Australian electricity and gas markets – August 2026 update

What you need to know

August delivered a very busy period of regulatory and market activity:

• Data centres continue to come under significant scrutiny – the AEMC's advice and the new NSW guidelines show a high level of government intervention with impacts on the wholesale electricity market
• Auto-bidders come under scrutiny – the AER released a compliance bulletin which has serios implications for owners, operators and providers of autobidders.
• NEM Review implementation progresses – the Electricity Contract Co-Design Working Group has released draft terms for the three ESEM & MMO products (bulk energy, shaping and firming), with consultation in September/October – this is a critical opportunity for industry to provide feedback.
• Victorian Offshore Wind Auctions finally announced.
• AEMO 2026 ESOO – no reliability gaps before 2030; record 9.1 GW connected in 2025-26; data centre demand forecast to grow from 3% to 13% of grid supply by 2035-36.
• Gas network transition – the AEMC proposes a 20-year outlook for gas networks and the AER opens consultation on a gas Market Monitoring Information Order.

Highlights for August 2026

In this update, we take a look at the latest rule changes and market updates published in August 2026 which affect participants in the Australian electricity and gas markets.

National Electricity Rules

Compliance bulletin – Automated bidding and utilisation of third-party services

On 5 August 2026, the AER released a compliance bulletin on automated bidding and third-party services. The bulletin has no legal force but signals compliance expectations for market participants. The bulletin responds to a significant increase in auto-bidding in the NEM. Given the decision to delay updates to the Rebidding and Technical Parameters Guideline (as discussed in our May and June 2026 Update), the AER has published this guidance separately.

Key guidance on third-party providers:

• Market participants should undertake due diligence on providers, including vetting practices and software, monitoring for legislative changes, and contingency planning.
• Third-party providers may face accessorial liability where they are directly or indirectly concerned in, or party to, a participant’s breach.
• Bids via third-party providers must be made independently. Cartel conduct risks criminal/civil penalties under the Competition and Consumer Act 2010 (Cth).

Key guidance on auto-bidding:

• Automation does not dilute NER responsibility. Bids must be compliant whether made manually, by in-house software, or through a third party.
• Automated bids sent directly to AEMO without the ability to verify or adjust are higher risk. System-generated logs capturing inputs, decision logic and outputs would meet contemporaneous record requirements. Enhancing distribution network planning & reporting

AER Exemption Guidelines Review 2026 – Draft Decision

On 18 August 2026, the AER released the draft Retail Exempt Selling Guideline (version 8), draft Network Exemptions Guideline (version 8) and accompanying draft notice of decision for consultation. The key driver is the National Electricity Amendment (Unlocking CER Benefits through flexible trading) Rule 2024, which commences on 1 November 2026. The amendments clarify that secondary settlement points established for consumer energy resources (such as solar PV, batteries or EV charging) are treated as a single user network and are not subject to network exemption registration requirements. The guidelines also address exemption arrangements for commercial embedded network retrofits. Submissions are due by COB Tuesday, 15 September 2026.

Rule change request: Dispatch limits for inverter-based resources

On 27 August 2026, the AEMC published a consultation paper for a rule change request from AEMO seeking to amend the NER to expressly enable dispatch instructions to include a limit on the number of inverters online at a connection point.

The rule change seeks to formalise AEMO’s inverter dispatch initiative, which is implementing a mechanism to automate AEMO’s communication of inverter-limits. The proposed amendments include:

• Inserting a limit on the number of online inverters, where AEMO considers it necessary, to maintain power system security.
• Stating the desired outcome of the dispatch instruction (if applicable) such as active power, reactive power, transformer rap, maximum number of online inverters or other outcome.
• Introducing new definitions of “inverter” and “online inverter” to support consistent interpretation.

Submissions close 24 September 2026. A draft determination is planned for 3 December 2026.

Data Centre - AEMC Advice and ECMC Reforms

On 5 August 2026, the AEMC published formal advice to the ECMC responding to a request from Energy Ministers at the 8 May 2026 ECMC meeting. The advice, informed by targeted consultation with over 50 stakeholders including an industry roundtable in June 2026, sets out regulatory pathways requiring data centres to offset their electricity demand through renewable generation and firming investment, demand flexibility and efficient location.

The AEMC’s four recommendations are designed to achieve the Ministers’ policy objectives while ensuring data centre growth does not leave other consumers worse off:

1. Mandate data centres to offset consumption using certificates linked to new renewable generation.

2. Mandate contracting for firming capacity, aligned with the Retailer Reliability Obligation (RRO) design.

3. Require data centres to obtain market registration with AEMO to improve visibility and enable voluntary market participation.

