Australian electricity system and market: Market design and regulatory framework

Through the National Electricity Market (NEM), Australia operates one of the world’s longest interconnected electricity networks, stretching over 5,000 kilometres. The electricity system is undergoing a profound transformation to renewable energy, driven by exceptional solar and wind resources and ambitious policy targets: 82 per cent renewables in the electricity mix by 2030. The momentum of this transformation is already evident: Australian households are global leaders in rooftop solar and the uptake of battery storage, and in the fourth quarter of 2025 renewables met more than half of electricity demand in the NEM for the first time. At the same time, grid expansion, security of supply and affordability remain key challenges. This briefing series offers an overview of the key structures and central debates surrounding Australia’s electricity system and market.

The first briefing introduces the NEM’s market structure and policy framework. It explains the NEM’s core principles and outlines the division of responsibilities among the key institutions – from the Energy and Climate Change Ministerial Council (ECMC) to the Australian Energy Market Commission (AEMC), the Australian Energy Regulator (AER) and the Australian Energy Market Operator (AEMO). It also presents the Integrated System Plan (ISP) as an overarching planning instrument and explains its relevance for transmission planning. The briefing further discusses the role of interconnectors, which physically link the individual states. In addition, it examines the NEM’s market mechanisms and provides an overview of current debates on market design reform. At the centre of this debate is the question of how the energy-only market can continue to provide the investment signals needed for a reliable electricity system.

The briefing is available as a PDF in German.

Further publications in this series

• Second briefing: Electricity grid

• Third briefing: Renewable energy expansion

• Fourth briefing: Energy storage