The energy system is changing. New technology and digitalisation are providing new choices and opportunities to customers. At the same time, the rapid uptake of Variable Renewable Energy (VRE) and Distributed Energy Resources (DER) is well underway and the existing ageing thermal generation fleet is progressively retiring. The National Electricity Market (NEM) of the future is very different to that of the past.

Similar changes are occurring in many electricity markets across the world. But the rapid pace of change occurring in Australia and the adoption of distributed (rooftop) solar photovoltaic (PV) systems is remarkable. At least 2.2 million households now have solar PV on their rooftops, up from 100,000 a decade ago. This means the changes to the NEM design are likely to be among the first in the world to meet these needs.

All the changes occurring mean that the current set of systems, tools, market arrangements and regulatory frameworks is no longer entirely fit for purpose and able to meet the changing needs of the system and customers. To address these matters, the Energy Security Board (ESB) is tasked by the former COAG Energy Council to develop a market design for the NEM that delivers secure and reliable power at least cost to consumers, and accommodates the changes underway and expected in the future. This paper sets out for consultation a number of potential solutions to identified problems and opportunities.