On 20 December 2024, the Senate Select Committee on Energy Planning and Regulation released its final report. This review comes at a critical time and presents a real opportunity to address fundamental governance issues in Australia’s energy market that have held the energy transition back.
The debate about how to deliver best practice governance in the energy market has been going on for many years, including several reviews initiated by the former Council of Australian Governments (COAG) Energy Council.
The key issue is that current market structures and governance arrangements are not keeping pace with developments across the world in new energy, business models, consumer preferences, and decarbonisation.
Decades of progress, and potential benefits for Australians, have been lost because of the politics and debates about energy policy, and lack of accountability for the delivery of a timely and orderly energy transition.
Instead, regulatory ‘tinkering’ has been a mainstay of the energy transition over recent years, we are now at an inflection point. If this is not addressed now, we will have little success in managing the risks and embracing the opportunities of a more dynamic power system, let alone meeting our climate targets.
There is broad agreement that Australia’s energy market governance is not fit for purpose. This means Australians are bearing the unnecessary cost of delays.
As technical as it might seem, there is a straight line between the planning and regulation issues that are shaped by governance, and the electricity bills that Australian families and businesses pay.
And as the report highlights, it ‘is vitally important that the interests of ordinary Australians are centred in energy policy and in the work of the market bodies’.
The Committee has put forward 22 recommendations, attempting to address some of the governance issues highlighted in submissions to review and over the years by governments, market bodies, industry, experts, academia and many others, including Nexa Advisory.
Key highlights include:
Recommendation 1 – A comprehensive review by the Productivity Commission into transmission regulatory arrangements, focusing on the RIT-T process, accountability for planning and delivery, and ensuring competition.
The RIT-T is a process tied up in red tape and bureaucracy. Political leaders and market bodies are well aware of this, yet continue to assess projects through deep down that rabbit hole. There have been many regulatory band-aids overlaid to try and ‘fix’ the situation leaving us with a tacritical transmission build out process with endless loopholes and reviews. The result being that each project takes a decade to be approved.
Recommendation 2 – An updated Strategic Energy Plan to be developed by energy ministers, to ensure national coordination and accountability across government and market bodies.
Despite the Federal Government’s recent collaborative partnership with the states and territories through the National Energy Transformation Partnership (NETP) there remains a clear need for overarching and enduring policy certainty, to ensure the delivery of nation-building transmission infrastructure.
To make true progress and underpin the $142billion of capital investment required by 2050,
we need a truly collaborative approach, way beyond just the much needed bipartisan energy policy.
Recommendation 3 – Enhanced accountability for market bodies, including a review of the governance structures of the market participants and an examination of the responsibilities of AEMO, AEMC, and AER.
AEMO has strayed outside its core roles of system operation and market operation, into policy and market design which are key AEMC functions. Clear independence and allocation of responsibilities across market bodies are necessary to embed accountability and effective oversight.
Recommendation 4 – Make AEMO a corporate Commonwealth entity, through to Recommendations 7,8, 9 – ECMC to table the ISP in parliament as having met the National Electricity Objectives, requiring AEMO’s Board of Directors sign off on the ISP prior to publication, a rule change to remove AEMO’s power to make projects actionable for the 2026 ISP, and the Productivity Commission to undertake an independent review of the 2028 ISP. These recommendations attempt to respond to concerns expressed by a vast number of stakeholders about the expanding role and powers of AEMO, and the impact this is having on the integrity of the ISP, an important roadmap for Australia’s energy transition.
Recommendation 11 – Explore the need for greater contestability and diversity of providers to enhance competition, drive innovation and overcome incumbency bias.
Competition and innovation are vital aspects of the energy sector. This aspect is particularly important in regards to the emergence of Consumer Energy Resources, which pose a challenge to the business models of incumbent energy market participants.
There is also an issue with regulated monopoly distribution network service providers overreaching into competitive markets, which is adding cost and barriers to competition and innovation.
Recommendations 16, 17, 18 & 21 – A focus on consumer energy, with several recommendations to better support consumers. This includes establishing an independent body to represent new energy consumers, reviewing the Energy Consumers Australia board, accelerating the establishment of a CER Technical Regulator, and developing nationally consistent standards and consumer frameworks.
This consumer focus is long overdue. Energycustomers currently have to navigate a complex energy environment with various products, government subsidy schemes, technical obligations, and compliance requirements,all before they even think about their tariff arrangements.
This finally leads us to Recommendation 22 – A comprehensive review of network charges, which we expect will focus on distribution and retail tariff reform. The need for tariff reform is the biggest blocker to consumer energy and consumer empowerment. It continues to be raised and then left behind in the ‘too hard basket’.
As always, the devil is in the detail
Regardless of whether all the recommendations are necessary or supported, the issues raised by a wide range of stakeholders present a pivotal opportunity to ensure we keep the debate alive.
There have been many reviews into these issues which have seen little or no implementation of their recommendations, it is as yet unclear if this review will suffer the same fate. However, the fate of the review and its recommendations remain unclear.
However, what is clear is the unquestionable need to maintain momentum in the energy transition. For that, we need certainty for investors, most particularly about coal-fired power station closures, stronger strategic leadership, and accountability for infrastructure project delivery.
We need the transition done and done on time.
