News Topic ID

AEMC proposes new grid standards for data centre connections

12 March 2026

Australia's data centre boom is accelerating. Cloud computing, artificial intelligence, and digital services are driving unprecedented demand for energy-intensive facilities. But rapid growth comes with a hidden risk: without clear technical standards, data centres could adversely impact grid stability.

The Australian Energy Market Commission (AEMC) has released a draft rule proposing new technical standards for large data centres and similar facilities connecting to the National Electricity Market. The AEMC is now seeking stakeholder feedback by 7 May 2026, before finalising the standards.

Why this matters now

Most data centres use inverter-based technology, similar to that used in many wind and solar farms, as well as batteries. When the grid experiences a credible disturbance such as a voltage dip, these facilities can suddenly disconnect - and if many disconnect simultaneously, it could increase the risk of cascading outages or instability.

In July 2024, 60 data centres in the U.S state of Virginia pulled 1,500 MW off the grid simultaneously during a single fault. This caused cascading failures and grid instability. Similar incidents in Ireland and Texas have prompted some jurisdictions to halt new data centre connections entirely.

What the AEMC is proposing

The draft rule proposes three key changes:

First, a clearer framework for defining and classifying large inverter-based loads (including data centres), which would determine when and to whom the technical connections standards apply, particularly for those parties connecting to the distribution network.

The draft rule would raise the current threshold for large inverter-based loads from 5 MW to 30 MW and embed this definition directly in the National Electricity Rules, so stricter technical requirements apply only to those most likely to affect power system security.

Secondly, data centres would need to meet specific disturbance ride-through requirements, staying connected during certain voltage and frequency disturbances and recovering power within defined timeframes. These standards are based on actual plant capabilities and grid needs.

Third, alignment with global practice. By largely matching the standards proposed or used in the U.S state of Texas, Ireland, and Finland, data centre operators could use the same equipment and feasibility studies as they do elsewhere. This standardised approach would mean faster deployment, lower costs, and better investment certainty.

Chair Anna Collyer says clear grid standards are essential to supporting Australia’s data centre growth without compromising system security.

“Data centres aren’t passive loads anymore; they’re active grid participants. When they fail to ride through faults, it has the potential to trigger cascading failures and blackouts,” Ms Collyer said.

“We have seen this happen overseas, and it can cost consumers billions in lost electricity supply or emergency network upgrades.

“These proposed standards would help prevent that. They are designed to enable investment with certainty, not block it. Data centre operators would know exactly what’s required upfront, and network service providers would be able to apply technical connection standards consistently.”

Ms Collyer added that industry input had been crucial in shaping the proposal. And stakeholder feedback would be equally important before finalising the rule.

“We have consulted extensively with data centre operators, network service providers, and equipment manufacturers throughout this process. We welcome feedback from the broader market before we finalise the rule.”

Key draft recommendations

Large data centres: Connecting to the grid would need to meet new ride-through standards to stay connected during faults
Clear threshold: For data centres connecting to distribution networks, the draft rule defines ‘large’ inverter -based loads as 30 MW or greater (up from 5 MW), so technical requirements apply proportionately based on actual grid risk
International alignment: Standards would largely match those in use or proposed in Texas, Ireland, and Finland, reducing equipment costs and engineering complexity
Better visibility: Network service providers and the Australian Energy Market Operator (AEMO) would have clearer data on how data centres respond to grid disturbances, enabling more efficient system management
Compliance focus: Connection agreements would require terms ensuring non-registered data centres stay compliant with performance standards (registered facilities already need to comply with strict compliance requirements under the NER).

Supporting the transition

To help stakeholders prepare for these new standards, AEMO is publishing interim guidelines in the coming months. These guidelines, developed through the same technical working group process, will help network service providers and data centre developers understand and prepare for the proposed rule changes. The guidelines will be designed to support consistent assessment approaches across the National Electricity Market while the final rule is being finalised.

What happens next

The AEMC is seeking stakeholder feedback on the draft rule and determination. Submissions close on 7 May 2026. We will consider all feedback before publishing a final rule, expected mid-2026. We have worked with AEMO, network service providers, and major data centre operators to develop this draft proposal. Stakeholders are now invited to comment before the final rule is decided.

