AEMO's Draft 2026 ISP prices consumer flexibility gap at A$7.2bn
AEMO's Draft 2026 ISP modelling finds the NEM could reduce total system costs by A$7.2bn if consumer energy resources respond to price signals.
Australia's Draft 2026 Integrated System Plan has put a A$7.2 billion price on what the National Electricity Market is currently failing to extract: the cost reduction available if rooftop solar, batteries and smart appliances respond to wholesale price signals rather than sitting as passive load.3
AEMO CEO Lorenzo Marchese told Australian Energy Week on Thursday (2026-06-11) that the NEM's operating reality has changed fundamentally since market start, when a clear boundary divided supply from demand.3 The market rules and frameworks were built around that boundary, he said, yet "this thinking still permeates our industry." Consumer energy resources have already crossed that line; the rulebook has not followed.3
The scale of the underlying shift became visible in fourth quarter 2025 data. Australia's main grid hit a record power demand high while renewables supplied more electricity than fossil fuels for the first time across the entire NEM, the ABC reported on Thursday (2026-01-29).1 Variable supply is growing faster than the market's ability to value and absorb it from the demand side.1
Prices have nonetheless been subdued for months. WattClarity wrote on Sunday (2026-06-21) that a "volatility drought" had persisted through the 2025-26 summer, pointing to the "rise and rise of battery storage — both small and large" as a key contributing factor.4 That drought briefly broke in Tasmania on Sunday (2026-06-21) and then in South Australia on Sunday (2026-06-21) and Monday (2026-06-22), producing short-lived price spikes before conditions normalised.4
The A$7.2bn ISP finding points beyond what batteries are currently delivering. Consumer energy resources — rooftop solar, hot water systems, EV chargers — remain largely passive as market participants.3 If those assets dispatch in response to price signals, the system needs less new generation and network capacity built out. If they stay passive, the avoided cost becomes an incurred one, spread across all consumers.3
The supply side is developing its own pressure. WattClarity reported on Wednesday (2026-06-03) that at the Australian Wind Industry Forum, the dominant view — expressed during the industry outlook panel and later by KPMG's Mark Leersnyder — was that many auction outcomes, for wind in particular, were struck against a materially different cost environment than what now prevails.2 Developers are signalling that the economics of contracted capacity are shifting faster than auction frameworks can accommodate.2
That creates a reliability exposure. Capacity procured under earlier cost assumptions may face financial strain, potentially leaving the system with less committed generation than planned at a time when the need for dispatchable capacity is rising alongside variable renewables penetration.2
The A$7.2bn number is also an argument for regulatory action. AEMO has flagged that existing market frameworks were never designed for a system where millions of distributed assets produce power at near-zero marginal cost while wholesale prices occasionally go negative.3 The ISP treats consumer flexibility as a resource to be dispatched. The rules still treat it largely as background noise.3
For traders watching NEM spreads, a market that successfully integrates consumer flexibility will show flatter residual demand curves and fewer scarcity pricing events. One that does not stays exposed to price spikes during prolonged renewable droughts, even if day-to-day volatility is being suppressed by batteries. The subdued conditions WattClarity documented are a battery-driven phenomenon; the scarcity exposure during extended low-wind, low-solar periods runs through different mechanics entirely.4
The Draft 2026 ISP is open for consultation ahead of a final version. The A$7.2bn figure will attract scrutiny from generators, networks and retailers with competing views on how any cost burden should be allocated.3 The NEM's market design was built around a supply-demand boundary that consumer energy resources have already erased; how fast rule reform follows is what the consultation process now needs to answer.3