The First Nations Clean Energy Strategy provides an endorsed national framework for equitable partnerships, economic benefits and better energy access. The Electricity Services Entry Mechanism (ESEM) should be designed as an instrument for delivering its goals.
First Nations participation supports better projects
First Nations are rights holders with continuing responsibilities for Country, whose rights and decision-making authority require recognition in their own terms. First Nations should also be able to shape projects and share in the long-term economic value created on Country.
These commitments are also relevant to investment and delivery. The Network’s report Investor benefits of First Nations participation in clean energy projects, identifies potential benefits including faster development, lower project risk, improved access to capital and offtake, and workforce opportunities. The benefits depend on the quality of the partnership and project circumstances.
A narrow focus on bid price can overlook these delivery benefits. Nationally consistent standards, published before procurement, can reduce compliance costs and uncertainty for developers and investors, improve project planning and limit the risk of unanticipated delays. Credible partnerships and clear requirements support affordable, reliable electricity over the project lifecycle.
Our September 2025 submission sought competitive First Nations merit criteria, with national preconditions as the minimum fallback. Our July 2026 briefing focused on national expectations, credible gateways and enforceable delivery under the expected price-based model. Competitive merit assessment remains our preferred approach. Strong national requirements for rights and economic participation are essential if price-only auctions proceed.
Our response to the consultation
Proposed National Electricity Law (NEL) section 118AAI defines the entry objective around reliability and emissions targets at the lowest cost to consumers. Section 118AAK sets related principles but contains no express First Nations requirement. This framework should be amended to require the Administrator to give effect to First Nations rights and participation requirements when designing and conducting procurements, and to authorise procurement arrangements that advance First Nations economic participation.
The proposed statutory framework should make clear that cost minimisation operates subject to these requirements. Sections 118AAM and the proposed Schedule 1 rule-making powers, particularly items 14Z, 14ZB and 14ZC, should support the corresponding standards, procurement arrangements, reporting and enforcement. Core obligations belong in the Law and Rules; guidelines should explain how to meet them.
The Future Made in Australia Act 2024 provides a legislative precedent. The Network’s July 2024 submission called for a distinct First Nations community benefit principle. Section 10(3)(a)(iiia) of the enacted Act now expressly recognises First Nations communities and Traditional Owners participating in and sharing the benefits of the transition to net zero. This precedent supports an equivalent express focus in the ESEM.
In our subsequent proposals on implementing the community benefit principles, we distinguish the quality of engagement under Principle 3 from material economic outcomes under Principle 4. The ESEM should likewise recognise First Nations economic participation separately from general community engagement and benefits.
Set national standards and reward stronger commitments
The government's consultation paper recognises the desirability of ESEM-wide eligibility criteria. The Network proposes that this should be given clear effect in the Rules by requiring national minimum community, social and environmental standards alongside distinct First Nations requirements.
The Network suggests that clauses 4AA.C.7, 4AA.C.9 and 4AA.C.36 should be amended to require early engagement with Traditional Owners and affected First Nations groups and communities to enable the exercise of self-determination and free, prior and informed consent (FPIC), heritage protection, and credible, locally agreed participation and benefits. Stage-appropriate requirements through development, operation, decommissioning and closure should be applied.
The gateway must assess economic outcomes as well as engagement processes and should require measurable commitments to ownership or revenue participation, employment and training, procurement from First Nations businesses, and business development, reflecting community priorities.
Projects should demonstrate credible delivery plans and the capacity and resources to implement them. General community funds or consultation activities should not be treated as satisfying distinct First Nations economic participation requirements.
The Network suggests that national minimum and tiered economic participation requirements with First Nations organisations should be developed.
The Network’s FMIA proposals seek at a minimum a 5 per cent equity or an equivalent revenue-sharing interest, with stronger participation and governance rights recognised above that floor. These proposals should inform ESEM requirements, with transparent assessment of economic equivalence and community choice over arrangements. The minimum must operate as a floor, not a ceiling.
Amend clause 4AA.C.7(b) to require capacity and commitment to meet national standards, making these mandatory rather than part of the criteria the Guidelines may include. Clause 4AA.C.36 should require standards, evidence and assessment processes to be published before procurement.
Jurisdictions should be able to supplement or strengthen these standards. Amend clause 4AA.C.9(d) and the inconsistency exception in clause 4AA.C.7(a)(5) so national minimums cannot be weakened or displaced, including for cross-jurisdictional bids. Establish transparent procedures for resolving overlaps while maintaining each national minimum.
Mandatory standards should be accompanied by competitive assessment of stronger First Nations commitments. Capacity Investment Scheme (CIS) Tender 9 assigns a distinct 12.5 per cent weighting to First Nations participation and benefits sharing, alongside a separate social outcomes criterion. This is a useful precedent for recognising First Nations interests distinctly from general community benefits.
