If emission reduction is not to be achieved through the “stick” of emission prices included in electricity prices then the NEM’s prices can’t be relied upon to drive renewable generation and storage at the rate that will achieve the government’s emission-reduction objectives. Instead, government has no choice but to intervene either by contracting for renewable generation and storage, or by providing incentives to private investors.

Evidence of both can now be found. The governments of NSW and Victoria are at early stages of the implementation of ambitious programs to contract for new renewable generation and storage, and the Albanese government was elected on the promise of a $20 billion fund as its contribution to the delivery of its remarkable target of 82 per cent renewable electricity generation by 2030.

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So, if new investment is to be driven substantially through policy, what then is the purpose of the NEM itself, since its principal purpose – to let market forces determine investment – has been irreparably hobbled by the government’s rejection of emission prices?

I do not think that Australia’s energy polity has properly grasped this truth. A successful career in regulation in Australia requires fealty to the dogma that “the market” should decide new investment and this requires wilful blindness to the inconvenient truth that governments have hobbled the market.

The failure to properly grasp this truth has resulted in half-baked policy support for renewables and storage (indeed the Abbott/Turnbull/Morrison governments actively sought to reduce such support). It has also resulted in much wasted effort in attempting to tweak the NEM to somehow magically conjure up renewable generation and storage needed to meet governments’ ambitious targets and at the same time ensure reliable supply.

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The abandoned NEG – the national energy guarantee – was one such conjuring trick. Regulators are now expected to reheat proposals for a “capacity mechanism” and dish it up to ministers at the end of this month. This is another such conjuring trick.

So, what to do? Government must accept that as long as it refuses to price emissions, it has no option but to itself drive investment. It needs to ensure it has the capacity to do this properly. As noted, NSW and Victoria have already started down this track.

The federal government needs to work out how best to support the states. We have argued elsewhere that it has a particularly valuable role to play in driving the rapid expansion of electricity storage, without which its renewable electricity target will not be achieved.

As for the regulators, they need to stop trying to solve policymakers problems for them. They must be slimmed down to focus only on regulation, not market design or policy development.

What about the NEM? If its main purpose is to ensure efficient dispatch, not drive investment, economists might be invited to propose new arrangements that provide adequate compensation and incentives to reduce operating costs but not to signal scarcity. This recognises government’s – not “the market’s” – role in driving new investment.

Something good must come from this embarrassing failure. Might we hope for more honesty, courage and imagination?

Bruce Mountain is director of the Victoria Energy Policy Centre. An energy econmist, he has been a longstanding adviser to governments, regulators, market participants and interest groups in Australia and internationally.