to be add8essed may well have changed.[64]
Recommendation 8
1.83Reduce red tape in the energy market. Commission a root and branch overhaul of the National Energy Rules and administrative procedures to make them coherent, lean, accessible and efficient in enabling the fast-moving pace of the energy transition. The overhaul should be commissioned to the ALRC or contracted to a suitably resourced legal task force.The overhaul should be commenced immediately and progress in parallel with, and be informed by, the expanded Post-2030 Review. The review should finalise no later than December 2026, unless extended with the agreement of ECMC. The review should, to the extent possible, report in stages that facilitate the progressive implementation of its recommendations through legislative amendments and rule changes.
1.84Several submissions sought to address the problem of energy poverty inherent in the high capital costs that attach to Consumer Energy Resources, and inherent in the circumstances of renters and many apartment dwellers.
1.85The Renew Illawarra Network stated:
There are currently forces active within the Generator-Transmission-Distribution-Retail system that are artificially restricting the free market and community governance of Consumer Energy Resources.As a consequence, consumers face inflated energy prices, with the only alternative being substantial capital investments that yield minimal returns, particularly for batteries.A large number of consumers, including low-income households, renters, and apartment residents, who are unable to make such investments, are bearing the brunt of this injustice.[65]
1.86The Justice and Equity Centre noted:
Energy law and regulation has objectives, but these need review and reframing to ensure they equitably protect and promote the interests of all consumers. Other energy policy and institutions (at Commonwealth and jurisdictional level) need to be more consistently aligned with these reformed objectives. In particular, there are opportunities to more explicitly ensure energy governance (and bodies) recognise and promote equity of outcomes in their decision-making and strengthen their independent remit to do so as ‘expert’ bodies.[66]
1.87ACOSS recommended, amongst other things, amending the National Energy Objectives to address inequity, consumer risk and harm, and demand side through adding social equity and energy affordability as objectives, and, subject to consideration, avoiding exposure of consumers to risks they are ill-equipped to understand, manage or price.[67]
1.88Government appears predisposed to pass to the three market regulators responsibility for mitigating energy poverty amongst consumers.While there is scope for regulation to counter some of the drivers of energy poverty, there is also scope – and likely very much more – for fiscal and taxation measures to rebalance the interests of those cannot participate in the energy transition because they lack the resources, or they rent, or they live in apartments. Time is running out before the drivers of energy poverty take enduring effect. This would be morally reprehensible. And it would severely erode political support for the energy transition.
Recommendation 9
1.89Commission an inquiry, to report for consideration by ECMC no later than December 2025, on the nature, extent and trajectory for energy poverty resulting from the energy transition, and recommend policies to substantively negate such poverty. The inquiry to be led by a panel comprising experts in welfare, economics and the energy market.
1.90Although I accept much of what is contained in the majority report, there are a number of recommendations that I do not support.
1.91I do not support Recommendation 1 of the majority report. As outlined above, the more appropriate body to conduct a review is the Post-2030 Review.
1.92I do not support Recommendation 3 of the majority report. The Terms of Reference for the Post-2030 Review should be broadened as set out in Recommendation 1 above.
1.93I do not support Recommendations 9 or 10 of the majority report. AEMO’s ability to make projects actionable is significant to facilitating our energy transition. I have concerns about the practicality of implementing these recommendations.
1.94I support in principle Recommendation 11 of the majority report, but recommend the review be focussed as set out in Recommendation 8 above.
1.95I support Recommendation 12 of the majority report.
1.96I do not support Recommendation 15. I have concerns about the practicality of implementing this recommendation and I do not believe it will have a significant impact.
1.97I strongly support Recommendations 16, 17 and 21 of the majority report in relation to Consumer Energy Resources.
Senator David Pocock
Independent Senator for the Australian Capital Territory
Footnotes
[1]Cited in: Erne Energy, Submission 32, p 1.The reviews having been Parer (2002), Vertigan (2015), Finkel (2017), and Edwards (2020).
[2]Global Carbon Budget, ‘Fossil fuel CO2 emissions increase again in 2024’, 13 November 2024, (accessed 12 December 2024)
[3]Climate Change Authority, ‘Media Release:Emissions need to fall further, faster:Climate Change Authority – 2024 Annual Progress report released today’, 28 November 2024, (accessed 12December 2024)
[4]The Grattan Institute, Submission 48, p. 2.
[5]Engineers Australia and AATSE, Submission 18, pp. 5-6.
[6]Clean Energy Investor Group, Submission 17, pp. 1-2.
[7]Erne Energy, Submission 32, p. 1.
[8]Australian Financial Markets Association, Submission 66, p. 2.
[9]The Superpower Institute, Submission 24, p. 4.
[10]DCCEEW, Energy and Climate Change Ministerial Council, National Consumer Energy Resources Roadmap – Powering Decarbonised Homes and Communities, 19 July 2024 (accessed 13 December 2024).
