How will new incentives around EV charging reshape the grid?

Proposed new rules are heralding a radical transformation of Australia’s electricity grid.

The Australian Energy Market Commission (AEMC) has released a draft determination that allows Virtual Power Plants (VPPs) and community batteries to act as direct providers in the large-scale energy generation market.

In the first phase, the system will tap into home batteries to establish proof of concept. The next goal is to turn EVs into batteries on wheels, with the capacity to support the grid.

From flexible trading arrangements to advanced vehicle-to-grid systems, we are experiencing a major transition in the way we produce, use and trade electricity.

A slow burn: The path to smart EV charging

The planned reforms would enable consumer-owned resources to bid, set prices, receive instructions and earn revenue for their grid services.

Just by allowing VPPs to operate in the market – competing with coal and gas – predicted cost savings of $834 million could be achieved between 2027 and 2050, according to AEMC figures.

Intelligent Energy Systems (IES) modelling, commissioned by the AEMC, suggests significant cost savings could result from the integration of non-scheduled price-responsive resources (PRR) into AEMO’s existing scheduling processes. The social benefits could amount to a net present value of $1.4-$1.8 billion to 2050.

Integration will take us part of the way, Director of Cadency Consulting, Anthony Seipolt, says. However, with viable vehicle-to-grid technology not yet available to Australian consumers, there’s some distance to go to reach the AEMC’s goals.

“It’s a slow burn. Our EV chargers today are still pretty basic. With the new generation of vehicle-to-grid chargers rolling out in Europe, it’s possible for EVs to charge and discharge into the grid, according to prices. We’re just not there yet.”

We’ve only really freed up the retail side of the market in Australia, he adds. The network component, representing up to 50% of costs, is still “very much in the dark ages” in terms of tariffs.

“Network tariffs are very simplistic, with most customers still on flat-rate tariffs. Smart meters have only 40% to 50% penetration here. And it’s really hard to get smart energy use for your EV without a smart meter.”

The costs of not acting on flexible trading

A 2024 University of California Institute of Transportation Studies paper suggested that 67% of Californian ‘feeders’ (publicly available EV charging stations) will need capacity upgrades by 2045, at a cost of between $US6 and $20 billion. This is offset by growth in electricity demand, leading to reduced electricity prices (between $0.01 and $0.16/kWh).

According to Seipolt, the consequences of inaction are very real.

“These studies are important for highlighting the costs of not deploying strong incentives around all flexible loads,” he says.

“AEMO has forecast ten million EVs on Australian roads by 2050. With an average residential charge of around 5kW, this represents up to 50GW of potential demand. Our current capacity is only 36GW on the hottest days in summer, so there is a real disconnect about how we will service this.”

He sees smart charging as vital to meet the anticipated hike in electricity demand.

Smart chargers send signals to consumers, using price to encourage or discourage charging at any given time.

“If we don’t send signals, even a small proportion of the EV fleet charging at the wrong time has big implications for demand. We know we can save consumers billions of dollars. How? By avoiding the need to build billions of dollars’ worth of grid which is only used for a small part of the year.”

Currently, everything is built around peak demand. In Australia, the top 25% of electricity generated is only used for 20 to 40 hours a year, mainly to run air conditioners.

“Air conditioners are a necessity and needed at specific times. EV charging, in these terms, is a luxury that can be shifted to different times. That’s why we need smart chargers, responsive to price cues and rewarding consumers for using them during low-demand hours.”

The power of resisting the peak

Seipolt sees demand shifting and service balancing for EV chargers as an essential component of a stable, reliable grid going forward.

“Any incentives to shift demand will help lower cost for consumers. If we don’t enable these services to reward consumers for shifting demand away from the peak, the lights will go out, or we will have to build a huge amount of additional capacity.”

Vehicle-to-grid technology will enable consumers to switch EV charging from the evening peak when prices are soaring. They will pay far less by charging when the grid is less congested.

By flicking to ‘discharge’ mode and selling EV power back to the grid in peak times, customers can also turn their vehicles into electricity generators which earn them money.

Currently, only South Australia has access to bidirectional charging at home. In mid-2025, Amber Electric is launching a two-year bidirectional trial for a thousand east coast customers based in Queensland, NSW, ACT, Victoria and South Australia.

Questions also exist around potential harm to car batteries, which are designed for one charge a day with no pull-back.

The technology is rapidly changing, Seipolt says.

“Car batteries are building resilience and longevity all the time, so this will become a diminishing concern. Manufacturer warranties are also becoming more flexible, to accommodate this.”

The need to get it right

Seipolt points to the new partnership between CitiPower, Powercor and cloud-based local flexibility platform Piclo Flex as an example of things to come.

Piclo Flex enables service providers to source electricity from sellers in a flexible way, during times of high demand or low supply. This reduces network costs and supports smart homes, allowing VPPs and retailers to bid in the marketplace.

“EV power is an incredibly large untapped resource we can use for the good of everyone. On the flip side, it will damage our grid and greatly increase costs if we don’t get it right.”