Distributed energy is the key to decarbonisation

State governments should refocus attention from large scale renewable energy projects to the immense decarbonisation opportunities available in leveraging the A$25 billion spend to-date by households and businesses on distributed energy resources – including rooftop solar, batteries, electric vehicles, and smart appliances, finds a new report from the Institute for Energy Economics and Financial Analysis (IEEFA).

“Distributed energy resources are fast to install, especially in comparison with large-scale wind and solar which can take several years and are dependent on the availability of transmission infrastructure,” says report author, IEEFA guest contributor Dr Gabrielle Kuiper.

“Consumers’ estimated A$150 billion spend on distributed energy infrastructure over the next 10 years should be leveraged to support the cheaper, faster and necessary decarbonisation of the electricity system to urgently address climate change targets.

“Both the Federal and state governments have a critical role to play here in accelerating the integration of these distributed energy resources into our future electricity system – now.”

The Federal election result should spur major advances in national renewable energy projects, given Labor and Greens policy and the climate focus of the so-called Teal crossbench MPs.

The ALP platform cites solar and wind powering 82% of the country’s energy needs by 2030 and its $20 billion Rewiring the Nation project aims to modernise the transmission grid to accommodate new energy sources.

In the Greens’ $17bn transition plan, policies include breaking down barriers to DER by reforming energy retailer and supplier rules and enabling grid access for local electricity trading between consumers and community energy projects. For NSW, it supports one million domestic batteries.

“With more rooftop solar than any country in the world, Australia is at the forefront of the distributed energy revolution,” says Kuiper.

“Countries across the globe are watching how we are integrating the considerable consumer investment in distributed energy resources (DER) to shore up our electricity supplies going forward.

“All forecasts point to distributed energy resources playing a major role in the future electricity supply, demand response, and grid services.”

Australian households have spent more than $15 billion on rooftop solar alone, over $1 billion on 110,000 batteries, and expenditure on electric vehicles is growing rapidly. Commercial and industrial facilities are also investing in solar, batteries and in some cases, smart control equipment to manage energy use. If only half of Australia’s 14 million cars are replaced with EVs during the next decade, it will provide a $140 billion investment in distributed energy resources.

By 2050, rooftop solar is expected to provide about a quarter of electricity consumption, or about 75 gigawatts (GW). At that time, about three-quarters of all dispatchable (“on demand”) electricity capacity will be distributed.

“Energy consumers will be relying more and more on distributed energy resources going forward. That means the energy from rooftop solar shared back to the grid, the storage supplied by batteries, the demand response provided by smart appliances that turn on and off pending demand and supply.

“EVs and batteries, and flexible demand in homes, businesses and factories, can balance energy demand and the supply from variable renewables, as they will be the largest capacity available to draw upon.

“As the sun sets or wind speeds decrease, the millions of distributed energy assets will be critical to ensuring sufficient supply to the electricity system, alongside large-scale batteries and pumped hydro.

Kuiper says the role of state governments is critical in integrating distributed energy resources across the nexus of energy, buildings, planning, transport and technology portfolios.

“Collaboration will be required for success,” Kuiper says. “All of these portfolios need to be involved in smart policy and planning. And as a starter, more efficient housing is the best investment state governments can make.

“For instance, social housing could be upgraded to be more efficient, with rooftop solar added and polluting gas connections and appliances removed to create healthier, cheaper-to-run homes for people who most need it.”

The report makes 10 recommendations for state governments to consider – and deliver on – to assist the accelerated uptake and integration of distributed energy resources in Australia.

1. Invest in more energy efficient housing
2. Electrify homes and exclude on-site gas from new developments
3. Remove gas connections from all buildings as gas has high-level methane emissions and its’ role as a transition fuel has finished
4. Legislate a demand response capability requirement for priority household appliances to ensure larger appliances (such as air conditioners) can be used as a resource
5. Expand the demand response mechanism (DRM) to include aggregated household distributed energy resources to enable participation in the wholesale DRM
6. Upgrade energy efficiency schemes to reward “emiciency” (emissions savings by time of day) and “pay for performance” programs based on actual verified savings
7. Support managed EV charging including national technical standards and planning requirements
8. Investigate how to update distribution network service provider (DNSP) revenue regulation
9. Determine the commercial viability of supplying Standalone Power Systems (SAPs) and microgrids to remote, regional and climate vulnerable consumers
10. Ensure the compliance and enforcement of distributed energy resource devices, software and installations is undertaken by the Australian Energy Regulator (AER)

“State governments can lower the overall cost of the energy transition by taking a major role in optimising the use of household and businesses’ distributed energy resources for the benefit of all energy consumers,” says Kuiper. “This will enable cheaper, faster decarbonisation.”