Sep 13, 2017

How to fix Australia’s energy crisis: scrap the National Energy Market

The objective of NEM's replacement authority would be the provision of a stable, reliable and affordable supply of energy while managing a transition to a zero-carbon economy, writes economist John Quiggin.

There are quite a few proposals around to intervene in, or repair, the National Electricity Market. In my view, it’s much too late for that. We need to scrap the NEM and start on a new path towards a zero-carbon electricity and energy system. I’ve written down some preliminary thoughts. I’d appreciate comments and also suggestions as to how I might push this idea along a bit.


(a) The National Electricity Market has failed, and requires radical restructuring; (b) The ultimate goal of energy policy should be a 100% renewable supply of electricity, providing both for existing needs and for conversion to electric vehicles by 2050; and (c) The goal of a bipartisan policy is currently unattainable. Policy design should be based on the premise of a change of government at the next election.

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7 thoughts on “How to fix Australia’s energy crisis: scrap the National Energy Market

  1. Decorum

    “The existing NEM is unique to Australia.” What are the essential differences with the NZ setup?

    1. [email protected]

      Public ownership of most monopoly assets and dominance of gentailer model of vertical integration, strongly deprecated here.

  2. Tabot Retemt

    Fix depreciation allowances. As I understand it, network assets may be revalued to new replacement cost every year and then depreciated – even assets that are decades old.

  3. Roger Clifton

    Suggestion: focus the plan on the word, “carbon”, fossil carbon. The enemy is carbon in the greenhouse and the cure is non-carbon energy. These are scientific facts and can be used to persuade the most conservative of voter to back any new plan.

    Ditch the words, “renewables” and “coal”. They are only hero and villain to a minority of voters. By using these words you are guaranteed to fail. If you mean non-carbon energy sources, then say non-carbon. But the religious concept that the world is running out of minerals will certainly be resisted by our conservatives. Coal usage will be suppressed as a matter of course as we reduce carbon emissions towards our targets.

    The NEM system was designed around a baseload provided by steam, and will continue to be. The next logical emissions reduction will be achieved by providing baseload with gas-powered steam. It needs the market system to protect it from short-term (less than half an hour) disruption by intermittent generation. If wind and solar are required to negotiate their own backup and storage, they will be able to compete with steam on the NEM market as fast-responding dispatchables.

  4. K

    For Heaven’s sake will you people please stop calling it the “National” or “Australian” Energy Market! It is the South Eastern Energy Market at best. There is a whole half of the country that is not connected to it!

  5. DF

    The Reserve Bank was given responsibility for interest rates, so as to depoliticise them and to take their manipulation out of the political contest. Why not do the same with energy policy? Create a statutory authority that is beyond the short-termist influence of politicians so it can focus on the larger short, medium and long term energy needs and means of delivery in Australia.

  6. John Hall

    Nationalize all essential services. Then we know exactly who to blame. All the problems in Victoria arose after Kennet sold off our gas, electricity & water to the highest bidders. Labor followed through by leasing off the Docks. What next?

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