Australia To Review National Energy Market To Accommodate Renewable Energy

The Australian government has appointed an expert independent panel to conduct a review of the country’s electricity market and advise a roadmap to better integrate renewable energy as aging coal power plants exit the system.  

The panel led by the Associate Professor at Australia’s Griffith University Tim Nelson, who previously worked with Spain’s Iberdrola, will look into the National Energy Market (NEM) wholesale market settings to ensure the market promotes investment in firmed renewable energy generation and storage capacity into the 2030s and beyond as demand continues to grow.  

The focus will be on better managing the rapid increase and smooth integration of rooftop solar and utility-scale reliable renewable energy capacity.   

It will make the final recommendations to the Energy and Climate Ministers in late 2025. Nelson is joined by the former Chair of the Australian Energy Regulator Paula Conboy, one of the designers of the New South Wales (NSW) Energy Roadmap Ava Hancock, and former Boston Consulting Group Senior Partner Phil Hirschhorn.  

“The Albanese Government implemented a reformed Capacity Investment Scheme in 2023, and it has massively outperformed to date, which is a good thing and shows the investment appetite to deliver reliable renewables in Australia is very strong,” said the Minister for Climate Change and Energy, Chris Bowen. “The review will provide a comprehensive assessment of what the market will need next, once the current CIS tenders end in 2027, to ensure that investment pipeline remains strong.”  

Under the country’s existing Capacity Investment Scheme (CIS), the government plans to support 32 GW of renewable energy capacity via the competitive auction route to accelerate the country’s progress to achieve 82% renewable energy share in the national electricity mix by 2030 (see Australia Announces Plans To Auction 32 GW RE Capacity).   

Renewable energy provides over 40% of Australia’s electricity, having doubled within the last 5 years, according to the Clean Energy Council and Green Energy Markets’ recent report titled Emissions reductions delivered by renewable energy 2015 to 2025. Since 2015, the country has installed 40 GW of new rooftop solar and large-scale renewable energy capacity.  

The report writers expect it to account for 48% share by 2025, scaling up to 60% by 2030 based on under-construction or committed projects with offtake or underwriting contracts. 

Additionally, the government has also introduced the Future Made in Australia (Production Tax Credit and Other Measures) Bill 2024 to the Parliament, which aims to offer production tax incentives for renewable hydrogen and critical minerals   

These will only be provided once the projects are up and running, producing hydrogen or processing critical minerals used in products like wind turbines, solar panels and electric vehicles (EVs).  

Under the bill, a Hydrogen Production Tax Incentive worth AUD 2/kg will be offered for renewable hydrogen produced between 2027-28 and 2039-40 for up to 10 years/project.  

The Critical Minerals Production Tax Incentive is worth 10% of relevant processing and refining costs for Australia’s critical minerals processed and refined during the same period as above for up to 10 years/project.    

Welcoming the introduction of the bill to the Parliament, the CEC Policy Director – Decarbonization Anna Freeman said, “The production credit is a key element of our investment attraction strategy, and it should be complemented with demand-side policy measures to encourage uptake.”  

Australia introduced the Future Made in Australia Bill 2024 in July this year to identify sectors that will be key to the country’s net zero transformation (see Australia To Boost Clean Energy Technologies).