4. Incentivise demand flexibility and co-location with generation through streamlined connection agreement processes.

Under the proposed framework obligations could be tiered by size (with larger facilities facing stronger requirements), and data centres would have multiple compliance pathways including PPAs, REGO purchases, behind-the-meter investment, or retailer support. The AEMC has outlined two implementation approaches: a staged rollout (Commonwealth legislation for REGOs first, then NER changes) or a single NEL/NER package.

Data Centres - New South Wales outlines its position

The NSW Government has issued a consultation paper on 31 July 2026 (Reforms to electricity network connection and cost recovery arrangements for data centres in NSW | NSW Climate and Energy Action) outlining proposed reforms to network connection and cost recovery arrangements, including:

1. requiring distribution network service providers to recover appropriate transmission network upgrade costs from data centres connecting to distribution networks;

2. requiring data centres to guarantee they will pay for the costs of capacity made available to them, regardless of whether they use it;

3. requiring data centre connection applicants to pay a Major Network Upgrade Fee with a default rate of $200,000/MW for connections in Sydney-Newcastle-Wollongong and $100,000/MW elsewhere;

4. requiring transmission-connected data centres to contribute to the costs of jurisdictional schemes; and

5. requiring network service providers to use connection agreements to offset demand through Power Purchase Agreements and firming agreements and to reduce load in times of grid stress.

The NSW Data Centre Policy Framework, announced by Energy Minister Penny Sharpe on 17 August 2026, confirms that data centres would get a fast-tracked assessment period of 75 days if they meet certain performance measures, including sourcing 40% of their electricity from wind power.

It is uncertain whether other states will follow suit – for example, Queensland and the Northern Territory have not indicated support for reforms mandating data centres invest in renewable energy.

The NSW Government's Electricity Infrastructure Investment Amendment Bill 2026 (NSW Bill) , introduced 5 August 2026, is a REZ-style access scheme that empowers the State Minister to create “large load infrastructure access schemes” and control grid access for "large load infrastructure". This would require proponents of large load infrastructure to pay the cost of network infrastructure required to supply them.

The NSW Bill provides a planning architecture and clear cost recovery regime for NSPs and data centre developers. This approach, which could be adopted in other States or included in the broader connections reforms, would in principle allow:

• a single infrastructure planner (such as the relevant NSP) to plan augmentation for the precinct once, sized to serve the cluster rather than sequential individual connections;
• pooled cost recovery across all connecting data centres within the declared zone, potentially smoothing capital contribution timing and reducing the “first mover pays, second mover free-rides” problem inherent in sequential negotiated connections under the current charging framework;
• This was echoed in Minister Bowen's rule change request, directly aiming to resolve the ‘first-mover’ disadvantage through the amendments to funded augmentations as mentioned above;
• structured, mandated community consultation modelled on the existing urban REZs (such as the Illawarra REZ) roundtable process, directly addressing the social licence issues;
• the co-ordination of other shared assets such as fibre connection and water availability.

Also see our publication Powering Up the Bill: Proposal for Data Centres to Pay for Grid Costs.

NEM Review

Draft ESEM Contract Terms – Electricity Contract Co-Design Working Group

The Electricity Contract Co-Design Working Group has released draft high-level product term sheets for the proposed ESEM contracts. The Working Group will consult on the draft terms during September and October 2026, aiming to deliver a final report by the end of October 2026. The three products being considered are:

• Bulk energy: Regional Reference PPA. Based on a swap structure. It works by fixing the price received by the Seller per MWh of output, where the notional quantity is determined by using the Reference Production Index (which is based on the performance of a reference fleet of renewable projects within a NEM Region).
• Dynamic Time of Day Block Spread Swap. The dynamic, time of day block spread swap uses an ex-ante, dynamic approach to defining the forecast optimal periods for discharge and charge ahead of time (using an arithmetic formula to determine the trading intervals to be included in the Discharge Period and the Charging Periods), with the actual block spread settled against an agreed fixed spread for a day calculated ex-post (the spread being the average spot price for the deemed discharging trading intervals minus the average spot price for the deemed charging trading intervals). See the AEMO Governance Review – Final Report and the ECMC response to the AEMO Governance Review.
• Firming: $600/MWh cap contract. Converts uncertain but significant wholesale price exposure from volatile events into a consistent cash-flow, providing increased certainty for buyer and seller.

All three products are proposed to be structured as financial instruments under an ISDA Master Agreement framework, with no physical performance obligations. Force majeure treatment is still under consideration. The products are intended to be fungible and tradeable.

National Gas Rules

AER consults on draft gas Market Monitoring Information Order

On 20 August 2026, the AER published a draft Market Monitoring Information Order (MMIO-GAS-2026-01) and accompanying Explanatory Statement for consultation. This follows an earlier draft Order consulted in late 2024, after which the AER decided not to proceed while it considered stakeholder feedback.

