Australia’s energy transition: Why the Government is banking on household batteries

Households will increasingly be doing the heavy lifting to manage Australia’s energy transition as the cost of building new poles and wires soars.

On Friday, the Australian Energy Market Operator (AEMO) revealed that for the first time household solar and batteries will play a much more important role in the nation’s energy roadmap.

According to AEMO, ‘consumer energy resources’ (CER) will transition from being an input to the grid, i.e., via exported solar in the middle of the day, to becoming an important component of demand management via the networking of household batteries.

Australia is increasingly reliant on intermittent renewable resources for its energy mix, with as much as 40 per cent of power contributed from wind and solar, both rooftop and utility scale.

1 in 3 Australian households have rooftop solar, and when added to commercial rooftop solar arrays provide 25 gigawatts of energy. By comparison, Australia’s largest coal fired power plant, Eraring, contributes 2.9gW.

But the excess of power created in the middle of the day has meant the economics of power generation has fundamentally changed, sending prices negative for hours and placing a potentially destabilising amount of load on the grid.

As part of the Government’s net zero ambitions to get to 82 per cent renewable generation, an additional 11gw of energy will be added to the grid, much of which will also be delivered into the system during the middle of the day.

According to Tim Buckley, a director at Climate Energy Finance and a former director at the Institute for Energy Economics and Financial Analysis, too much production could trigger the kind of blackout that shut down Spain’s and Portugal’s grid for a day.

“Probably the biggest lesson out of Spain, was they’ve got one of the highest renewable energy penetrations in the developed world, but one of the lowest battery capacities in the world,” Mr Buckley said

“We need batteries to time shift demand from when solar is generating to when consumers are demanding it, and that is invaluable for grid stability.”

Labor has committed $2.3 billion to subsidise the take-up of 1 million household batteries by 2030, providing up to 30 per cent off the upfront cost of installing eligible small-scale battery systems.

While Mr Buckley worried that adding 1 million batteries in such a short time frame could create the kind of scramble for unskilled operators that were the worst part of the Rudd government’s Pink Batts scheme, he said the speed with which batteries could be added to the network made them a far more efficient model than other large scale generation investments.

“Building transmission takes 10 years. Building nuclear takes 20 years. Building a utility battery takes 18 months to two and a half years, if you have to include connection. But an electrician can install a solar and battery combo behind the meter in one week,” he said.

That could mean the shift to renewable energy could occur at a much faster rate and for less money than originally envisaged.

The Government’s Rewiring the Nation project allocates $19b to help build 4,581 km of new transmission lines to connect so called Renewable Energy Zones (REZ) to major capitals.

But AEMO’s s Draft 2025 Electricity Network Options Report revealed construction costs on some projects had jumped as much as 55 per cent in the past two years driven by supply chain constraints, workforce shortages, and the sheer scale and complexity of new projects. Sustained community pushback had also meant many projects faced longer delays, and more community consultation before being approved.

Mr Buckley said things had changed drastically since Chris Bowen’s clarion call that there was “no transition without transmission,” in Labor’ first term.

“AEMO is acknowledging that they have massively underestimated batteries. It is a quantum leap forward in AEMO thinking. The integrated system plan was a brilliant roadmap at a time Australia did not have a roadmap for renewable generation.

“What they’ve effectively done this week is said ‘technologies are moving massively, capital costs are moving massively, battery costs have halved, grid transmission costs have doubled, and we need to evaluate the priority,” Mr Buckley said.

Battery rush amid transmission delays

The push to integrate households into the wider grid may help ease a growing logjam across the network.

With rollout of transmission lines delayed by construction restraints and consumer pushback, project developers were increasingly struggling to ensure access to the grid.

That was creating economic challenges for financing development, putting some generation projects at jeopardy.

Compounding the problem was a hodge-podge of various government agencies that resulted in a complicated approval process.

“We’ve now got a situation where we’ve got an alphabet soup of Australian government and state level organisations, and to some degree, rather than having too little resources, we’ve now got the situation where no one’s accountable,” Mr Buckley said.

NSW’s 1680 megawatt Waratah battery was a case in point, Mr Buckley said. Funded by global investment giant BlackRock, the battery project was to act as a shock absorber in the system. It’s construction was completed on time, but delayed approvals meant it was missing its revenue targets.

“This is the biggest battery in NSW, if even BlackRock can’t get this done, are they going to do it again?” Mr Buckley asked.

Local lines can pick up the slack

It is possible the construction of new transmission may not need to be as comprehensive as first envisaged. Increasingly, the providers of household poles and wires, such as Ausgrid, believe they can play a role in connecting renewable projects more efficiently.

Ausgrid won the tender to connect Newcastle’s renewable energy zone, meaning wires could be added to existing infrastructure.

Distribution networks, such as Ausgrid, are designed for maximum loads, meaning they are underutilised as much as 70 per cent of the time. That could allow them to carry the newly installed capacity rather than it be connected to new, expensive transmission networks.

Mr Buckley said poles and wires were already Australia’s largest asset at a value of $105b.

“I would rather reassess and actually optimise the grid, rather than spending $20b that will become $40b on new transmission,” he said.