A new report highlights the potential benefits that coordinated consumer energy resources (CER) can deliver to Australia’s electricity system.

The AEMC commissioned Energia to estimate the incremental system benefits unlocked by flexible operation of consumer energy resources (CER) to 2050. Energeia’s analysis found that these benefits could amount to $45B in net present value terms.  

• Most of the modelled benefits of CER flexibility would come from energy arbitrage in the wholesale market (see Figure 1). Wholesale market cost savings account for 88 per cent of the total savings through 2050, with networks at 11 per cent and FCAS at 1 percent (in present value terms). 
• 80 per cent of the modelled system benefits result from using residential customers’ CER more flexibly. The remainder of the savings are split between small and large commercial customers, the study excluded industrial customers. 

• Energeia’s modelling predicts that the flexible nature of batteries will lead them to quickly become the largest source of additional CER flexibility, contributing to 58 per cent of benefits in 2050 (see Figure 2). 

   

CER are an increasingly important part of Australia’s energy mix 

Millions of Australian households and businesses are already embracing CER, including solar panels, batteries, electric vehicles, water heaters, and pool pumps. According to the Australian Energy Market Operator (AEMO)’s 2024 Integrated System Plan (ISP)

• One in three detached homes in the NEM currently have rooftop solar,
• Residential and commercial battery storage currently provides the NEM with 1 GW of capacity, and
• Around 100,000 electric vehicles are currently in use. 

The ISP forecasts uptake of CER to grow five-fold by 2050, when these technologies are expected to make up almost half of the NEM’s total capacity. In 2050, the 2024 ISP expects that

• Four out of five detached homes in the NEM will have rooftop solar, 
• Battery storage will provide 34 GW of capacity to the NEM, and
• 97 per cent of all vehicles are expected to be battery EVs. 

The National Consumer Energy Resources Roadmap, released by the Energy and Climate Change Ministerial Council (ECMC) in late 2024, has set out reforms to ensure Australians are able to harness the full potential of CER. The Roadmap suggests that if CER is operated effectively, these technologies could unlock billions of dollars in savings to the energy system that could be passed on to consumers.

Active operation and efficient prices are key to unlocking the full potential of CER

The $45B in system benefits to 2050 estimated in Energeia’s report arise from the widespread implementation of an ‘active’ CER strategy, where a ‘passive’ one is taken as a counterfactual. 

Currently, it is common for owners of CER to operate their technologies in a ‘passive’ way that is not responsive to prices. Such a strategy typically involves

• Charging batteries when solar generation exceeds gross demand (generally during the morning and afternoon), and
• Self-consuming once gross demand exceeds solar generation (generally during the evening). 

The ISP assumes that CER will increasingly be operated ‘actively’, responding to wholesale, network and FCAS prices. This might involve

• Charging batteries during low price periods and self-consuming during high price periods, 
• Shifting the flexible load of storage water heaters, pool pumps and EV chargers from peak to lower-priced periods, and 
• Curtailing solar generation during negative wholesale price periods. 

For networks, active CER can reduce network costs by dynamically relieving network constraints where they arise, for example by:

• Heating water and charging electric vehicles when network voltages are high, and
• batteries and vehicle-to-grid electric vehicles during high demand to help manage the thermal load on network infrastructure.

Energeia found that even if CER were to be operated actively, current mainstream retail market offers (and the underlying network tariffs) do not align well with system costs or encourage flexible operation of CER. Time of use tariffs, the most common retail offer for CER owners, encourage CER to focus on self-consumption, particularly during the defined ‘peak’ charging windows, in order to minimise customer bills. This misses out on opportunities to reduce energy costs for all customers, including those without CER, by engaging in energy arbitrage in the wholesale market or relieving network constraints in a focused manner. Energeia found that retail and network price reform is necessary to unlock the flexibility benefits of CER for all customers.