The draft Order would require persons obligated to publish information under Part 10 and/or Part 18A of the National Gas Rules to provide that information to the AER, with the addition of counterparty names and copies of contracts and agreements for which actual prices payable information is published. Information would be submitted annually via the AER Portal, with the first reporting period covering calendar year 2026.

The information will support the AER’s wholesale gas market monitoring functions, including assessing market concentration, market participant behaviour, access to transport and storage infrastructure, and whether market conditions are enabling effective competition. Submissions close 1 October 2026, with a final Order expected in December 2026.

Draft National Gas Amendment (Gas networks in transition) Rule

On 27 August 2026, the AEMC published a draft determination with a coordinated package of reforms to the gas pipeline economic regulatory framework, responding to rule change requests from Energy Consumers Australia and The Justice and Equity Centre. The reforms are designed to support an orderly energy transition and promote the long-term interests of consumers as gas demand declines.

As demand and customer numbers decline, pipeline costs must be recovered from fewer consumers, placing upward pressure on prices. Service providers face increasing uncertainty about future utilisation and cost recovery from long-lived assets. The draft package introduces:

• Long-term outlook. A new 20-year framework requiring service providers and the regulator to identify, assess and explain how long-term transition risks have informed access arrangement proposals and decisions, bringing emerging risks to light earlier.
• Capital cost recovery. Amendments to depreciation and inflation tools to better align cost recovery with expected network use, promoting efficient tariff outcomes while preserving service provider incentives.
• Redundant capital. A mechanism enabling the regulator to reduce a service provider’s capital base where necessary to respond to competition, benchmarked against prices consumers who can readily switch would pay for alternative energy sources.
• Expenditure assessment. Strengthened requirements ensuring proposed capex is future-focused, prudent and strictly necessary for safe and reliable services, with greater scrutiny to minimise capital base growth and stranding risk.

The package also includes broader incentive mechanisms, updated tariff arrangements recognising competition from alternative energy sources, and extended access arrangement timeframes. The reforms sit alongside the recent gas connections and customer abolishment rule changes.

Submissions are due 8 October 2026. A final determination is expected in December 2026.

Other publications

National Consumer Energy Resources Roadmap – Case Studies

On 3 August 2026, DCCEEW published case studies illustrating how the National CER Roadmap will benefit households by 2030, covering virtual power plants, rooftop solar value optimisation, and vehicle-to-home EV integration.

The case studies signal the CER Roadmap’s policy direction, including a new Consumer Energy National Technical Regulator and reforms to device standards, data sharing and connection processes.

For market participants, the key implications are accelerated VPP participation in wholesale markets, new interoperability requirements for grid-connected devices, and increased behind-the-meter aggregation in dispatch. The AEMC’s Minimum System Load rule changes (discussed above) take place in this context.

ECMC review of AEMO’s governance arrangements

On 7 August 2026, the Energy and Climate Change Ministerial Council (ECMC) published the final report of the AEMO Governance Review together with its response.

Led by independent reviewer Mr Nigel Ray PSM, the review made 14 recommendations to update and strengthen AEMO’s governance to suit its expanded role in the energy transition and improve accountability, transparency and responsiveness to governments. Key recommendations include:

• retaining AEMO’s Corporations Act structure, with strengthened accountability to governments through constitutional and legislative amendments
• transitioning to 100% government membership (removing industry members)
• spinning off ASL as a standalone multi-jurisdictional entity — significant for CIS, LTESA and future ESEM administration
• board reforms including 5-year terms (up from 4) and removal of restrictions on industry-experienced directors
• a statutory ‘duty to inform’ obligation requiring proactive reporting to ministers on significant matters
• AER oversight of AEMO’s annual budget to ensure expenditure efficiency
• a national security directions power for a Commonwealth minister, to be used only in exceptional circumstances.

Almost all Ministers agreed to the 14 recommendations (with Queensland noting recommendations 7, 12 and 14 and otherwise agreeing in principle). Drafting of amendments to the national energy laws should commence before the end of 2026.

