Consultation launched as preferred ESEM contract structures take shape in next stage of NEM Review implementation

16 September 2026

The Industry-led Electricity Contract Co-Design Working Group (the Working Group) has launched an industry consultation seeking feedback on the preferred contract structures for bulk energy, shaping and firming services for use in the first Electricity Services Entry Mechanism (ESEM) tender, expected to occur in late 2027 subject to ECMC approval.

The ESEM, a proposed mechanism for long-term contracting to support the required investment in new generation and storage, was a key recommendation of the 2025 National Electricity Market wholesale market settings review (NEM Review). The NEM Review recommended an industry-led co-design process be convened to define the core set of derivative contracts for use in the ESEM.

The launch of the consultation marks a significant milestone in the Electricity Contract Co-Design process. Following several months of collaboration, the Working Group has progressed from exploring potential contract concepts to well-formed structures for each of the proposed Electricity Services Entry Mechanism (ESEM) services.

The Working Group’s preferred contract structures are:

• Regional Reference PPA for bulk energy services;
• Dynamic Time of Day Block Spread Swap for shaping services; and
• $600 Cap Contract for firming services.

The Regional reference PPA is designed to support investment in new renewable generation and reduce a buyer’s exposure to project-specific risks by settling based on the performance of a regional portfolio of generators.

The Dynamic Time of Day Block Spread Swap is designed to value flexibility by comparing realised price spreads between dynamically determined charging and discharging periods based on forecast electricity demand conditions.

The $600 Cap contract provides protection against high-priced events by requiring sellers to provide financial cover when spot prices exceed $600/MWh, while providing sellers with a fixed premium to support investment in firming capacity.

Since commencing work in May 2026, the 11-member Working Group has engaged extensively with industry through workshops, public webinars, engagement with peak industry bodies, and the publication of project materials. Industry input has played an important role in shaping the proposed designs, including through the identification of the Regional Reference PPA for bulk energy, a contract structure not previously contemplated.

Feedback received through this process will be critical in supporting the continued development of the preferred contracts and shaping the Working Group’s final recommendations. The Working Group is seeking feedback from a broad range of stakeholders to help ensure the proposed contract structures can meet the needs of a range of market participants.

Consultation is open from 14 September 2026 to 2 October 2026. Feedback received will be released to market alongside a webinar outlining the findings. The Working Group will leverage the industry feedback to refine the proposed contracts and make its final contract recommendations, expected in November 2026. Further consultation is expected to be held following the final recommendations of the Working Group.

Stakeholders can access the consultation paper and submit feedback via the Industry-led Electricity Contract Co-Design webpage.