Empowering Consumers: The Role of Home Batteries in Australia’s Energy Market
Demand-side participation continues to be overlooked in Australia’s energy landscape, often referred to as ‘the forgotten half’ of the market. Despite numerous regulatory changes and political promises aimed at empowering consumers, there has been insufficient progress in recognising them as significant players in the energy sector.
A recent report from the Energy Efficiency Council highlights that, even after years of reviews and commitments from regulators and state governments, traditional views favouring energy suppliers still dominate. However, there is potential for change, spurred by initiatives like the federal home battery rebate and new rules encouraging demand response, as well as the introduction of the Consumer Energy Resources Roadmap.
Shifting Perspectives in Energy Markets
According to Luke Menzel, CEO of the Energy Efficiency Council, we are at a pivotal moment where all stakeholders—including government, market bodies, industry, and consumers—are reassessing how to structure energy markets for optimal investment in a modern energy system. He emphasises the need to create a level playing field between demand and supply sides to ensure that new participants and business models can compete effectively with established players.
However, achieving this balance will require further efforts building on the recent National Electricity Market (NEM) Review. The report outlines several recommendations, including modifications to energy spot markets and targeted subsidies that encourage consumer involvement in demand-side initiatives, such as the virtual power plant requirement linked to the federal battery rebate.
Recommendations for Enhanced Consumer Engagement
The authors of the report, Gabrielle Kuiper and Dylan McConnell, point out that existing subsidy programmes are not well-suited for a system with high renewable energy integration, particularly as they do not consider time-of-day energy consumption. They suggest that the most effective use of out-of-market subsidies would be to reorient them towards enhancing flexibility in household and business electrification.
For instance, Solar Victoria serves as a successful model for a state-administered subsidy scheme that has effectively supported electrification through quality appliances, compliance audits, enforcement measures, and consumer information dissemination. To maximise impact, home subsidies should focus on flexible hot water systems, pool pumps, heat pumps, and even home insulation, which remains a politically sensitive topic.
Implementing dynamically-managed hot water systems could potentially unlock savings of £6.7 billion annually by 2040 and contribute an additional 22 gigawatts (GW) of flexible demand to the energy system, according to Kuiper’s analysis for the Institute for Energy Economics and Financial Analysis (IEEFA).
For industrial facilities, similar strategies could be applied, targeting flexible hot water systems, industrial heat pumps, factory line upgrades, and enhanced cooling systems for refrigeration sites. Ideally, a national scheme with a registry of approved devices would streamline these efforts.
Additional recommendations from the report include establishing a technical regulator for distributed energy resources (DER) and enhancing open data protocols that facilitate communication between devices and third parties, as demonstrated by initiatives in Victoria and South Australia.
