A transition without a backbone

For several years, energy infrastructure providers have argued there is a missing piece in Australia’s energy transition. Governments have invested heavily in renewable energy through the Capacity Investment Scheme (CIS) and state-based schemes.

But there has been no equivalent policy support for the technology that will hold the whole system together when the coal is gone and wind stops blowing and the sun goes down — gas powered generation (GPG).

The Australian Energy Market Operator (AEMO) has consistently called out the need for more GPG. The 2026 Draft Integrated System Plan forecasts that the National Electricity Market (NEM) will need approximately 11GW of new GPG by 2050 to help meet peak demand and firm intermittent renewables.

Recent news reports have suggested several CIS-backed wind farm projects are struggling to reach financial close. Developers are seeking to renegotiate their government revenue guarantees in a shifting cost environment.

Now consider the position of a GPG developer — facing the same cost pressures, the same financing environment, but without any government underwriting at all.

Trying to deliver into the NEM’s ‘energy only’ spot market that is not set up to send the long-term investment signals needed for generation that runs infrequently but must be available on demand. There is a structural mismatch between market design and the settings needed to encourage essential investment in firm, dispatchable capacity.

The solution is already designed – it’s time for implementation

The good news is that the policy architecture has already been designed to start addressing this.

The NEM Review Final Report, published in December 2025, recommends an Electricity Services Entry Mechanism (ESEM) to underwrite investment in firming, including GPG, beyond the shorter contracts typically offered by energy markets.

APA supports the ESEM and the inclusion of firming as one of its core services. We made that case in our September 2025 submission to the NEM Review. The logic is straightforward — ESEM contracts, if designed properly and in genuine consultation with industry, should provide the long-term revenue certainty that the existing spot and derivatives markets cannot.

The implementation timeline is ambitious: legislation by the end of 2026, a pilot firming tender by late 2026, the ESEM operational by 2028. It’s a timeline that is achievable if the ECMC acts at its 8 May meeting by approving the reform framework and signalling clearly to the market that investment in firming capacity is critical.

The signals are there – time to back them with decisions

Recent events in the Middle East have further reframed the public debate about the role of gas in our energy system. And recent comments from our Prime Minister in a speech  to the Chamber of Minerals and Energy of Western Australia in Perth are encouraging.

The Prime Minister highlighted the importance of a Domestic Gas Reservation for the east coast that would be built on the Western Australian model, along with a single-touch approvals process to fast-track new projects.

A well-designed reservation matters for the ESEM and new GPG projects too, because a GPG project can’t confidently be delivered if the cost and availability of their fuel remain uncertain.

The comments, alongside the NSW Government’s recent announcement to open the Bancannia and Pondie Range Troughs and approval of new gas exploration for the first time in more than a decade, suggest that both state and federal governments are connecting the dots between domestic gas supply, energy security, and transition.

Australian gas is helping to secure our liquid fuel supply lines and our standing in the region. What the system needs now is the policy certainty provided by a domestic reservation and ESEM to unlock the next wave of investment in gas supply and gas powered generation.