Are we building the energy transition backwards? DNSPs think so.

Australia’s distribution network service providers (DNSPs) are no longer operating at the quiet edges of the power system. As rooftop solar, household batteries, electric vehicles and other customer energy resources (CER) scale rapidly, the grid is becoming increasingly decentralised, bidirectional and customer-led. That shift is forcing a redefinition of what distribution networks do, how they plan, and how they deliver value.

At the Future Grid Summit held in Sydney in December, three of Australia’s leading voices on energy networks - Marc England (CEO, Ausgrid), John Cleland (CEO, Essential Energy) and Dr Dani Alexander (CEO, UNSW Energy Institute) - converged on a shared message: that DNSPs must evolve from being passive delivery conduits into proactive, customer-centric system operators. Their ability to unlock existing network capacity, integrate CER at scale, and deliver equitable outcomes will materially shape the cost, speed and social licence of the energy transition.

Cleland told Energy Insights that distribution networks are “transitioning from simply traditional functions to become a decentralised energy system”, managing two-way power flows and embedding customer resources into daily operations and long-term planning.

The Australian Energy Market Operator (AEMO) has highlighted that distributed PV can supply more than half of electricity demand in some regions at certain times, fundamentally altering load shapes, voltage profiles and system security requirements. DNSPs sit at the interface where those system-wide ambitions meet local realities.

Delivering community benefits

One of the strongest themes highlighted by all three experts was the opportunity for DNSPs to deliver visible, local benefits - by using more of what already exists.

“We can’t solve new problems with an old paradigm,” England told Energy Insights. “There’s lots of opportunity in the sub-transmission space for distribution networks to reuse the existing network - with better outcomes for the community as well as being a faster and cheaper solution.” 

The Hunter–Central Coast Renewable Energy Zone (REZ) illustrates this shift. As Australia’s first distribution-connected REZ, it demonstrates how sub-transmission assets and local substations can host significant new renewable capacity without waiting years for major transmission builds. Ausgrid estimates that one gigawatt of new renewable hosting capacity can be delivered through existing infrastructure by 2029, with further capacity unlocked in later phases.

This approach aligns with recent regulatory analysis. The Australian Energy Market Commission (AEMC) has found that in some regions there is substantial spare capacity in zone substations - for example, it noted that over 75% of Queensland distribution zone substations have at least 40% spare capacity relative to peak demand - suggesting under-utilised headroom that could defer or avoid expensive greenfield investments.

Cleland highlighted how similar thinking applies in regional and remote NSW, where Essential Energy’s network footprint includes many fringe-of-grid communities. Advances in microgrids and islandable systems can materially improve reliability during outages by combining network assets with behind-the-meter solar and batteries. “Once created, this will materially improve the reliability of electricity supply to remote communities and minimise the risk of extended outages,” he said.

For Alexander, the equity implications are just as important. Apartment dwellers, renters and households without access to rooftop solar or EV chargers risk being locked out of the benefits of electrification. Distribution-level solutions - such as community batteries, shared charging infrastructure and local energy sharing - offer a way to broaden access.

“Clare Savage’s t-shirt slogan still holds true: ‘before we build more, let’s use more’,” Alexander told Energy Insights. “DNSPs could facilitate greater access to clean energy for more consumers,” she said, noting that regulated network businesses may be uniquely positioned to deliver shared solutions at scale.

“Right now I’m driving down the Pacific Highway, which is an annual Christmas pilgrimage to Queensland, but the first time in an EV. Our first stop was the Wyong Westfield, and I was surprised that there wasn’t a single [EV] charger in that multi-level carpark,” Alexander said.

“These access issues have existed for a long time without scalable solutions, so it seems worth investigating whether our regulated network businesses could play a positive role in sharing clean energy with more Australians.” 

Balancing decarbonisation, reliability and affordability

The trilemma facing network operators - cutting emissions, keeping the lights on and containing costs - has intensified as the pace of change accelerates. According to Cleland, the core challenge is that “the energy system is transforming far faster than the planning, regulatory and legislative frameworks.”

This mismatch has tangible consequences. While wind and solar are often described as the cheapest forms of new generation, England argues that the full system cost - including transmission - is not always reflected. “Whilst wind and solar are often referred to as the cheapest forms of new generation, the high cost of transmission isn’t always fairly represented in these assertions - which is the key role DNSPs can play, at a far lower cost.”

Recent analysis supports this view. The Grattan Institute has warned that rising power-system costs - including the cost of new transmission to connect renewables - are likely to put upward pressure on bills even as generation gets cheaper. Strategic use of distribution assets can relieve pressure on transmission pipelines, buying time for major projects while lowering near-term cost impacts on consumers.

Alexander framed the issue bluntly: electricity prices sit at the centre of the cost-of-living debate, and DNSPs, as regulated monopolies, are “at the heart of this conversation.” The question is not whether to build, but how to sequence and allocate costs fairly across the community - especially as coal exits accelerate and reliability margins tighten.

Capabilities DNSPs must strengthen for the future grid

Looking ahead, all three leaders pointed to capabilities beyond traditional engineering and asset management.

For Cleland, customer-centricity is paramount. “Customers need to be at the heart of everything we do in the energy transition,” he said. “It is important that collectively across the industry we’re developing products and services that ensure customers can genuinely benefit and that those products and services are simple and easy to access.”  

England’s focus is on planning sophistication and regulatory flexibility. Distribution networks need the tools and mandate to act earlier, integrating distribution-connected renewables, storage and EV infrastructure as part of system-wide optimisation rather than as an afterthought to transmission planning.

Alexander added a human dimension. “One capability that DNSPs can strengthen… are their people,” she said, arguing that the cultural shift required within incumbent network businesses may be as significant as the technical one. Skills in data analytics, customer engagement, DER orchestration and community partnership will be critical as networks evolve from passive infrastructure providers into active market participants: “The energy sector of the future will look very different from the energy sector of the past.”

The Australian Energy Regulator (AER) has echoed this need, noting in its 2025 State of the Energy Market report that improved data visibility, workforce capability and stakeholder engagement are now core enablers of efficient network investment.

The middle of the grid as a transition lever

Taken together, these perspectives point to a reframing of the energy transition narrative. The focus is no longer solely on replacing coal with large-scale renewables, nor on what happens behind the meter. The “middle” of the system - sub-transmission lines, local substations and distribution-level assets -has emerged as a powerful lever to accelerate decarbonisation while managing cost and equity risks.

“The poles and wires that deliver electricity to homes and businesses are the backbone of the energy system,” England said. “If given the opportunity through common-sense regulatory changes, we as networks can help meet the moment.” 

For DNSPs, the challenge now is execution: translating spare capacity, regulatory reform and customer-led technologies into outcomes communities can see and trust. Done well, distribution networks could become one of the quiet success stories of Australia’s energy transition - delivering a system that is not only cleaner, but faster, fairer and more resilient.