The document flags the urgent need for the design and adoption of new market and regulatory changes that will ensure energy security and reliability and better customer outcomes.

AEMO’s focus as the market and system operator is to meet the objective of delivering safe, secure, reliable, affordable and low emission energy for energy customers however, based on our recent experiences of operating the markets, it is clear that the NEM no longer achieves optimal outcomes for customers and investors.

The rapid changes occurring in our supply mix, electricity demand and weather now require us to consider whether aspects of the arrangements continue to be fit for purpose, and reflect the dynamic and evolving needs of future energy customers.

Our observations document also outlines potential avenues that could address the challenges that we are seeing such as:

• A more encompassing and holistic view of the needs of the future framework be taken
• Consideration of an operational reliability standard beyond the existing Reliability Standard, which factors in a level of reserve to manage power system reliability during extreme conditions.
• Strategic reserves that the power system needs, reserves that sit outside the market (that respond quickly and are available when we need them) should a gap in supply and demand arise. These reserves should be procured in the more efficient manner possible to reduce costs to consumers. 
• A better mechanism to pay for reliability and flexibility.

AEMO looks forward to working closely with the Energy Security Board, governments and stakeholders on finding solutions for Australia’s energy future.

• AEMO observations: Operational and market challenges to reliability and security in the NEM(3.47 MB, pdf)