What's happening? 5 min read
Reforming the regulatory framework that underpins our electricity system is a key aspect of Australia's energy transition, but the scale and pace of change can seem overwhelming.
From integrating renewables and consumer energy resources to managing system security, access and data, a range of reforms are in progress across the national framework.
In this Insight, we break down five key regulatory reforms currently underway, outlining the problem each aims to address and the proposed solution.
Five key regulatory reforms
1. Resource adequacy and capacity
What's the problem?
The retirement of coal-fired generation raises security-of-supply issues and there is a continued need for government support to secure supply and encourage the rapid buildout of renewables as part of the energy transition.
What's the solution?
The Capacity Investment Scheme (CIS) is a federal government initiative which aims to secure adequate capacity in the market. The CIS operates through competitive tenders whereby successful clean renewable generation and storage projects are offered long-term underwriting agreements for an agreed revenue 'floor' and 'ceiling'. The first tender round commenced in November 2023, and there have been tender rounds approximately every six months in the NEM, and 12 months in the Western Australian Wholesale Electricity Market. At present, gas projects are not able to participate in the CIS.
The Federal Government has indicated that the CIS will only continue until 2027, so a key consideration going forward will be what future solutions will address security-of-supply issues following the conclusion of the scheme.
Additionally, the South Australian Government is currently consulting on a proposed Firm Energy Reliability Mechanism (FERM) aimed at managing energy reliability risks within South Australia. Under the FERM, a five-year rolling firm energy target would be set and long-duration firm capacity generators would tender annually for contracts to meet this target. Notably, gas projects would be eligible to participate in the FERM, unlike in the CIS.
2. Transmission access reform
What's the problem?
Transmission access and congestion remains a stumbling block in the buildout of renewables in Australia. This needs to be addressed to ensure we have new sources of generation in efficient locations as coal-fired power stations are closed.
What's the solution?
Progress of Transmission Access Reform has been fractured over the last few years. While a Congestion Relief Market (CRM) was explored as a possible solution, this was shelved by the Energy Ministers in December 2024 on the basis that existing jurisdictional schemes already seek to address this, noting that the CRM would create marginal benefits, especially in comparison to the costs and complexities involved in its implementation. As a result, we are likely to see a fragmented approach to transmission and access across the jurisdictions, with each state developing their own respective access regimes. For example, VicGrid has already announced its plans for the Victorian Access Regime, which would seek to mitigate curtailment and future congestion by placing a cap on connections (known as access limits) in REZ-declared areas.
3. Consumer energy resources
What's the problem?
The high uptake of consumer energy resources (CER) in the NEM (eg rooftop solar) needs to be carefully managed and coordinated at a national level, as properly integrated CER has the potential to facilitate a faster and less costly energy transition, boost system reliability and reduce consumers' energy bills.
What's the solution?
The CER Roadmap was released in July 2024 and aims to promote better coordination and optimisation of CER at a national level by setting national reform priorities against the backdrop of an agreed set of guiding principles. There are 14 national reform priorities identified in the Roadmap and in March 2025, the Energy Ministers reported that progress has been made on 12 out of 14 of those priorities. The development of CER technical standards and a regulatory framework to enforce them are two key priorities under the Roadmap that are well progressed, with public consultation on those reforms slated for the second quarter of 2025.
4. Essential system services
What's the problem?
Essential system services, such as frequency control, inertia, system strength and operating reserves, help keep the electricity grid in a safe, stable and secure operating state. Historically, these services have been provided by thermal generators and, as we transition to renewables, a new approach is needed.
What's the solution?
The Australian Energy Market Commission (AEMC) has implemented several rule changes to address essential system services, although a concern remains that these reforms will not be completed before the exit of coal, particularly in NSW with the exit of the Eraring Power Station scheduled for 2027.
Most notably, in March 2024, the AEMC introduced a new rule which leverages the existing tools and frameworks within the power system to enhance system security procurement frameworks. Among other things, this rule aims to promote greater transparency around current system security needs and how the Australian Energy Market Operator (AEMO) plans to manage system security during the energy transition. This is effected by the introduction of a requirement for AEMO to publish a new annual report, the 'Transition plan for system security'. The rule also ensures that AEMO can procure necessary security services that fall outside the existing frameworks to ensure the security of the power system.
The AEMC is also considering further essential system services-related rule changes such as the operational procurement of inertia, including by way of a potential ancillary service spot market.
5. Data
What's the problem?
Efficient use and sharing of energy-related data (including existing energy data and data related to new technologies, such as virtual power plants and electric vehicles) will be an important part of managing the energy transition, and changes are needed to the current regulatory framework to enable this.
What's the solution?
As a part of the first stage of reforms in this area, the Statutes Amendment (National Energy Laws) (Data Access) Act 2025 was passed in February 2025. This Act aims to remove regulatory barriers and enable more effective access to existing AEMO energy data by amending the National Electricity Law and National Gas Law to allow AEMO to share protected data with certain trusted 'prescribed' bodies, including the Clean Energy Finance Corporation and the Australian Renewable Energy Agency. While not much detail has been given on the expected future reforms in this area, the Energy Ministers have flagged that they are considering a more significant overhaul of the energy data framework which will be supported by agreed new Energy Data Policy Principles and aligned with wider national data reforms.
