Passive home batteries deliver “enormous benefits” to the grid, says AEMO – even if not orchestrated in VPPs

Australia’s huge and growing fleet of home batteries are delivering “enormous benefits” to the electricity grid, cutting system costs and power bills, even without being orchestrated as part of virtual power plants, the head of the Australian Energy Market Operator says.

AEMO chief executive Daniel Westerman says the market operator has been surprised by the positive, system-wide impact that hundreds of thousands of “passive” home batteries have had on the grid, changing the shape of demand even without high levels of third-party orchestration.

Westerman on Wednesday opened the Australian Energy Week 2026 conference in Melbourne with a market update that zeroed in on how batteries of all sizes are “fundamentally changing” the electricity system, while also changing the outlook for AEMO’s grid blueprint, the Integrated System Plan.

At the small end of the scale, the more than 430,000 batteries installed through the Cheaper Home Batteries scheme over the past year takes the total to around 600,000 Australian homes with storage.

But the side-quest of the federal home battery rebate – to encourage virtual power plant (VPP) participation, including through the offer of higher discounts in some states – has had far less success.

While all batteries installed under the federal rebate must be VPP compatible, data shows only about 10 per cent of households that have invested in battery storage have connected their asset to a VPP.

AEMO has counted on strong uptake of VPPs, an ingredient it thought essential for a future grid and critical to harness the huge rooftop solar resource that has thus far remained largely beyond its control.

The theory is that VPPs “coordinated at scale and in a predictable and reliable manner” could significantly reduce the need for network and other investments to firm renewables and maintain reliable and secure electricity supply – making its job easier and, theoretically, cutting the cost of electricity for all.

But in reality, Westerman says that the “new wave” of home batteries is having a real impact on the grid – “emerging as another game-changing force” alongside rooftop solar, even without major VPP buy-in.

He says that, on average, across the first quarter of 2026, households with batteries reduced the amount of energy they drew from the grid during the evening peak by nearly a kilowatt. That suggests total peak reduction of nearly 600 MW from 600,000 households.

“Even acting in passive mode, so a consumer with complete control over their battery, just soaking their own solar or using a free power period during the day, actually has enormous benefit to our grid, reducing their own costs and reducing the costs for everyone involved,” Westerman told the AEW 2026 conference.

“If you had have asked us 12 months ago, would we have seen such an impact on on the grid from passive home batteries? I think we wouldn’t have pointed to such an impact.”

“There is an opportunity for retailers to provide a value proposition to consumers to participate in a VPP, we do see that, and actually that benefits the grid even more, but ultimately this is a decision for consumers based on … the sort of propositions that they have.”

Westerman says the uptake of electric vehicles (EVs), which as well as driving decarbonisation of the transport sector can act as batteries on wheels, promises to have a similar impact as customers take advantage of bi-directional charging and using excess rooftop solar to charge up during the day.

“Obviously, EVs have impact on the grid and, to be honest, those impacts are still kind of working their way through – as more and more EVs come online, we’ll be seeing the impact and working through the implications,” Westerman told the conference.

“Ultimately, consumers will decide when they plug in their vehicles, how they charge … based on the signals that they receive, the incentives, the tariffs, and fees that they face.

“And hopefully there’s an opportunity for – again – retailers who have that relationship with the customer to incentivise customers to charge in low [demand] times, so in the middle of a day – and I know those propositions already exist – and less in the evening peaks, and even potentially help out,” he said.

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