Final review of Australia’s National Electricity Market published

The Australian government set up a review of the NEM wholesale market settings by an independent expert panel led by associate professor Tim Nelson, which published its draft report in August 2025. Following consultation throughout October, the final report (277-page / 8.3MB PDF) was published in December 2025. Detailed design and trials will occur throughout 2026 with the aim of introducing phased reforms by 2030.

Nick Li, an expert in Australia’s energy market at Pinsent Masons, said: “The purpose of the Nelson Review is to recommend wholesale market settings to promote investment in firmed, renewable generation and storage capacity in the NEM following the conclusion of the current Capacity Investment Scheme in 2027.”

“The final report confirmed all 12 recommendations from the draft report but made several significant changes due to the results of stakeholder consultation,” he said.

While the draft recommended offering seven year contracts to provide long term certainty for investors under the ‘Electricity Services Entry Mechanism’ (ESEM), the final report recommends that contracts are set by the ESEM administrator but, as a minimum, are three years in length, following feedback that overly long tenors could lock participants into inflexible arrangements and deter innovation.

The ‘Market-Making Obligation’ (MMO), a mechanism that forces large electricity generators or storage providers to keep basic contract offers prepared so smaller retailers can purchase them when needed, has also been refined. Originally designed as an “always-on” requirement for certain participants, it is now trigger-based and only activates when liquidity falls below defined thresholds in specific regions.

Annabelle Pendlebury of Pinsent Masons said: “This refinement reduces unnecessary compliance costs and intervention during normal market conditions, while ensuring support when contract markets become thin.

“This is critical for price discovery and risk management in a renewables-heavy system,” she said.

The final report also mandates that participants in the NEM must provide transparent data on availability and responsiveness of dispatchable resources.  It is hoped that this will reduce the risk of inefficient market outcomes.

Energy ministers in every state except Queensland have agreed in principle to the proposed reforms. They noted that the ESEM, the MMO and improved visibility are essential to maintaining reliable and affordable electricity while strengthening investment in renewables and firming assets. These ministers’ implementation roadmap is expected to be published by February 2026.