Visit the project page for the draft determination, draft rule and information sheet.

About the AEMC

The Australian Energy Market Commission (AEMC) is an independent statutory body that advises Australian governments on energy market rules and conducts reviews of the energy sector. The AEMC's work is guided by the long-term interests of energy consumers - including reliable, safe and affordable energy.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au

Reliability Panel delivers final recommendations to strengthen System Restart Preparedness

11 December 2025

The Reliability Panel has published its final determination for the Review of the System Restart Standard, including a revised Standard and recommendations for future work to enhance system restart preparedness as the power system transforms.

The review has considered the Australian Energy Market Operator’s (AEMO) reports of growing challenges in securing adequate System Restart Ancillary Services (SRAS), which play a vital role in helping to re-energise the power system in the unlikely event of a major supply disruption or ‘black system event’.

Chair of the Reliability Panel, Rainer Korte, said that the revised Standard and recommendations will support AEMO in procuring the SRAS needed to prepare for and respond effectively to a major disruption, ensuring a more secure power supply for consumers.

"These are important updates to the framework that guide how much and what kinds of System Restart Ancillary Services are needed, and how they can best be coordinated to meet the changing needs of the electricity system," Mr Korte said.

"While major power disruptions, or black system events, are rare and can be triggered by a combination of factors impacting supply, demand and transmission of electricity, when one occurs, it can unfortunately have significant impacts for communities."

"That's why, in addition to revising the System Restart Standard, we have also made recommendations for critical future work to support the resilience of the electricity system as coal generation units come to the end of their life and are replaced by renewable generation, batteries and other resources."

The Panel's final changes and recommendations have been informed by advice from AEMO and stakeholder feedback.

They also consider economic analysis, which found that there is significant value in investing in new system restoration capability for the national electricity market (NEM) to protect against a prolonged disruption to electricity supply.

The final Standard:

provides AEMO with increased flexibility around how it plans for the initiation of system restart, allowing AEMO to consider new approaches and respond to new challenges to initiate restoration
supports the procurement of additional services to provide a higher level of aggregate reliability of SRAS, and to allow AEMO to address operational challenges deeper into the restoration process
clarifies how AEMO takes into consideration the strategic location of SRAS for each electrical subnetwork and any sensitive loads – such as aluminium smelters – that may be impacted by decreases in power supply.

The revised Standard will take effect from 1 July 2027 and will guide AEMO's next round of SRAS procurement, expected to commence in 2026.

The Panel intends to submit a Rule change request to the Australian Energy Market Commission (AEMC) to strengthen the system restart regulatory framework, enabling greater transparency and reporting on system restoration modelling and planning, as well as enhancing system restart testing arrangements.

The Panel also makes recommendations for AEMO to improve system restart preparedness by:

conducting future-focused modelling and planning to identify system restart needs further in advance, and leverage the existing system restart framework to procure SRAS to meet future system restart needs
reviewing and updating its guidelines for preparing Local Black System Procedures, to improve the quality of information made available to AEMO that is used to support AEMO's development of jurisdictional black system plans.

About black system events

Black system events are rare.

The NEM last experienced a black system event in South Australia in September 2016, when storm damage led to a state-wide blackout that lasted approximately 8 hours.

Prior to that, an event occurred in northern Queensland in 2009, and one in New South Wales in 1964.

In April this year, Spain and Portugal experienced a black system event, that disrupted electricity supply to more than 50 million customers for around 16 hours.

Electricity pricing reforms target fairness, lower costs

11 December 2025

The Australian Energy Market Commission (AEMC) has published a draft report proposing a comprehensive package of reforms to build a pricing framework that is smarter, fairer and delivers the lowest overall cost for all Australian electricity consumers.

The Pricing Review draft report outlines recommendations that could be implemented over an approximately 10-year period beginning in 2026, designed to ensure all consumers benefit from competition, have meaningful choice in products and services, and share system costs equitably as consumer energy resources (CER) adoption accelerates.

The context for reform

AEMC Chair Anna Collyer said the review aims to ensure the pricing framework supports the availability of products and services that consumers want, while delivering a lowest-cost system for all.

