Take government out of the electricity market

If Australia is to have a viable and efficient NEM, one that coexists in competitive equilibrium with the supra-NEM, the supply chain must work together to offer the best overall service and price. There is now an incentive for this to happen. But it won't while large commercial risks are controlled by government third parties with no skin in the game.

Take history out of the equation, and there is no way NEM participants or a rational federal government would choose the current set-up – it's inefficient, plain and simple. This truth continues to be ignored because the existing bodies, along with the multitude of legal, economic and technical consultancies that feed at the bureaucratic trough, have a vested interest in the status quo. And consumers pay for it.

Without fearless advice, the Energy Council remains conservative, resorting to meaningless rhetoric, such as a commitment to "modernise regulatory frameworks and consumer protections so consumers can engage with increasingly dynamic and decentralised energy markets driven by the need to accommodate emerging technologies".

There is only one feasible response to the financial and technical risks engulfing the NEM: committed co-operation that is flexible enough to capture the qualitative aspects of supply chain efficiency. This means removing the government from its over-bearing role to establish lean and mean commercial arrangements based on a shared industry imperative to survive.

Such micro-economic reform might not be sexy or easy, but it is necessary if Australia is to have an agile and innovative electricity sector.