Episodes in the Australian National Electricity Market: Lessons for Investors
Over the past 30 years, the Australian National Electricity Market has moved
through repeated investment cycles, policy resets and technology waves. It has
rewarded investors who, understood the physical market, avoided excessive
leverage and deployed capital during moments of pessimism. It has punished
investors who assumed stable policy, relied mechanically on consultant
electricity price forecasts, ignored complexities in the NEM design (such as loss
factors), overly emphasise contracted cashflows and/or extrapolated early-cycle
outcomes into the long-run.
The core investor lesson is that the NEM is not a pure infrastructure market. It is a
volatile commodity market embedded inside a political system, a weather-
dependent physical grid and an accelerating technology transition. Value has
often accrued not to those with the lowest discount rate, but to those with the
best underwriting discipline: a view on medium-term prices, a clear
understanding of risk, and the capacity to survive policy and market cycles.
This paper outlines insights across the history of the NEM and lessons for
Investors today
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