"The way we use energy is changing rapidly. By 2040, we expect one in every two Australian homes will have solar systems, one in every four will have batteries, and one in every four will have electric vehicles," Ms Collyer said.

"We're working toward a pricing framework that is robust and adaptable to these changes, supports a diverse range of products and services, gives consumers meaningful choice, and delivers the lowest-cost system that meets all consumers' needs.

“This includes addressing current challenges like the loyalty tax, ensuring everyone can access products they want, and making sure cost-sharing is fair as the energy system evolves."

Three reform themes

Harnessing competition for all consumers

The draft report recommends requiring energy service providers to charge all customers on the same plan the same price, addressing the loyalty tax so all customers continue to receive the best price over time.

Under current arrangements, customers who don't regularly shop around for a better deal could end up paying more than new customers for the same service, with some long-standing customers paying significantly more simply because they haven't switched.

The draft report also proposes a model where energy retailers would compete to serve customers who haven't actively chosen a plan, bringing them competitive prices without requiring them to shop around.

"We want to move beyond discount wars where customers need to constantly shop around. We want retailers offering products that genuinely suit different customers, for example, a simple monthly subscription for people who want certainty or flexible plans for people who want to actively manage their energy use. We want to see real differentiation based on customer needs," Ms Collyer said.

Improving consumer ability to compare offers

Electricity products are becoming increasingly diverse with new offerings like virtual power plants, solar soak plans, and flexible pricing that responds to how and when energy is used, making it harder for consumers to compare their options and find the best deal.

The draft report recommends providing the Australian Energy Regulator with additional funding to upgrade the website Energy Made Easy so consumers can easily compare different electricity offers, including these new and emerging types.

"Consumers tell us they can't find the products they want, and when new products do emerge, it's very difficult to compare them. Whether you're interested in a virtual power plant or a simple subscription plan, you should be able to compare your options and find what suits you best," Ms Collyer said.

Targeting rewards and ensuring equitable cost-sharing

The draft report recommends amending the rules to focus network tariff design on efficiency, supporting a lowest-cost grid and a fairer way of sharing costs among consumers.

The draft report also recommends that network tariffs be designed for energy retailers to translate into diverse customer offerings, rather than being passed directly to consumers as complex charges.

"Where electricity once flowed in one direction, it now flows in two. Our reforms would ensure everyone who relies on the grid contributes fairly to maintaining it, while creating strong rewards for behaviours that genuinely help the system, for example, storing solar in batteries and using it during evening peaks.

“This also enables retailers to create the innovative products consumers want," Ms Collyer said.

Before finalising recommendations, the AEMC will conduct a detailed customer impact analysis using real customer data from network businesses.

This analysis will examine how different transition pathways affect different types of households to ensure any changes are implemented fairly and potential impacts are carefully managed.

Implementation and transition

Implementation commences in 2026, with full implementation extending to the mid-2030s.

"We envisage an approximately 10-year pathway. Stakeholders have emphasised that getting the transition pathway right is potentially the most significant element of the reform programme,” Ms Collyer said.

“A well-designed transition will help ensure benefits are realised while minimising disruption.”

The AEMC is seeking written submissions on the draft recommendations by 13 February 2026, will hold a public forum on 15 December 2025, and will publish a final report in early 2026.

Complementary reforms

The Pricing Review is one element of a coordinated reform program across the energy sector designed to support consumers and deliver value for CER owners through the energy transition.

The AEMC's pricing reforms complement other critical initiatives including the National CER Roadmap and Implementation Plan, reforms to the Default Market Offer and introduction of solar sharer arrangements, Better Energy Customer Experiences reforms, and the AEMC's upcoming network regulation review.

"Pricing is only part of the picture. These reforms must work together with other initiatives already underway to ensure consumers benefit from the energy transformation," Ms Collyer said.

Visit project page for more information and contact details.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au

Faster renewable buildout and electrification key to affordable energy transition

04 December 2025

Accelerating the buildout of renewable generation, transmission, and battery storage is essential to keep residential electricity prices affordable over the next decade, according to the Australian Energy Market Commission's (AEMC) latest Residential Electricity Price Trends report released today.

