In August 2025, Modo Energy covered the Nelson Review's draft recommendations and their implications for BESS. Since then, the final report landed (16 December 2025), and AEMO published Version 8 of the NEM Reform Implementation Roadmap (May 2026). This article provides an update on the NEM reforms most relevant to BESS. It covers both the Nelson Review recommendations and the operational NEM reforms running alongside them.

These NEM reforms mostly support contracted revenue rather than reshape merchant mechanisms. The Nelson Review chose to work within the NEM's current energy-only market model. This matters most as BESS revenues continue to compress and the BESS pipeline keeps scaling. Financing leans increasingly on contracted income.

Executive Summary

• The Electricity Services Entry Mechanism (ESEM) and the Market Making Obligation (MMO) are in active design. A Working Group started in May 2026 to develop the standardised contracts for both over 18 months. The first ESEM tender should land in late 2027.
• Grid-forming BESS have been eligible for system strength revenues since 2024. By 28 October 2026, AEMO will automate these services. This makes participation easier.
• Project EnergyConnect Stage 2 construction completes in October 2026. Capacity then ramps gradually over 2027. Operators can hedge state price differences in the September 2026 Settlement Residue Auction.
• South Australia has the most to gain. The MMO tackles the state's limited contract market. Project EnergyConnect ends its long-standing connection bottleneck. Cumulative price changes limit triggers for extended price caps.

What BESS developers and operators should track

Each row describes what is changing from May 2026 onwards. Items already in force sit under "How it works today."

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