As we release the post-2025 market design consultation paper today, I am reminded of the saying “the whole is greater than the sum of its parts”.

There is no doubt that developing a roadmap for the transformation of how we generate, transmit, distribute and use energy is a large undertaking. The consultation paper covering seven market design initiatives is testament to that. These are complex, highly technical issues that require deep analysis.

I am often asked what is the most important aspect of the reform, and the answer is that we have to address the seven market development initiatives together. There is too much going on in the national electricity market (NEM) that the current rules can’t – and were never designed to –deal with.  The speed of change we are dealing requires a comprehensive approach, fully informed by an understanding of complex interlinkages and consequences for families and businesses.

The rapid and continued uptake of grid scale renewables and distributed energy resources has transformed our energy system: Today solar PV is installed on more than 2.5 million households, up from 100,000 10 years ago In the last decade more than 10GW of grid-scale renewables connect to the NEM, 5GW in the last 2 years.

And looking ahead Australia will replace most of its current generation stock by 2040.Transforming from a system dominated by centralised, synchronous generators to a system which is showing every sign of becoming one of the most decentralised power systems in the world – with consequential impacts on the security and reliability we tend to take for granted.

So while essential system services reform is absolutely critical, we also need to deal with aging thermal generation in way that reduces disruption. There is no question we need to integrate distributed energy resources. But we also need to ensure new generation has access to the grid.

Consumer relationships have changed. In past decades consumer relationships with their retailer and the networks was limited to paying bills and occasionally switching retailer.  Today, through technology change including rooftop solar and digitalization, customers can flex their demand and be rewarded for doing so. This was once only available to customers with very large loads, but now water heaters and pool pumps can be grouped together to yield value. Load shaping at a system level is possible and benefits for consumers can be significant.

And so on. Across these reforms, we must apply the lens of the national electricity objective to deliver reforms that work in the long-term interests of consumers.

That’s not to say that everything will happen with a “big bang” on January 1st, 2025. We have already made changes, other changes are currently underway, we will make more changes before 2025, and we envisage changes will continue afterwards. But we need to look at the system as a whole to know where we are going.

It is not just the power system that is greater than the sum of its parts, but perhaps more importantly that the reforms we move forward are also greater than any single point of view.

The scale of the change we’re facing requires bold thinking from you. And that’s what we are seeking through this consultation paper. We are not laying down the way forward, but asking everyone across the sector to contribute your ideas in coming up with the right solutions.

This consultation paper is a substantial package which builds on a great deal of feedback from stakeholders and interested parties over the past six months.

It includes the pathway forward as we move from refining the problems and analysing the options, towards shortlisting recommendations, based on consultation with you, which will go to energy ministers at the end of 2020. Then we will further develop and evaluate detailed market design options ahead of making final recommendations to ministers in mid-2021.

The ESB will continue close engagement with stakeholders over the next two phases of the project.  The structure and format of program workstreams to date has supported the collaborative consideration of issues across the seven initiatives. As we move into the evaluation phase, we are committed to working even more closely with stakeholders to adjust the structure of these workstreams and stakeholder forums to better meet what you need to support this.

Basically, if you have a good idea, we want to hear it.

Dr Kerry Schott AO

INDEPENDENT CHAIR

ENERGY SECURITY BOARD