The independent report, aligned with AEMO's Integrated System Plan projections, projects residential electricity per unit prices (not bills), will fall by around 5 per cent over the next five years, supported by new renewable generation growth.

However, those prices risk rising by 13 per cent from 2030–2035, unless new renewable generation, battery and transmission projects are delivered faster than currently projected.

AEMC Chair Anna Collyer said increasing momentum in renewable deployment and batteries now and through to 2030’s will be crucial to keeping prices affordable.

“Our price outlook highlights a critical five-year window: residential electricity prices are projected to fall through 2030 as renewable generation and batteries ramp up, but then rise through 2035 if the pace of new investment doesn't keep ahead of growing electricity demand and planned coal retirement.

"Our analysis clearly shows renewable energy and batteries drives prices down, we see this in the first five years. The risk of prices rising after 2030 only emerges if we slow down renewable deployment just as coal plants retire. This is a timing challenge, not a technology cost issue. With the right pace of investment, we can manage the energy transition while keeping prices stable," she said.

The scenario analysis found:

Delays to wind and transmission projects could increase annual household electricity prices as much as 20 per cent.
Poor coordination of consumer energy resources could add up to 13 per cent to electricity prices.
Prolonging the life of existing coal plants to meet future demand growth could pose significant price risks, with increased outages potentially adding up to 5 per cent to prices.
Conversely, faster wind and transmission delivery could reduce prices by up to ten per cent.

Electrification offers significant household savings

The report also finds that many households can significantly reduce their ‘energy wallet’ - their total spending on electricity, gas and petrol – by electrifying their energy use, with savings typically exceeding upfront costs within 10 years.

The analysis shows households that electrify could see:

Electric vehicles: an approximate 40 per cent reduction in annual vehicle running costs (around $1,400 per year in fuel and maintenance savings).
Gas appliance electrification: an approximate 60 per cent reduction in heating and cooking costs (around $1,400 per year for a household currently only using gas for these purposes).
Solar panels: approximately $1,000-$1,200 per year in electricity savings for typical households.
Home batteries: additional $600-$900 per year in savings when combined with solar.

"A household that fully electrifies could reduce total energy costs by up to 90 per cent, with typical payback periods of 4 years,” Ms Collyer said.

Smart use of consumer energy resources critical

Beyond grid-scale infrastructure, the report highlights the growing importance of storage, such as home batteries and other consumer energy resources, in managing peak demand and reducing system costs for all consumers.

"Well-coordinated consumer energy resources, like charging electric vehicle’s during the middle of the day when there is plentiful solar, and using batteries to reduce evening demand when prices are higher, can lower costs and reduce network investment. However, poor coordination could add to household electricity costs," Ms Collyer said.

"This is why the AEMC has made rule changes to make it easier for customers to benefit from their price-responsive resources, and why our Pricing Review is examining how retail and network pricing can better reward customers for taking action that supports efficient use of the grid.”

Three actions to ensure affordable, equitable transition

The report identifies three priority areas for policymakers:

Reduce barriers to new renewable and transmission buildout:
- Implement credible mechanisms to ensure sufficient renewable generation and firming capacity.
- Speed up planning and approvals processes.
- Continue building social license for new transmission projects.
Encourage coordinated uptake of consumer energy resources:
- Continue to support home battery uptake while ensuring systems help smooth, not increase, peak demand.
- Implement consistent national standards for consumer energy resources.
- Ensure visibility of these resources to the system operator.
Enable all households to electrify:
- Address the barriers that households face, including upfront costs, rental and apartment constraints, and EV charging access.
- Provide efficient pricing for both electricity and gas services.
- Give consumers clear information to support long-term energy decisions.

"The energy transition requires action on multiple fronts. Governments, industry, the AEMC and other market bodies all have roles to play. The AEMC's rule changes and ongoing policy reviews are focused on the coordination and equity challenges,” Ms Collyer said.

“But the fundamental message remains consistent: with the right pace of renewable investment and enabling households to electrify, we can deliver an affordable energy transition," she said.

Regional trends

Electricity price trends vary by jurisdiction, with New South Wales and the Australian Capital Territory prices projected to be stable or fall, while Victoria, Queensland, South Australia and Tasmania are projected to see increases, primarily in the latter half of the outlook period as electricity demand grows and the supply-demand balance tightens.

