Australia is seeking to design a ‘reliability mechanism’ as part of the Turnbull Government’s National Energy Guarantee. This Working Paper provides analysis and suggestions on how to design the mechanism and how it might work. On balance, we support a well-designed retailer obligation that utilises commercial market drivers. But we recognise that there are risks in this approach. Policy makers will need to learn from international experience, take account of the particular challenges confronting Australia’s National Electricity Market, and consult widely with industry stakeholders to avoid unintended consequences and ensure the new mechanism achieves the right balance between higher reliability and lower costs. If major flaws remain, then an alternative model may need to be adopted.