The Time Is Now: Leveraging Distribution Networks and Consumer Energy Resources To Achieve Australia’s Decarbonisation Targets

The task to decarbonise Australia’s electricity sector is immense. Australia has set ambitious targets for emissions reductions in the electricity sector by 2030, including a national policy target of 82% renewables and state-based targets with similar ambitions.

To achieve these targets, Australia has embarked on one of the largest and most ambitious infrastructure builds in the country’s history. The energy capital investment task between 2020 and 2030 (covering grid-scale generation and new transmission) is expected to be c.$300 billion-$400 billion AUD.¹ This will exceed the scale of the 2007-2017 liquefied natural gas(LNG) investment boom and will almost equal the size of the economy-transforming 2005-2015 mining investment boom. This will be one of the largest capital investment cycles we have ever undertaken.

However, building large-scale generation at the pace needed to achieve this goal will be incredibly difficult. Achieving the 82% renewables target by 2030 will require 8GW of new renewable capacity to be added each year between 2024 and 2030. This compares against a historical peak of 5GW added in 2022 and a recent average of c.2.9GW p.a. from 2019 to 2023 (see Figure 1). Global supply chains and obtaining environmental and planning approvals, landholder engagement and community licence, and local industry and workforce capacity represent significant barriers to this pace of large-scale generation construction.

Falling short of this 82% renewables target will not only mean missing an opportunity to decarbonise; it will also mean higher costs for electricity consumers. L.E.K. has modelled a scenario called ‘Missed Opportunities’ in which the rate of large-scale renewable capacity additions stays at c.5GW per year between 2025 and 2030. In this scenario, without other corrective actions, consumers pay an additional $7 billion AUD in annual electricity costs by 2030 due to the need to run higher-cost electricity generation resources.

To retain hope for an orderly transition and deliver for energy consumers, Australia’s electricity sector needs to be pulling every lever at its disposal.

Despite this need to pull every lever, L.E.K.’s analysis shows that the existing plans we have to guide the electricity sector through the energy transition, such as the Australian Energy Market Operator (AEMO) 2024 Integrated System Plan (ISP), have underestimated the potential role for energy resources connected to electricity distribution networks (including consumer energy resources, or CER). To date, these resources have often been ascribed a static role in energy transition plans and there is latent capacity in distribution network assets and the supporting industries to play a more significant role.

In partnership with Energy Networks Australia (ENA), L.E.K. has worked with each of the Australian distribution networks to model an ‘All Levers Pulled’ scenario, which maximises the use of the distribution grid and shows that going after these levers can deliver $7 billion AUD in annual benefits to consumers by 2030 when distribution-connected resources play a more significant role in the energy transition (see Figure 2). This would allow the energy system to still deliver the consumer cost benefits and emissions reductions that are built into the current energy transition plans in the event that the building of large-scale generation is prolonged. 

The All Levers Pulled scenario combines multiple changes that are beneficial for energy consumers in a way that complement each other and includes:

• 7GW of additional community generation by 2030²
• 5GW of additional rooftop solar by 2030²
• 5GW of additional distribution-connected battery storage by 2030²
• 1 million more electric vehicles on the road by 2030²
• Coordination of consumer energy resources

Some actions needed to make better use of distribution resources and CER are already underway, such as the Consumer Energy Strategy announced by the New South Wales government in September 2024, which aims to have 1 million homes and small businesses equipped with solar and battery systems by 2035. But more is needed across the National Electricity Market to unlock these benefits.

Implementing the changes in the All Levers Pulled scenario would save a typical electricity consumer $160 AUD per year in energy costs by 2030. Importantly, it will also allow Australia to meet its 82% renewables energy policy target by 2030 (see Figure 3).

L.E.K. and ENA have published a joint report, The Time Is Now, which lays out the analysis to support this outcome and provides case studies to demonstrate that these changes are achievable today. The report also describes a series of pragmatic, near-term actions that can be taken by the electricity industry, as well as by governments, policymakers and regulators, to unlock this opportunity and set our energy system on the path to an optimised result by 2030. The report can be downloaded here:  https://www.energynetworks.com.au/resources/reports/the-time-is-now-getting-smarter-with-the-grid/

Endnotes
¹According to Bloomberg New Energy Finance. These costs cover large-scale generation, transmission and distribution but do not include capital invested by consumers in CER.
²Compared to the AEMO 2024 ISP Step Change scenario. 

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