Learn More

This page is here to help you understand the Energy market in Australia, the following is a quick overview on the energy market.

The Electricity Distribution Network

The Electricity Distribution Network
















National Electricity Market (NEM)

The NEM interconnects five regional market jurisdictions (Queensland, New South Wales, Victoria, South Australia and Tasmania). Western Australia and Northern Territory are not connected to the NEM.

The NEM involves both wholesale generation that is transported via high voltage transmission lines to electricity distributors, who deliver it to our homes and businesses.

The transport of electricity from generators to consumers is facilitated through a ‘pool’, or spot market, where the output from all generators is aggregated and scheduled at five-minute intervals to meet demand.

The pool is not a physical thing but a set of procedures that AEMO manages in line with National Electricity Law and National Electricity Rules (the Rules). The market uses sophisticated systems to send signals to generators instructing them how much energy to produce each five minutes so that production is matched to consumer requirements, spare capacity is kept ready for emergencies, and the current energy price can be calculated.

NEM infrastructure comprises both state and private assets managed by many participants.

The NEM:

  • Supports 19 million residents
  • At over 5,000 km from far north Queensland to Tasmania, and west to Adelaide and Port Augusta, is the longest alternating current system in the world.
  • Has about 40,000 km of transmission lines and cables.
  • Supplies about 200 TWh of energy to businesses and households each year.
  • Is long and linear compared with Europe and North America.
  • Can be costly to upgrade because of the large distances.

Have you ever wondered what some of those abbreviations are in your bill? well having a read of this might shine some light on that.


Energy Saving Certificate (ESC ): –

The Energy Savings Scheme (ESS) commenced on 1 July 2009 and is only applicable in NSW.The Energy Savings Scheme is designed to increase opportunities to improve energy efficiency by rewarding companies who undertake eligible projects that either reduce electricity consumption or improve the efficiency of energy use. Reducing electricity use will help NSW families and businesses to save money on their power bills and will shield customers from rising electricity prices and from future electricity price increases.The scheme works by setting a target for electricity retailers and other liable parties, known as Scheme Participants. Scheme Participants meet their energy savings target by obtaining and surrendering tradable Energy Saving Certificates (ESCs) – called “es-keys”. ESCs will be calculated in tonnes of carbon dioxide equivalent, just like NGACs and in GGAS.Scheme Participants in the ESS are the same persons required to participate in GGAS; that is, any supplier of electricity in NSW. This includes electricity retailers, electricity generators who supply direct to a customer, and any market customer.Companies that become Accredited Certificate Providers (ACPs) will be able to create ESCs when they undertake specific actions to improve energy efficiency in a variety of residential, commercial or industrial settings. Applications to become an ACP will be managed by IPART in its role as Scheme Administrator and will be available after 1 July 2009.The ESS will commence with an energy efficiency target of 0.4% of total electricity sales in NSW. As some Trade-Exposed Emissions Intensive industries will be exempt from the Scheme, this translates into 0.5% of the liable electricity sales in NSW. The Minister will publish a Ministerial Order which will list those activities that will be exempt from the ESS. The Order will also allow the Scheme Regulator to make rules regarding how Scheme Participants may identify and deduct any exempt loads.

The energy efficiency target will increase incrementally to 4% total electricity sales (5% of liable electricity sales) by 2014 and will continue at that level until the ESS ends in 2020 or is replaced by a national energy efficiency trading scheme.


Victoria – Victorian Energy Efficiency Target (VEET) Scheme: –

The Victorian Energy Efficiency Target (VEET) is a Victorian Government initiative promoted as the Energy Saver Incentive. It was established under the Victorian Energy Efficiency Target Act 2007 (the Act) and commenced on 1 January 2009. It is legislated to continue in three-year phases until 1 January 2030.The purpose of the scheme is to reduce greenhouse gas emissions, encourage the efficient use of electricity and gas, and to encourage investment, employment and technology development in industries that supply goods and services which reduce the use of electricity and gas of consumers.The scheme operates by placing a liability on energy retailers with more than 5000 customers based in Victoria to surrender a specified number of energy efficiency certificates every year. Each certificate represents in tonne of greenhouse gas abated and is known as a Victorian energy efficiency certificate (VEEC). The Act and the Victorian Energy Efficiency Regulations 2008 allow for accredited entities to create VEECs when they help consumers make selected energy efficiency improvements to their homes. Revenue generated through the sale of VEECs enables accredited entities to offer consumers special offers that reduce the cost of undertaking these energy efficiency improvements.There are approximately thirty prescribed activities that are currently included in the scheme, ranging from the installation of high-efficiency hot water systems, air heater/coolers, lighting, draught proofing and window treatments through to the purchase of high-efficiency appliances like refrigerators and televisions. A full list of these activities can be found on the VEET website.The Act and Regulations are maintained by the Department of Primary Industries (DPI), and the Essential Services Commission (ESC – not to be confused with Energy Saving Certificates) is responsible for administering the scheme in accordance with the legislation. The ESC has also produced the Victorian Energy Efficiency Target Guidelines 2010.


Energy Efficiency Scheme :–

Still awaiting further information from the South Australian Government, but estimate that the price impact will be in the vicinity of $2.00 to $4.50 per MWh

National Schemes – (Across All States)

LRET (LREC) and SRES : –

From 1 January 2011 the Renewable Energy Target (RET) was split into two separate schemes; the Large-scale Renewable Energy Target (LRET) and Small-scale Renewable Energy Scheme (SRES). The renewable energy certificates traded under LRET are classified as large-scale generation certificates (LGCs) and under SRES they are classified as small-scale technology certificates (STCs).

Large-scale Renewable Energy Target (LRET):-

The Large-scale Renewable Energy Target creates a financial incentive for the establishment and growth of renewable energy power stations, such as wind and solar farms, or hydro-electric power stations. It does this by legislating a requirement for liable entities to obtain Large-scale Generation Certificates (LGCs). These LGCs are created based on the amount of eligible renewable electricity produced by the power stations. LGCs can be sold or traded to liable entities, such as retailers or customers connected directly to the grid. Liable entities buy LGCs and surrender them to the Office of the Renewable Energy Regulator (ORER) – (which will be known as the Clean Energy Regulator from April 2 2012 onwards) on an annual basis.

Small-scale Renewable Energy Scheme (SRES): –

The Small-scale Renewable Energy Scheme creates a financial incentive for owners to install eligible small-scale installations such as solar water heaters, heat pumps, solar panel systems, small-scale wind systems, or small-scale hydro systems. It does this by legislating demand for Small-scale Technology Certificates (STCs). STCs are able to be created for these installations according to the amount of electricity they produce or displace. Liable entities have a requirement to buy STCs and surrender them on a quarterly basis.