Total energy cost savings from electrification are projected across all regions: 16-21 per cent in New South Wales, the Australian Capital Territory, Victoria and South Australia, and more modest savings of 6-7 per cent in Queensland and Tasmania, reflecting lower current gas usage.

Media:  Jessica Rich, 0459 918 964, media@aemc.gov.au

About the AEMC: We are an independent statutory authority that makes the rules for Australia's National Electricity Market and provides independent, evidence-based analysis to energy ministers. Any stakeholder can propose changes to how markets work through our transparent rule change process. Everything we do is guided by one objective: promoting the long-term interests of Australian energy consumers on price, reliability, security, safety, and emissions reduction.

About the report: The Residential Electricity Price Trends report provides a 10-year outlook (2026-2035) for electricity prices and household energy costs across Australia's National Electricity Market. It is based on Australian Energy Market Operator's latest 2025 demand projections, which reflect a slower pace of electrification compared to AEMO's 2024 projections. The projections are an outlook based on current data and assumptions, not a forecast. Actual prices will depend on how quickly the energy system evolves.

TABLE 1: Household Electrification Cost Reductions & Payback Periods

Action	Payback Period
Replace gas appliances with electric	7 years
Install 10kW rooftop solar	6 years
Install 10 kW solar + 15kWh battery	7 years
Full electrification	4 years

TABLE 2: Average Annual Electricity Price Change by State (2026-2035)

Region	Electricity Price Change per annum (Annual Average)
NSW	-0.6%
ACT	1.2%
Victoria	+1.7%
South Australia	+0.5%
Queensland	+1.7%
Tasmania	+2.8%

Note: Electricity prices reflect price per unit.

A Note on terminology: Prices, bills and energy costs

This report uses three related but distinct terms:

Electricity prices refer to the per-unit cost of electricity (measured in cents per kilowatt-hour). This is the rate that retailers charge for each unit of electricity consumed.
Electricity bills refer to the total amount a household pays, which is a product of both the price per unit and the quantity of electricity consumed.
Total energy costs refer to a household's total expenditure on energy across electricity, petrol, and gas.

Reliability Panel seeks views on draft reliability standard and settings for 2028-2032

27 November 2025

The Reliability Panel has published its draft report for the 2026 Reliability Standard and Settings Review (RSSR), seeking stakeholder feedback on draft recommendations for the reliability standard and market price settings to apply from 1 July 2028 to 30 June 2032.

The Reliability Panel monitors and reports on the security and reliability of the national electricity system and determines standards and guidelines used by market participants to maintain a reliable and secure power system for consumers. The Panel operates under the AEMC's governance, monitoring and reporting on the security and reliability of the national electricity system.

The Panel comprises representatives from across the National Electricity Market (NEM), including small and large consumers, generators, networks, retailers and the Australian Energy Market Operator (AEMO).

Reliability is about making sure we have enough electricity to deliver power to consumers when and where they need it.

The RSSR involves recommending a reliability standard and market price settings that encourage sufficient investment in generation, storage and demand response capacity to meet customer needs at a level that they value.

Balancing cost and the value customers place on reliability

Two significant market changes since the 2022 Reliability Standard and Settings Review suggest a different reliability standard may better serve customers.

First, the costs of building new gas-fired generation have increased significantly. While we expect the market to deliver a mix of batteries, generation, and demand-side response, modelling shows that new gas-fired generation remains the critical backup needed to meet the reliability standard during peak periods. This means it could cost more to meet the current reliability standard.
Second, according to the Australian Energy Regulator’s latest assessment, the reported value that customers place on reliability has decreased by an average of 18 per cent across all regions.

The impact of these two changes is that a different reliability standard could manage costs for consumers without significantly affecting the reliability they experience day-to-day.

The Panel's draft report recommends that the reliability standard for the NEM be set within the range of 0.002% to 0.004% unserved energy (USE).

This proposed range starts at the current level of 0.002% USE and is equivalent to approximately 10 minutes of outages per customer per year, up to 21 minutes of outages.

