Australia’s AEMO needs governance overhaul as energy transition workload expands, review finds

The review was led by senior public sector governance specialist Nigel Ray PSM, commissioned by the Energy and Climate Change Ministerial Council in December 2025 and announced publicly on 5 February 2026. The final report was released to the public on Friday (7 August).

AEMO is an independent organisation responsible for operating Australia’s electricity and gas markets. It manages the power grid and plans the country’s energy system.

The review found that AEMO plays a critical role in operating Australia’s electricity and gas markets and is widely recognised as a world-class institution. It concluded, however, that the governance arrangements, largely unchanged since AEMO’s creation in 2009, no longer reflect the organisation’s expanded responsibilities.

Since its establishment, AEMO’s functions have expanded well beyond its original role as a system and market operator.

Today, they include integrated system planning, gas supply adequacy and intervention powers, operation of the Western Australian market, cybersecurity roles, market and system advisory and the provision of services for jurisdictional energy investment schemes.

The review also noted that AEMO is increasingly being asked to balance objectives relating to energy system security, reliability, consumer costs and national security, trade-offs it describes as complex and consequential.

The 14 recommendations seek to amend rather than replace the existing framework. The review concluded that a similar outcome to a structural overhaul could be achieved through less disruptive means, which it described as a key consideration during a period of significant transition.

The most consequential recommendation is a change to AEMO’s membership. The review recommends that governments amend AEMO’s constitution to establish 100% government membership, replacing the current arrangement under which industry participants hold formal governance roles as members.

The report acknowledges that industry fees are passed on to consumers and that AEMO’s decisions must be made in consumers’ long-term interests, making full government accountability more appropriate. Industry would continue to contribute expertise through board and advisory committee roles.

On board structure, the review recommends removing restrictions on directors with industry experience, extending board terms from four to five years, and staggering appointments to ensure two positions are up for appointment or reappointment each year. The AEMO chair would be required to report annually to energy ministers on the board’s skills, performance and upcoming vacancies.

Another key recommendation is that AusEnergy Services Limited (ASL), AEMO’s subsidiary responsible for investment procurement, be established as a standalone entity.

The report found that ASL’s procurement role does not align with AEMO’s core functions and gives rise to perceived conflicts of interest, a concern that would be amplified if ASL were tasked with administering any Electricity Services Energy Mechanism functions.

Regarding budget oversight, the review recommends that the current Financial Consultation Committee be converted into a formal challenge committee enshrined in AEMO’s constitution, with an independent expert chair who reports directly to the board.

It also recommends that the Australian Energy Regulator (AER) be given a role in ensuring the efficiency of AEMO’s expenditure by overseeing its annual budget, carefully designed to preserve AEMO’s independence.

On national security, the review recommends amending energy laws to include a national security objective for AEMO and granting a Commonwealth minister a national security directions power to be used only in exceptional circumstances.

An embedded officer within AEMO, funded by the Commonwealth, would support coordination on national security matters.

A body navigating unprecedented system change

The governance review arrives as AEMO is managing the largest expansion of its operational and planning responsibilities since its creation.

AEMO’s 2026 Integrated System Plan called for nearly 120GW of utility-scale wind and solar by 2050, approximately five times the current level, requiring sustained deployment at rates not yet achieved in any consecutive five-year period. The pace of delivery is already accelerating.

Around 9.1GW of new generation and storage were brought to full output in the National Electricity Market (NEM) in FY26, more than double the FY25 result, with battery storage dominating the technology mix.

Renewables met more than 50% of NEM generation for the first time in the December 2025 quarter, and the NEM’s renewable energy share reached 42.1% in Q2 2026 as wholesale prices fell to their lowest Q2 average since 2020.

Alongside generation and storage, AEMO is managing a rapidly expanding connections pipeline, processing data centre load connection applications, overseeing the NEM Reform Program, and integrating the governance changes flowing from the Environment Protection Reform Act 2025.

The review’s decision to work within the existing framework rather than recommend a new statutory structure reflects a judgement that the costs of disruption outweigh the benefits of a more fundamental reset at this particular moment in the transition.

The recommendations on transparency and accountability are designed to address the review’s finding that the current framework provides for government oversight but does not compel it.

The review found that existing instruments rely on AEMO’s willingness to provide information and governments’ willingness to engage with it actively. The Statement of Role, introduced as an accountability mechanism, has in practice been a static document that adds limited value.

Under the recommended changes, AEMO would be required to report proactively to governments on material matters, the Statement of Role would be updated at least once every three years with clearer performance expectations, and energy ministers would initiate a programme of targeted performance audits by an independent auditor.

The review notes that implementation will require close collaboration by governments, AEMO and stakeholders, with the details of several recommendations to be worked out in a subsequent implementation phase.