Aussie homes to benefit from changes to energy rules

The energy sector’s rule maker has proposed a tweak to give greater returns to households with solar and batteries, which it hopes will spur increased uptake and less need for grid-scale developments.

Australia’s energy rule maker will tweak its rules to allow households with rooftop solar and batteries to secure greater financial returns by using their assets to compete against retailers like Origin Energy and AGL Energy.

The rule change, the Australian Energy Markets Commission says, will incentivise the uptick in batteries and negate the need for as much new renewable energy capacity to be built – though the tweak will be a blow to retailers who will likely have to pay more for electricity capacity.

The AEMC made the draft ruling and expects a final determination by the end of the year.

Australia’s energy rules currently see retailers pool households with rooftop and solar to create a so-called virtual power plant, which the companies use to supplement their existing generation assets such as coal power plants to meet their customers needs.

But the AEMC has said these VPPs should be allowed to compete against the likes of coal power stations and wind farms by bidding into the National Electricity Market, a move that the agency said will be financially beneficial and reduce the need for so much generational capacity to be built across the country.

Should the rule change be endorsed, it would likely spur the creation of so-called energy market aggregators – which pool household VPPs to compete against incumbent players – potentially far more lucrative than the sums received by households that have installed solar and a battery.

The move will also benefit the broader country, the AEMC said. By allowing VPPs to participate in the National Electricity Market trading, the wholesale cost of producing electricity is expected to fall – which would put downward pressure on annual price tariffs.

AEMC chair Anna Collyer said this work represents a pivotal moment in our energy market’s evolution.

‘’Fully integrating these resources will allow energy, security, and reliability services to be provided more efficiently,” said Ms Collyer.

“Over time, this integration will reduce the need for large scale generation and storage infrastructure, ultimately decreasing costs and emissions for all consumers.”

Recent modelling indicates that VPP market participation could result in cost savings of $834m between 2027 and 2050, the AEMC said.

Increased returns to households will coincide with an expected decline in the cost of batteries – which would rapidly decrease the payback period for the assets. Currently, batteries remain prohibitively expensive for many households and savings generated are too small to justify an asset with a 10-year warranty.

An uptick in household batteries would be a boost to Australia’s energy transition. The federal Labor government has set the ambitious target of having renewable energy generate 82 per cent of the country’s electricity by 2030 – which authorities estimate requires some 6GW of new zero emission sources being installed each year. Australia is currently installing just 3GW each year.

The rule change would also aid the Australian Energy Market Operator in stabilising the country’s electricity market. As a participant in the NEM, the VPPs would be governed by AEMO, giving it greater oversight and control.

AEMO is tasked with ensuring there is sufficient electricity capacity to meet demand, but current rules mean it does not have a clear view on the capacity of VPPs at any given time, while it does not have the capacity to order dispatching at a particular moment.

The powers would give AEMO far greater capacity to accurately estimate electricity supply and demand to potential risks.

AEMO can during periods of emergency order coal power stations to dispatch electricity if it is concerned there is insufficient capacity.