Power dynamics: Why governance, and how we make decisions, is central to the green energy transition

Australia’s energy transition is often framed as a challenge of infrastructure, investment and market design. Just as critical, however, is how we make public policy decisions – in other words, governance.

Over the past year, I interviewed over a hundred leaders from governments, market bodies, industry, non-profits and research institutions to understand how public policy decisions are made in practice — and why reform can be so difficult.

At the beginning I assumed that ‘fixing’ the energy market bodies would solve most of our governance challenges.

These institutions play critical roles, and there are important opportunities to strengthen them – including ensuring that they have greater in-house capability around issues like rooftop solar, distributed batteries and energy efficiency.

However, as the project progressed, it became clear that refining the market bodies is important – but not sufficient. In fact, there’s a risk that focusing too narrowly on institutional reform misses the bigger picture.

Many of the most significant constraints on Australia’s energy transition sit outside the market bodies – shaping not just how decisions are made, but what can realistically be considered.

The ultimate decision-makers in the National Electricity Market (NEM) are the cabinets of the Federal, state and territory governments. Market bodies operate and refine the system, but major reforms require explicit or tacit agreement across jurisdictions.

When energy technologies and markets were relatively stable, this model provided significant benefits, including NEM-wide consistency and policy stability. However, in a period of rapid technological change, market settings and policies need to be rapidly updated. 

This requirement for broad consensus across multiple governments can slow reform and often result in more incremental changes.  Where governments have fundamentally different positions, progress can stall altogether. Market bodies can’t fix this – they can’t compel governments to agree.

This points to a different way of thinking about reform. Rather than assuming that all major changes should be pursued through multilateral processes, we need to be more deliberate about which issues genuinely need to be national or NEM-wide, and which need to be progressed unilaterally by the Federal, state or territory governments.

Decentralised decision-making is already a reality in Australia’s energy system. The challenge is to make it work better, supported by national institutions that provide information, coordination and shared frameworks.

The second challenge is that market bodies operate within tightly defined mandates that are set by multiple governments. If you’ve ever worked for multiple bosses, you’ll know how incredibly challenging this can be. This creates challenges not only for prioritisation, but also analysis and decisions.

Several interviewees noted that the scope of formal reviews, the design of modelling exercises and the range of options considered can all be influenced by these authorising environments. Exploratory or unconventional ideas — particularly those that may be politically sensitive — can sometimes be difficult to pursue within formal processes.

This does not reflect a lack of capability. On the contrary, Australia’s market bodies contain extraordinary expertise. But their ability to deploy that expertise is shaped by the governance system around them.

As a result, industry, consumer groups, research organisations and think tanks play a critical role in our governance system. They can challenge assumptions, develop novel policy ideas and create social licence for reform in ways that are sometimes difficult within formal processes. That makes them a central part of the governance ecosystem.

To unlock this potential and link it back to decision-making, we need to better fund and coordinate this ecosystem. Involving staff from governments and market bodies in collaborative projects that are arm’s-length from their institutions will also be critical to combine independence with deep system knowledge.

The third constraint is that energy policy is far broader than the NEM. Real-world investment in generation, networks and appliances is heavily influenced by electricity market settings, but it’s also shaped by a much wider range of policies, including incentives for solar and batteries, building standards, transport policy and land-use planning.

As highlighted in Figure 2, governance of energy policy is highly fragmented. This fragmentation also contributes to a persistent imbalance, where supply-side issues receive sustained attention while demand-side opportunities – such as energy efficiency and electrification – are less systematically developed.

Market bodies cannot control all these policy levers, and the most important place for coordination to occur is within and between government departments and levels of government.

Taken together, these dynamics point to a broader conclusion. Australia’s energy governance system is not simply centralised or decentralised — it is both. It consists of national institutions, multi-government processes and a wide range of policies and actors operating at different levels.

Improving this system requires more than institutional reform. It requires a clearer understanding of where decisions are actually made, where constraints arise and how different parts of the system interact.

These issues, and many others, are explored in detail in a new White Paper – Power Dynamics [insert link https://eec.org.au/wp-content/uploads/2026/04/202604_EEC_PowerDynamics_DIGITAL.pdf ] – from the Energy Efficiency Council with support from the RACE for 2030 Cooperative Research Centre.

The White Paper sets out a package of practical reforms, but it is also intended as a starting point for a broader conversation.

If there was one consistent message from the interviews, it is that there is no single ‘right’ answer to many of these questions. Different perspectives reflect different experiences, priorities and constraints.

What matters is that these perspectives are brought into the open, tested and debated.

Australia has the technical capability and resources to navigate the energy transition successfully. Whether it does so will depend, in large part, on how well its governance system can adapt — and how effectively people within that system can listen to each other, challenge assumptions and think beyond established frames.

That conversation is just beginning.

Rob Murray-Leach is an independent energy consultant and former CEO of the Energy Efficiency Council.