The NEM has delivered high levels of reliability with no supply interruptions caused by generation shortfalls over the last five years. When customers experience supply interruptions, 95 per cent are due to distribution network outages, such as trees falling on distribution lines, rather than generation adequacy issues.

Market price settings

The Panel's modelling shows that different reliability standards require different market price caps (MPC) and cumulative price threshold (CPT) levels.

We are seeking stakeholder feedback on which MPC and CPT combinations would best balance delivering a reliable system that customers value.

While these settings affect wholesale electricity prices less than 1 per cent of the time, they send critical investment signals to deliver the level of investment needed to meet customers’ reliability expectations.

The Panel has also made draft recommendations to:

Retain the market floor price (MFP), administered price cap (APC) and administered floor price (AFP) at -$1,000/MWh, $600/MWh and -$600/MWh, respectively.
Link the MFP to minimum system load (MSL) conditions to ensure the market continues to clear effectively and minimise the need for market intervention.

Reliability Panel Chair Rainer Korte said the draft recommendations reflect careful consideration of changing market conditions and represent a genuine consultation on how to balance evolving customer needs with system reliability.

"The reliability framework must evolve to reflect the realities of our transitioning electricity system. Analysis shows that customers now value reliability differently than they did four years ago, while the costs to provide that reliability have changed significantly,” Mr Korte said.

"The Panel’s draft recommendations are designed to maintain strong reliability performance while being mindful of cost impacts on households and businesses.”

The Panel is seeking stakeholder views by 29 January 2026

The Panel is seeking stakeholder views on setting the reliability standard within the proposed range and the associated market price setting that best serve customers' long-term interests. Submissions close 29 January 2026. The final recommendations will be informed by the feedback received.

Any recommended changes would require further AEMC work before taking effect in the market.

For more information, visit the project page.

Media enquiries: Jessica Rich | 0459 918 964 | media@aemc.gov.au

AEMC releases final report on wholesale demand response mechanism

23 October 2025

The Australian Energy Market Commission (AEMC) has released a final report recommending that the wholesale demand response mechanism (WDRM) should continue operating in the national electricity market (NEM).

The WDRM allows large electricity users to be paid for reducing their consumption when the grid is under stress – for example, a factory temporarily switching off equipment during peak demand periods.

AEMC Chair, Anna Collyer, said the decision recognises the WDRM's ongoing role in Australia's evolving energy market.

"The WDRM enables some electricity users to effectively incorporate their demand response participation into market outcomes, which benefits all electricity consumers," Ms Collyer said.

"This is currently the only market mechanism in the NEM wholesale market that facilitates payment for reducing load against a baseline. It's also the only mechanism that allows non-financially responsible market participants to participate in the electricity market."

The Commission maintains its commitment to strengthening demand-side participation in the NEM. The recent Integrating price-responsive resources into the NEM (IPRR) and Unlocking CER benefits through flexible trading (CER benefits) rules provide the main vehicles for broad demand-side participation.

"While the voluntarily scheduled resource framework introduced through IPRR is the key vehicle to facilitate broad demand-side participation, the WDRM provides important additional benefits alongside this," Ms Collyer said.

The AEMC's second recommendation is that the pending rule change request, Expanding eligibility under the WDRM, should be initiated to assess whether sites with multiple connection points should be allowed to participate in the mechanism.

This has the potential to increase participation in the WDRM and deliver additional benefits. We anticipate initiating this rule change in the first half of 2026.

For more information, visit the project page.

Media: Jessica Rich | 0459 918 964 | media@aemc.gov.au

AEMC decides against new inertia market: costs outweigh benefits while existing reforms take hold

09 October 2025

The Australian Energy Market Commission (AEMC) has today announced its final determination not to create a new, real-time trading market for inertia. The decision concludes that existing system security frameworks, recently enhanced by the AEMC, are sufficient and flexible to manage the grid’s stability efficiently for the foreseeable future.

The Commission's evidence-based analysis found that implementing a complex, new market for inertia at this time would be a costly and unnecessary change that would not deliver net benefits to Australian energy consumers.

Safeguarding Consumer Interests

AEMC Chair Anna Collyer said the final determination reflects a measured, timely, and proportionate approach to managing the grid’s rapid transition.