AER releases 2026 Wholesale Electricity Market Performance Report

On 19 August 2026, the AER published its 2026 Wholesale Electricity Market Performance Report, the first to use contract market data collected under the Market Monitoring Information Order – Electricity 2025 (see our update for details - Australian electricity and gas markets – November 2025 Update) The AER finds the NEM is fragmenting into distinct markets by time of day and service type, with price outcomes increasingly dependent on flexible capacity availability. Key findings:

• Wholesale prices fell in all regions in 2025 but remain above 2021 levels (except Queensland), with 82% of revenue concentrated in evening peak and overnight periods.
• Batteries are displacing gas and hydro as the dominant evening peak price-setters. Battery capacity grew from around 260 MW in 2021 to over 6.4 GW by end of 2025, with further capacity in the pipeline.
• Market concentration has declined due to diversified new entry, but firming services remain highly concentrated.
• Contract markets have stabilised with record ASX volumes, but the top 5 participants account for most reported volume.
• Around 15.7 GW of thermal capacity is scheduled to close this decade, with 6.8 GW closing in 2028-29 (Yallourn, Eraring, Gladstone). Delayed replacement risks price volatility and reliability pressure.

The AER recommends: (1) reducing overnight price pressure by shifting discretionary demand into solar hours; and (2) strengthening ESEM delivery discipline through clear milestones.

Regional wholesale price outcomes for 2025 were: Queensland $95.00/MWh (down $32.73), NSW $118.77/MWh (down $31.66), South Australia $113.91/MWh (down $18.59), Victoria $94.68/MWh (down $6.41) and Tasmania $100.33/MWh (down $1.48).

AER releases Strategic Plan 2026-2030

On 21 August 2026, the AER released its Strategic Plan 2026-2030, setting out its direction and priorities for the next five years. The plan is organised around three key outcomes: energy will be more affordable, the lights will stay on, and the energy transition will progress. These outcomes are supported by 12 strategic objectives across gas, electricity, wholesale markets and consumer protection. Key objectives include implementing an effective domestic gas reservation scheme, supporting investment in gas transmission pipelines (or alternatives) to ensure efficient gas delivery, supporting electrification while ensuring gas distribution services remain affordable, rigorously regulating wholesale markets and mitigating market power, supporting and protecting consumers to improve energy equity, and efficiently delivering regulatory outcomes in support of each jurisdiction’s energy priorities.

AEMO publishes 2026 Electricity Statement of Opportunities

On 25 August 2026, AEMO published the 2026 Electricity Statement of Opportunities (ESOO), showing a clear pathway to maintain reliable electricity supply across the NEM over the coming decade.

The reliability outlook has improved relative to last year, with no forecast reliability gaps identified before 2030. This has been supported by a record 9.1 GW of new generation and storage capacity connected in 2025-26 and a 40 GW pipeline of committed and anticipated projects expected to be delivered by the early 2030s.

However, over the next decade around 15 GW of coal and gas generation is scheduled to retire, while electricity consumption is forecast to increase by more than 40% as homes, businesses and industry electrify and data centre demand grows. Data centre electricity consumption is forecast to increase from approximately 5 TWh in 2025-26 to 34 TWh by 2035-36, increasing from around 3% to approximately 13% of electricity supplied through the grid.

Victoria launches Australia’s first offshore wind auction

On 26 August 2026, Victorian Minister for Energy and Resources Jaclyn Symes opened the request for proposal process for Australia's first offshore wind auction, seeking 2 GW of offshore wind capacity. No formal documentation has been released yet.

The auction forms part of Victoria’s pathway towards its 9 GW offshore wind target. Projects will be assessed on value for money, deliverability and local content benefits. The auction closes August 2027, with contracts expected to be awarded in 2028.

Contracts are expected to be integrated into the national ESEM. For market participants, this is significant as it signals how jurisdictional offshore wind procurement may interact with the national ESEM framework — particularly given the ESEM’s focus on dispatchable firming capacity rather than intermittent generation.

AER reports on significant electricity prices for Q2 2026

On 27 August 2026, the AER published its quarterly report on significant prices in the NEM covering April to June 2026.

Overall, energy and FCAS prices were significantly lower than in the same quarter last year, with quarterly volume-weighted average prices ranging from $60/MWh in Victoria to $95/MWh in South Australia — 42% to 64% lower than Q2 2025. However, significant price outcomes were identified in Queensland, Tasmania and South Australia across both energy and FCAS markets, driven by local market and network conditions including interconnector limitations that reduced access to lower-priced capacity. The highest 30-minute energy prices ranged from $251/MWh to $20,300/MWh, and FCAS prices ranged from $717/MW to $3,768/MW.

In South Australia, significant energy price outcomes on 21 and 22 June occurred under tight supply-demand conditions, with cold weather driving high demand combined with very low wind output and a cascading reduction in battery state of charge. These events added $13/MWh to South Australia’s quarterly volume-weighted average price.

Authors: Dan Brown, Partner; Dale Gill, Partner; Kate Phillips, Partner; Aylin Cunsolo, Partner; Paul Newman, Consultant; Lauren Zambotti, Counsel and Isabelle Jardine, Graduate.