From chaos to choreography: How orchestration can make Distributed Energy Resources the hero of net zero

Distributed Energy Resources (DER) are forecast to become the dominant source of dispatchable capacity in Australia’s energy system. But simply increasing the amount of DER is not enough. How do we convince households to allow their assets to be orchestrated for the greater good?

Everyone in the energy industry knows Australia is at an inflection point. We need to decarbonise our energy system to ensure affordable and reliable energy, meet the Australian government’s target of 82% renewable electricity by 2030,[1] and lay the foundation for Australia’s future prosperity and our low-carbon superpower opportunity. We need more solar and wind farms, more batteries and storage, and more transmission lines.

But building these large-scale assets takes time, and over-reliance on this end of the value chain puts our targets at risk.

With the clock ticking, we need to reach out to the other levers that can be pulled. One of those levers is right in front of us, embedded in homes and businesses across the country in the form of DER.

Switching on DER at speed and scale

Australia already leads the world in the uptake of solar panels. Households and businesses are embracing distributed energy resources, or DER, at an unprecedented speed and scale – including rooftop solar, batteries, electric vehicles and smart appliances.

According to forecasts from the Australian Energy Market Operator, DER will be the largest source of overall capacity and the largest source of dispatchable capacity by 2050.

To truly tap into the value of DER, we need these assets to be ‘orchestrated’ – in other words, coordinated to support system security and deliver electricity services where they are needed.

But customers are signalling that they are not ready to make the leap into orchestration. We need a step change in trust and shared understanding across energy customers and providers. But how? The EY Net Zero Centre’s latest thought leadership paper, From chaos to choreography, unpacks the obstacles and opportunities.

Navigating the energy maze

Reforms are needed to encourage customers, as the owners of DER, to step into the energy arena with confidence and allow their assets to be orchestrated as smart ‘dispatchable’ resources.

Confidence is a strong indicator of consumer sentiment, and a predictor of behaviour and engagement, including participation in DER. Energy consumer confidence is an important factor in driving investment in new energy solutions, and will help, or hinder, the breadth and momentum of the energy transition.

But we know Australian consumers are confused by their energy options, and their levels of confidence are low. Energy markets are labyrinthine, requiring customers to navigate a maze of anywhere from 200 and 400 competing offers before settling on a provider.

The Australian Competition and Consumer Commission’s 2023 inquiry into the National Electricity Market found many households are paying more for energy than they should, and that up to 79% of residential customers could save money by changing their electricity plans.

From confusion to confidence

The EY Energy Consumer Confidence Index has found that, globally, consumer confidence follows a consistent pattern as energy markets transform. Confidence typically rises in the early stages of the transition, reflecting hope in future possibilities, before falling sharply as the realities of scale, complexity and disruption dawn.

EY research suggests Australian consumers have already passed the peak of expectation and are now in a trough of confidence, likely reinforced by the local impacts of higher global energy prices. With time, our research suggests, consumers come to appreciate the value provided, and their confidence rises.

Encouragingly, consumers are looking for trusted advisors to guide them in the energy transition, with 75% of Australian consumers wanting their energy provider to play a role in the new energy product and service experience.

Reforms within reach

AEMO forecasts that DER will reach around 120 GW by 2050, so now is the time to act.

We need to set the rules before most consumer assets are commissioned. Orchestration must be understood, then trusted, and then second nature to customers. This will require simple, attractive, customer-centric offerings that unlock the value of DER for everyone.

Reducing complexity and establishing the right frameworks and ground rules early on is crucial to achieving affordable and reliable energy for everyone.

After years of ‘slower-than-hoped’ progress, the next two years represent a golden opportunity to get the reforms right.

The Energy and Climate Change Ministerial Council has committed to undertaking reforms through a National Consumer Energy Resources Roadmap. Expected to be handed down in July 2024, this roadmap promises to, among other things, allow consumers to export more solar power to the grid, and offer new consumer protections.

Turning theory into nationally consistent action is the top priority for achieving orchestration at scale. Action now can establish reforms that support energy system orchestration that is both fair to all and in the best interest of the nation.

Download EY’s latest thought leadership paper, From chaos to choreography: Why Australia needs to orchestrate Distributed Energy Resources, and how it can be achieved.

This is the first in a three-part Energy Infrastructure Executive Briefing Series, Stepping Up to Drive the Step Change, developed by the EY Net Zero Centre. This series explores three critical levers that Australia must pull to decarbonise our electricity grid and drive down the cost of energy to consumers. http://www.ey.com/au/energyinfrastructure

[1] Australian Energy Market Operator, Draft 2024 Integrated System Plan, Available at: https://aemo.com.au/-/media/files/stakeholder_consultation/consultations/nem-consultations/2023/draft-2024-isp-consultation/draft-2024-isp.pdf?la=en, 2023.