“This is a prudent decision that protects consumers from unnecessary costs. Our analysis shows that under current conditions, the estimated $5 - $10 million in upfront costs, plus millions more in ongoing operation, would far outweigh the modest expected benefits,” Ms Collyer said.

“This is fundamentally about getting the timing right. We have found that the necessary inertia supply is already being secured through work being done to ensure system strength.”

Ms Collyer emphasised that investments in a wide range of assets, including synchronous condensers, gas plants with clutches (allowing turbines to operate as condensers), and grid-forming inverters, are being installed to meet system strength standards, with these assets delivering inertia as a substantial co-benefit at minimal marginal cost to consumers.

“We are not waiting to act. We are acting by ensuring recently made security reforms, which include trialling new technologies and ways of providing system security services, have time to be fully rolled out before we introduce another layer of complexity,” she said.

Economic Efficiency and Future Readiness

The final determination is grounded in the principle that reforms should be introduced when they are clearly in the long-term interests of consumers.

Costs Don't Stack Up: Under all current and expected modelling scenarios, the costs of implementing and operating a spot market for inertia would exceed the projected benefits.
Co-benefits of Supply: Inertia requirements are expected to be comfortably met because Transmission Network Service Providers (TNSPs) are already procuring system strength to protect against network faults. The inertia delivered by these projects is expected to exceed minimum requirements for the foreseeable future.
Preserving Option Value: The Commission determined that delaying the market provides time for vital technical work, such as real-time inertia measurement and accurate quantification of synthetic inertia, to progress. This crucial work, already being progressed by AEMO, will better inform future market design should it become necessary.

Security through Ongoing Monitoring

The AEMC’s determination ensures that a real-time inertia market remains an option if system conditions change.

The Reliability Panel has been tasked with actively monitoring the system to determine when conditions would suggest that operational procurement for inertia could provide benefits. The AEMC will amend the Panel’s annual Reliability and Security Report to include a mandatory section tracking key inertia-related metrics.

If the Panel’s monitoring finds that the system’s need for, or the cost of, inertia has evolved to the point where an operational market would deliver clear consumer benefits, it can formally request the Commission to reconsider the reform.

What is Inertia

Inertia is a power system service that acts like a shock absorber and helps maintain the grid’s stability.

It is the resistance to sudden bumps or gaps in electricity supply by slowing the rate of frequency change. When a large generator or transmission line trips out, inertia slows the rate at which frequency declines, providing critical time for other services to respond and prevent a blackout.

Historically, thermal plants have supplied the vast majority of inertia to the grid through their heavy spinning turbines. As these plants retire, the grid needs new, non-traditional sources, such as synchronous condensers and grid-forming inverters in batteries, to maintain this essential stability service.

For more information, please visit the project page for Efficient provision of inertia

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au

AEMC releases draft report on wholesale demand response mechanism

10 July 2025

The Australian Energy Market Commission (AEMC) has released a draft report recommending that the wholesale demand response mechanism (WDRM) should continue operating in the national electricity market.

The Commission maintains its commitment to strengthening demand-side participation in the national electricity market (NEM) to enable improved market and consumer outcomes.

The recent Integrating price-responsive resources into the NEM (IPRR) and Unlocking CER benefits through flexible trading (CER benefits) final rules are the main vehicles for driving demand-side participation in the market.

AEMC Chair, Anna Collyer, said the review is timely given the AEMC's recent work on two-sided market solutions.

"The AEMC's work through integrating price responsive resources means that there are new opportunities for both energy suppliers and users to participate in ways that weren't possible before," Ms Collyer said.

"The WDRM continues to have a useful role alongside these broader market reforms, allowing certain types of demand response to participate in the wholesale market."

The AEMC's second draft recommendation is that the pending rule change request, Expanding eligibility under the WDRM, should be initiated to assess whether sites with multiple connection points should be allowed to participate in the mechanism. This has the potential to increase participation in the WDRM and deliver additional benefits.

Submissions to the draft report are due by 14 August 2025.

For more information, visit the project page.