Retaining that incentive requires an amendment to clause 4AA.C.10, which expressly requires assessment of eligible bids on bid price only. Amend that clause and the assessment methodology under clause 4AA.C.36 to allow meaningful assessment of the quality, durability and deliverability of First Nations commitments alongside price. Stronger commitments should be verified with the relevant First Nations groups, rather than assessed solely from proponents’claims.
If price-only auctions are retained, mandatory national standards covering substantive economic participation, a dedicated participation allocation and enforceable delivery obligations are essential safeguards. They should be designed to lift ambition over time. This fallback would still provide less incentive for continuous improvement than competitive merit assessment.
Create an enduring pathway to ownership
The ESEM should preserve and develop the CIS First Nations set-aside approach. CIS Tenders 9, 10 and 11 included a dedicated allocation for projects committing to qualifying First Nations sharing arrangements. A dedicated allocation should complement the national economic participation standards applying to all supported projects.
The ESEM should establish an explicit power and requirement to provide a dedicated allocation for projects with meaningful First Nations ownership or community-chosen sharing arrangements. Develop the allocation, eligibility requirements and review process with First Nations organisations. Equity should provide real economic value and appropriate governance rights, while revenue sharing should be transparent, durable and reflect the community’s self-determine choice.
Clause 4AA.C.42 currently concerns jurisdictional technology targets. It should not be assumed to authorise an ownership-based allocation. The Law and Rules need a clear additional pathway for that purpose. National First Nations minimum standards should apply to all relevant procurement pathways, including special-purpose procurement.
Procurement incentives must be supported by access to independent advice and suitable capital. Governments should coordinate existing First Nations advice programs and public investment institutions to help communities assess opportunities and finance participation.
Communities must remain free to decline equity or a project, and should not need to surrender rights or accept excessive financial risk to receive benefits.
Secure delivery through enforceable obligations
Amend clause 4AA.C.18(b)(5) to extend the requirement to comply with project criteria to all relevant gateway requirements and commitments, including First Nations, community, social and environmental obligations. Clause 4AA.C.36 should require measurable contractual obligations and monitoring. Use ESEM related contracts, including development agreements, alongside standardised, tradeable derivatives. The Financial Management Entity’s enforcement function under proposed NEL section 118AAM should expressly encompass these obligations.
Contracts should specify milestones, reporting, verification with affected First Nations groups, independent checks where appropriate, remedies and proportionate consequences for non-compliance. Commitments should survive changes in project ownership and continue through decommissioning and closure where relevant. Affected First Nations groups should have accessible ways to report failures and seek resolution.
Project-level commitments and aggregate delivery results should be published with the agreement of participating First Nations groups, protecting cultural information and legitimate commercial confidentiality. Reporting must distinguish promised benefits from benefits actually delivered. Material changes to agreed arrangements should require the affected First Nations parties’informed agreement and appropriate scheme oversight.
Renewable Electricity Guarantee of Origin (REGO) certificates administered by the Clean Energy Regulator can record First Nations attributes. The ESEM should align relevant definitions, facility identifiers and evidence requirements with the Guarantee of Origin framework. Verified information could support monitoring and inform buyers and investors, subject to First Nations authorisation, data sovereignty and confidentiality.
Safeguard special purpose procurement
Special-purpose procurement can address technology-specific barriers, but must remain consistent with reliable, affordable electricity and emissions reduction. Strengthen clause 4AA.C.42 to prevent technology-specific tenders for fossil fuel generation where the required firming services can be delivered through technology-neutral procurement. Any departure from technology-neutral procurement should require a clear, demonstrated public benefit.
Before a special-purpose tender seeking fossil fuel generation proceeds, require the relevant jurisdiction to publish a justification for the Administrator’s assessment. It should compare clean alternatives capable of delivering the required services and account for lifecycle emissions, including upstream methane. It should also assess costs and risks to consumers, including fuel-price volatility, contract duration, construction delays and current evidence on turbine and equipment supply chains.
The Administrator should publish its assessment and reasons before procurement. Existing prohibitions on modifying eligibility criteria should remain, and national First Nations, community, social and environmental minimums must apply. First Nations rights and participation requirements should be maintained across procurement pathways, with affected groups involved in decisions concerning Country.
Resource participation and accessible procurement
First Nations representation must help develop the ESEM guidelines, standards, ownership pathway and related contracts before procurement starts. First Nations representation should also inform ongoing governance and review.
Consultation with general industry stakeholders alone will not provide the knowledge or authority needed to design these requirements.
First Nations communities and groups require sufficient time, information and access to independent legal, financial and technical advice to negotiate on fair terms. Tender schedules should allow for community decision-making. Financial capacity tests, minimum project sizes and delivery milestones should be proportionate and accommodate credible consortia and partnerships, so they do not unnecessarily exclude First Nations-led projects. Requirements must remain sufficient to protect consumers and secure delivery.
Read our submission