Introduction to Australia’s electricity markets

Last Updated on 5 March 2026

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This section introduces Australia’s electricity market landscapes, with a particular focus on the context, structure, and opportunities most relevant to CER product developers in the NEM.

Further information is provided in the major non-NEM markets in the following sections:

Participating in the Wholesale Electricity Market (Western Australia)
Participating in the I-NTEM (Northern Territory)

Market transformation and renewable targets

Australia’s electricity system is undergoing a profound transformation, driven by ambitious climate policy, rapid market innovation, and evolving consumer demand. By 2035, most coal-fired generation will be retired, replaced by wind, solar, energy storage, and gas. The nation is targeting 82% renewable electricity by 2030, and both the NEM and WEM have already achieved record renewable shares. South Australia’s rooftop solar, for example, has at times exceeded total state demand, highlighting the scale of distributed energy adoption.

World-leading CER adoption

Australia leads the world in rooftop solar uptake, with over 4 million homes, nearly 40%, equipped with solar PV. South Australia exceeds 50% penetration, and installation costs are among the lowest globally. These factors, combined with pronounced daily price spreads in wholesale markets, create strong incentives for energy storage, flexible loads, and tariff optimisation. Policy initiatives, such as midday “free power” retail products for smart meter customers, and surging battery installations, further amplify opportunities for CER product developers. EV sales are also accelerating, supported by incentives and expanded charging networks, with standards enabling V2G integration through trials and early market deployments.

Electricity market retail market structure and competition

The electricity retail sector is largely contestable, allowing households and businesses to choose their electricity retailer. While three large “gentailers” (Origin Energy, AGL, EnergyAustralia) serve around 70% of customers in the eastern states, market share is shifting towards tier-two, digital-first, and CER-focused retailers. Growth in rooftop solar, batteries, EVs, and flexible loads is driving competition and innovation, with retailers increasingly differentiating themselves through digital services, CER-supportive tariffs and CER-integrated service offerings such as VPPs.

Participation pathways for CER

CER participation in the Australian market can take several forms:

Retail tariff optimisation: CER assets are operated against retail ToU tariffs promoting load shifting and solar self-consumption.
Spot-optimised asset portfolios: CER assets are dispatched in response to real-time market prices, providing heightened export value during high-price periods.
Forward-contracted arrangements: Larger CER aggregations within a retailer’s customer portfolio can be integrated into a retailer’s forward wholesale market contracting position, reducing the need for external hedges.
CER-backed financial contracts: Larger CER assets can underwrite financial hedge contracts, providing stable revenue streams and lowering financing costs.

Flexible demand and market-following CER must comply with emerging visibility and export control obligations, supporting system security and operational planning. DNSPs, regulated by the AER, are exploring non-network procurement and regulatory sandbox trials, supported by several sources of innovation funding.

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