Australia Needs Six Reforms to Unlock Full Distributed Energy Resource Potential

Distributed energy resources — including rooftop solar, distributed batteries, and demand-responsive appliances — can accelerate Australia's decarbonisation and reduce household energy costs if policymakers implement a coordinated reform package. Australian consumers have already invested at least A$25 billion in rooftop solar and other distributed energy assets, yet regulatory and market gaps prevent these resources from delivering their full value to the grid.

Australia installed almost 3 gigawatts of rooftop solar annually for three consecutive years, bringing total rooftop solar capacity to more than 22 gigawatts in the National Electricity Market (NEM). In September 2023, rooftop solar met more than 100% of South Australia's power demand for a five-minute period, and reached a NEM record of 46.7% of demand on the same day. By contrast, only 0.4 GW of new large-scale renewables investment reached financial close in the first half of 2023, well below the 5 GW per half-year required to meet the government's 82% renewables target by 2030.

The IEEFA report identifies six priority areas where reform can unlock greater distributed energy benefits: establishing a dedicated body for DER technical standards; removing static constraints on solar exports by implementing dynamic operating envelopes; unlocking flexible demand from residential appliances including hot water systems; fast-tracking distributed storage investment; creating a level playing field for DER in network service markets; and reviewing energy market governance to support a DER-rich future. A University of Technology Sydney study estimates that efficiently electrifying and enabling hot water systems by 2035 could save consumers up to A$6.7 billion annually by 2040.

The report was prepared ahead of the November 2023 meeting of State and Federal Energy and Climate Change Ministers, where DER policy sits on the agenda. Without regulatory action, the estimated A$250 billion that five million Australian households may invest in solar, electric vehicles, and smart appliances over the next two decades will deliver sub-optimal returns to the grid. Author Dr Gabrielle Kuiper notes that improved voltage management alone — following the Victorian government's lead — would reduce consumer costs by an estimated A$30 million per year in Victoria.

Key figure — Australian consumers have invested at least A$25 billion in rooftop solar and other distributed energy resources.