Media: Jessica Rich | 0459 918 964 | media@aemc.gov.au

AEMC releases draft determination on inertia market proposal

26 June 2025

The Australian Energy Market Commission (AEMC) has released a draft determination proposing not to make a rule to introduce an inertia trading market. The Commission found the costs of implementing and running the market would outweigh the likely benefits, while existing frameworks can deliver adequate outcomes for now.

The draft determination responds to the Australian Energy Council's request for a real-time market to trade inertia - the grid stability service that prevents blackouts when big generators trip. The Commission's analysis found implementation would deliver minimal benefits under current conditions.

AEMC Chair Anna Collyer said the decision reflects a proportionate approach that avoids premature change while maintaining flexibility for the future.

"We're not missing out on consumer benefits by waiting. Our analysis shows foreseeable inertia needs are likely to be met through synchronous condensers being installed for system strength, which provide inertia as a co-benefit at low marginal cost,” Ms Collyer said.

"This is about getting the timing right. Technical enablers like real-time inertia measurement need further development, and recent security framework reforms will enable innovation and learning before we layer on additional changes.”

The economics don't stack up

The AEMC’s draft analysis, which considered various modelling scenarios, found that under current conditions, expected benefits would be modest compared to the implementation costs of $5-10 million upfront plus millions more in annual operating expenses.

"Based on our draft assessment, implementing a complex new market for such modest benefits would not be in consumers' interests right now," Ms Collyer said.

The AEMC expects that recently reformed frameworks should deliver adequate inertia as they are rolled out. While system strength solutions are still being procured, they are expected to contribute inertia once operational. These frameworks need time to be implemented before further changes are considered.

Building blocks for the future

The draft determination proposes several steps to prepare for potential future implementation:

The Reliability Panel would monitor system indicators to identify when conditions may warrant implementing an inertia market
AEMO would enhance transparency of its technical work through its Transition Plan for System Security
Networks would improve communication about procurement decisions
Innovation trials would continue testing new applications of emerging technologies, such as synthetic inertia from batteries

What is inertia and why does it matter?

Inertia acts like the power system's shock absorber, it cushions sudden changes that could cause blackouts. Traditional coal and gas generators naturally provide inertia through their spinning turbines, but as these retire and are replaced by solar, wind and batteries, the grid needs new sources of this essential stability service.

Next steps

Stakeholders have until 7 August 2025 to provide feedback on the draft determination. The Commission expects to make its final determination later this year.

For more information, please visit the project page for Efficient provision of inertia

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au

Final rule to allow cash as credit support

26 June 2025

The Australian Energy Market Commission (AEMC) has published a final determination expanding credit support options available to participants in the National Electricity Market, with particular benefits for smaller retailers and consumers.

The final rule will allow participants to provide up to $20 million each in cash as credit support, in addition to existing bank guarantee and letter of credit options.

AEMC Chair Anna Collyer said the rule modernises credit support arrangements and delivers broad market benefits.

"While this rule change was initially requested by Delta Electricity to address specific financing challenges, our consultation revealed much broader market issues affecting many participants," Ms Collyer said.

"The final rule improves flexibility and reduces costs for all participants, with particular benefits for smaller retailers who face higher financing costs and barriers to entry. This will enhance retail competition and deliver benefits to consumers through lower prices."

Under current rules, net debtors in the market – typically retailers who purchase electricity and owe money to the market – must provide a bank guarantee or bank letter of credit as credit support. Securing these guarantees often involves lodging cash with the lender and paying fees.

The new cash option enables participants to provide cash as credit support directly to AEMO, avoiding reliance on third-party lenders and reducing risks of administrative delays that could prevent timely credit support provision.

Small and prospective retailers are expected to benefit most, as they typically have higher financing costs and limited access to capital compared to larger participants.

The AEMC responded to strong stakeholder support by increasing the cash limit from $5 million proposed in the draft to $20 million in the final rule.

The final determination also includes multiple layers of legal protections to prevent cash from being reclaimed if a participant becomes insolvent, and allows AEMO to distribute any delayed payments to other participants more efficiently.

The final rule commences on 1 November 2026, as recommended by AEMO based on implementation requirements and coordination with other major market reforms.

Visit the project page for more information and contact details.

Media: Jessica Rich 0459 918 964 or media@aemc.gov.au

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