AEMO dials back forecasts for home battery uptake, VPP participation, as push for rebate grows

The Australian Energy Market Operator has promised to take a closer look at the uptake and impact of consumer energy resources (CER) and refresh its range of energy transition scenarios, ahead of the release of the 2026 edition of its 25-year planning blueprint, the Integrated System Plan.

In a Draft 2025 Inputs, Assumptions and Scenarios Report (Draft 2025 IASR) published on Wednesday, AEMO kicks off formal consultation on how best to shape its 2024-25 forecasting and planning activities, including the 2026 ISP.

The scenarios, this time around will range from: Step Change – a refined version of an existing scenario, centred on limiting global temperature rise to below 2°C, to; Progressive Change – a transition to net zero in an economy with less growth and greater challenges than other scenarios, and; Green Energy – a new spin on the previous “Green Energy Exports,” AEMO’s most ambitious scenario, with the strongest decarbonisation and strongest economic growth.

High on the agenda for future planning, meanwhile, is a reassessment of home battery uptake, as the market operator factors in the “slower embrace” of the technology as well as the lower than expected consumer participation in virtual power plants and other forms of coordinated CER.

The shape and pace of CER uptake and integration is vital to planning for the energy transition because, as AEMO puts it, if “coordinated at scale and in a predictable and reliable manner,” it could significantly reduce the scale of network and other investments needed to firm renewables and maintain reliable and secure electricity supply.

But it’s not happening as fast as AEMO had expected – and this is being factored in to the scenarios (“plausible future worlds within which the energy transition occur”) AEMO is planning to put forward for the next ISP.

“The 2025 scenario is purposefully designed to recognise the slower embrace of battery uptake, and has a slower pace of adoption as compared with the 2023 IASR scenarios, and the most recent forecasts,” the report says.

“The companion reports from AEMO’s consultants demonstrate differing views of success, with success hinging on what support is provided to consumers to adopt battery systems, considering the various state government policies supporting battery uptake.”

Going hand-in-hand with lower battery uptake is the “modest” buy-in by consumers, so far, to virtual power plants, where home batteries and other assets, including electric vehicles, are coordinated to help balance supply and demand on an increasingly renewable grid.

“Compared to the 2023 Step Change scenario, while consumer investment in the energy transition remains strong… consumers are tentative to share control and coordinate the operation of their consumer energy devices through a third party such as their electricity retailer,” AEMO says.

“Despite the long-term potential, the uptake of VPP products to date has been modest. AEMO’s forecasts provide a wide band between the scenarios to reflect the uncertainty of both uptake and relative scale of coordination.”

In response, AEMO says its CER coordination parameter has been downgraded to moderate in the updated Step Change scenario the Draft 2025 IASR, while slower adoption also is anticipated for the new Green Energy scenario – the most ambitious of AEMO’s outlooks for the clean energy transition – although the magnitude of that forecast is closer to the previous forecasts.

These new forecasts, AEMO says, provide a “wide band between the scenarios to reflect the uncertainty of both uptake and relative scale of coordination.”

One way to clear up some of that uncertainty, of course, is to bring in a national home battery rebate – a point AEMO itself alludes to in the report.

“AEMO recognises that the IASR and ISP processes include a broad range of engagement with government stakeholders, allowing for insights to help drive policy, although it is the role for governments to determine specific means to incentivise a desired level of consumer participation in CER (and other consumer investments), if governments choose to support consumers in this way.”

As the increasingly popular and urgent argument goes, making batteries cheaper up front would soon sort out whether or not there really is demand for them among Australia’s millions of rooftop solar households.

And once consumers invest in batteries, including batteries on wheels in electric vehicles, they are much more likely to want to get all the value from them that they can – however they can, including through VPPs.

“The financial incentives don’t stack up for most households most of the time, and we need to make that work by having greater market participation,” says Gabrielle Kuiper, in an interview with Renew Economy in-between meetings in Canberra for the National CER Roadmap.

Kuiper, who is a consumer energy resources expert who in the past advised the Energy Security Board, says that while social licence for participation in VPPs and other coordinated controls is an unknown entity, this will continue to be the case until the “money is on the table” for consumers.

“So we need to make sure that all of these market design or redesign or review processes prioritise easy participation of aggregated, distributed energy resources, and that will provide the financial incentives,” she says.

“In the UK, if you allow your battery to be used to provide to support the network, you can earn 331 pounds per year for exporting from that battery when the grid the local distribution network is constrained.”

Tristan Edis from Green Energy Markets, which consulted with AEMO on the draft inputs, says he has faith that VPPs will substantially increase in popularity but it’s going to take a bit of time.

“Yes there is a major mistrust of electricity retailers that makes consumers wary of VPPs. But this is something we can successfully overcome,” Edis told Renew Economy on Wednesday.

“Firstly I think there’s a role for government policy to incentivise the adoption of batteries and in return ask households to enrol in VPPs. Government guidelines around VPP behaviour will need to be a part of this.

“Also we need households to be free to choose a VPP provider that is independent of their electricity retailer. Lastly though, many households will learn over time that they aren’t fully utilising their battery and will come to realise that a VPP is essentially free money. Some of them will have good experiences and tell their friends to join the same VPP and that will kick off a virtuous cycle.

But even if VPPs don’t take flight, Edis says the roll-out of home batteries will still deliver clear benefits to the grid and to consumers.

“Batteries’ uncontrolled default software behaviour will be to satisfy customer load as output from solar system output tails off – that’s precisely the time we need to take load off the electricity system to reduce wholesale power prices and pressure on power networks,” he says.