While Australia has more rooftop solar per capita than any nation, policy and regulation lags mean the potential for distributed energy resources to expedite the energy transition is yet to be fulfilled.
Dr Gabrielle Kuiper is Australia-South East Asia DER Lead at CSIRO, and a guest contributor to the Institute for Energy Economics and Financial Analysis.
Distributed energy resources (DER) are small-to-medium-scale energy resources connected to the distribution network, either in front of or behind the meter. There are three broad categories of DER:
- Distributed generation – Electricity generated at or close to the site of use
- Energy storage – Capturing energy locally produced at one time for use at a later time
- Flexible demand – Appliances or machines which are able to have their time of use altered passively or dynamically
Greater uptake and better integration of DER has the potential to speed up and help lower the overall cost of Australia’s transition to 82 per cent renewables by 2030.
Far from being “at least 20 per cent of our energy solution”, DER could be at least half of the future energy system.
Solar leadership
Australia is the leading country in rooftop solar (RTS) when measured in watts per capita. This means, to date, households and businesses have invested well over $25 billion in DER. With Federal Government subsidies having commenced on 1 July 2025, they will soon invest many billions in home and business batteries.
RTS is now capable of meeting at least half of the underlying energy demand across the National Electricity Market (NEM) in the middle of a sunny day.
Occasionally, the entire state of South Australia is fully supplied with electricity by RTS in the middle of the day. This first occurred on 23 September 2023, when RTS supplied 101 per cent of South Australian electricity.
DER’s future in the energy system
The Australian Energy Market Operator’s (AEMO) Integrated System Plan (ISP) projects that by 2050:
- RTS and other distributed solar will be the largest source of generation capacity at 86 GW.
- 79 per cent of households will have rooftop solar.
- 56 GW/660 GWh of storage capacity will be needed.
- Coordinated consumer energy resources storage will be 37 GW.
However, even AEMO’s 2024 ISP step-change scenario is conservative as it does not assume any vehicle-to-grid capacity before 2030.
Swiss army knife of the grid
Especially when aggregated, DER, like a Swiss army knife, can provide multiple services to an electricity system. A meta-analysis found that they could deliver at least $19 billion in net present value by 2040. This included $11 billion in reduced transmission and distribution augmentation and replacement costs, and $8 billion in reduced large-scale generation and storage costs.
In addition, economic consultants NERA identified a further potential consumer benefit of $10 billion in reduced generator super-profits through the smart, flexible use of DER.
Data flow challenges
Distribution networks were originally considered a passive termination of the transmission network with unidirectional power flows. A one-directional electricity grid delivered affordable and reliable energy through a “set and forget” design. Advances in technology, specifically low-cost solar panels, changed all that.
Now, distribution network operators need greater visibility of the low-voltage network for both operation and planning purposes. Solar Analytics’ DER Visibility and Monitoring Best Practice Guide lists common sets of static and dynamic data for eight use cases, compiled in consultation with industry. This space, where data science meets AI meets power electronics, is fast evolving.
Voltage management
Around 2019, there were industry concerns about exports from solar systems increasing voltages in LV networks. The results of a study commissioned by the Energy Security Board showed voltages were running above the 230 V NEM standard 95 per cent of the time. However, it was also discovered that the underlying cause was not rooftop solar, but operational procedures developed in response to large air-conditioning loads being installed in the 2000s and 2010s and a slow transition by distribution networks from 240 V to 230 V.
Rooftop solar was in fact a victim of high voltages, as rooftop solar systems trip when the network voltage reaches 258 V, which was happening more than was necessary.
Flexible exports
Given the lack of visibility at the LV level and traditional conservative approaches to network operation, distribution networks have generally set the export limit for household solar systems to 5 kW per phase. However, as the average household RTS system is now over 8 kW, these static limits can curtail the contribution of RTS to the grid, especially for homes that are empty during the day, and so reduce the return on investment for these households.
SA Power Networks has developed software that sends a dynamic operating envelope (DOE), “flexible export” limit of up to 10 kW to solar inverters. This innovative software means solar households in South Australia have the potential to double their exports 98 per cent of the time. In July 2022, consultants Cutler Merz found most DNSPs plan to incorporate DOEs within the next five years.
However, there are two regulatory issues: there is no harmonisation with several different approaches to the definition, publication, communication and enforcement of DOEs underway; and there is no compulsion for distribution networks to implement DOEs. This is one area where engineers can and should be engaging with the energy market bodies to ensure best practice in DER integration.
Future savings
Individual or aggregated DER can substitute for augmentation or replacement within existing networks. Harnessing DER to provide network support services is almost always cheaper than building new infrastructure.
In addition, owners of DER can be paid, increasing their return on investment and reducing all consumer bills. This could reallocate revenue from distribution networks to DER owners.
Back in 2017 ENA and CSIRO’s Electricity Network Transformation Roadmap forecast $16 billion in avoided network infrastructure investment by 2050 paying DER owners more than $2.5 billion per annum for grid support services.
Catalyst for success
The smart integration of DER into distribution networks could result in cheaper, faster decarbonisation. This depends on innovative engineers both developing the technical solutions and engaging with policymakers and regulators to ensure they understand the opportunities and remove barriers in a timely fashion.
The technical limitations on the integration of DER are not what is currently holding this back; it is the conservative mindset of those steeped in a 20th-century grid.
For the revolution in distribution, we need to recognise status quo bias and be less concerned with how the system has operated in the past. We need to be more like Emmett “Doc” Brown in Back to the Future: agile, innovative and harnessing lightning to change history.
This story was originally published in the August 2025 edition of create with the headline, “The distribution revolution”.
Read the full essay from Dr Gabrielle Kuiper.
