Post 2025 market design for the NEM

PIAC responded to the Energy Security Board’s (ESB) Post 2025 Market Design Issues Paper.

We consider fundamental change to energy markets and the planning and operation of the energy system is required to ensure energy supply remains reliable, becomes affordable, and there is steady emissions reductions.

We support the ESB’s proposed key principles for the post 2025 design of the NEM, with some modifications, particularly with respect to cost allocation.

We suggest replacing this ‘responder-pays’ cost principle with the more efficient and fairer ‘beneficiary-pays’ principle, so that ‘costs are allocated those who benefit from a given investment or action’.

We consider the ‘transparency and simplicity’ principle should be separated into two principles. Simplicity should be optional and subordinate to principles that promote efficiency and fairness. Transparency should not be optional.

We recommend scenarios used for forecasting should reflect the range of plausible futures and future pricing arrangements should be adaptable to changing and unpredictable conditions and needs.

We make a range of recommendations concerning future market design options and market price settings.