[11]The Hon Chris Bowen MP, Minister for Climate Change and Energy, Media Release, Making the National Electricity Market fit for purpose, 26 November 2024 (accessed 11 December 24)
[12]Superpower Institute, Submission 24, p. 4; Justice and Equity Centre, Submission 28, p. 2; Grattan Institute, Committee Hansard, 31 October 2024; Nexa Advisory stated this inquiry was not the appropriate path to resolving the issues raised in its submission, Submission 26, p. 1.
[13]Australian Energy Market Operator, 2024 Integrated System Plan, 26 June 2024, pp. 50, 67.
[14]Energy Efficiency Council, Submission 47, p 1.
[15]Climate Change Authority, 2024 Annual Progress Report, 15 November 2024, p 64, quoting Roberts et al, 2019.
[16]Sophie Vorrath, Renew Economy, ‘AEMO dials back forecasts for home battery uptake, VPP participation, as push for rebate grows’, 11 December 2024, (accessed 13 December 2024).
[17]Clean Energy Council, Submission 69, pp. 2-3.
[18]Climate Change Authority (2024), p. 6.
[19]Nexa Advisory, Submission 26, pp. 12-13.
[20]ACTU, Submission 51, p 2.
[21]Energy Efficiency Council, Submission 47, Attachment, and ACOSS, Submission 52, Attachment, referencing ACOSS, AiGroup, EEC, Property Council of Australia, ‘Demanding better: A reform agenda for harnessing the power and flexibility of demand side energy resources’, no date, (accessed 13 December 2024).
[22]Smart Energy Council, Submission 36, p. 2.
[23]Clean Energy Council, Submission 69, p. 3.
[24]Rewiring Australia, Submission 78, p. 2.
[25]Nexa Advisory, Submission 26, p. 13.
[26]AEMO, ‘2024 Integrated System Plan Overview’, 26 June 2024, p. 1, (accessed 13 December 2024).
[27]DCCEEW, ‘Capacity Investment Scheme’, (accessed 13 December 2024).
[28]DCCEEW, ‘Terms of Reference:Review of Market Settings in the National Electricity Market to Follow the Capacity Investment Scheme’, (accessed 11 December 2024).
[29]Climate Change Authority (2024), Recommendation 6, p. 15.
[30]Grattan Institute, Submission 48, p. 3.
[31]Smart Energy Council, Submission 36, p. 1.
[32]Australian Aluminium Council, Submission 56, p. 4.
[33]Energy Grid Alliance, Submission 54, p. 1.
[34]Rainforest Reserves Australia, Submission 22, p. 5.
[35]Rainforest Reserves Australia, Submission 22, p. 2.
[36]DCCEEW, ‘Community Engagement Review’, (accessed 13 December 2024).
[37]Farmers for climate action, Media Release, ‘The quiet majority: Australians in renewable energy zones support the energy shift,’ 26 November 2024, (accessed 13 December 2024).
[38]Senex Energy, Submission 34, p. 3.
[39]Senex Energy, Submission 34, p. 3.
[40]Smart Energy Council, Submission 36, p.3, endorsing the position of Nexa Advisory, Submission 26, p. 3.
[41]Clean Energy Council, Submission 69, p. 3.
[42]See, for example, Professor Bruce Mountain, Submission 8, p. 6.
[43]Smart Energy Council, Submission 36, p. 2.
[44]Erne Energy, Submission 32, pp. 4-5.
[45]Professor Penelope Crossley, Submission 58, p. 8.
[46]Australian Financial Markets Association, Submission 66, p. 3.
[47]Erne Energy, Submission 32, Attachment A, p. 1.
[48]Nexa Advisory, Submission 26, pp. 6-13.
[49]Erne Energy, Submission 32, p. 6.
[50]Erne Energy, Submission 32, p. 2.
[51]Nexa Advisory, Submission 26, Smart Energy Council, Submission 36, p. 12.
[52]Smart Energy Council, Submission 36, p. 2.
[53]Nexa Advisory, Submission 26, p. 2.
[54]Erne Energy, Submission 32, Attachment, p. 4.
[55]The Justice and Equity Centre, Submission 28, p. 3.
[56]ACOSS, AiGroup, Energy Efficiency Council, The Property Council, ’Demanding Better – A reform agenda for harnessing the power and flexibility of demand side energy resources’, no date, p. 14, (accessed 14 December 2024)
[57]Smart Energy Council, Submission 36, p. 2.
[58]Nexa Advisory, Submission 26, p. 13.
[59]Professor Penelope Crossley, Submission 58, pp. 5-6.
[60]Australian Financial Markets Association, Submission 66, p. 4.
[61]Australian Financial Markets Association, Submission 66, p. 4.
[62]Australian Law Reform Commission, Confronting Complexity: Reforming Corporations and Financial Services Legislation (ALRC Report 141), 18 January 2024.
[63]Grattan Institute, Submission 48, p. 2.
[64]Tilt Renewables, Submission 29, p. 2.
[65]Renew Illawarra Network, Submission 5, p. 2.
[66]The Justice and Equity Centre, Submission 28, p. 2.
[67]ACOSS, Submission 52, p. 6.
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