This community battery tariff doesn't make sense

Down the rabbit hole

I was easily convinced by Alex to join him at Currently Speaking because it gave me an excuse to write about the weird and wonderful things you encounter working in the energy sector. Even though the crowd of people working in and around the electricity market grew quickly over the past decade, it still feels easy to find yourself invested in an issue that only a small handful of people could possibly care about.

This post is about one of those niche topics. I’m looking at a “community” battery linked tariff. I’ll explain community batteries, network tariffs and unpack the intersection of the two. Finally, I’ll set out why this one doesn’t make sense to me, and some questions it raises.

A new Currently Speaking subscriber, circa 2025.

Who owns community batteries?

I wrote about community batteries a couple of years ago. If you don’t want to read that, the short is community batteries are batteries installed in residential areas but not in a house. Instead, they are installed front-of-meter, on a street corner or on a distribution pole etc. They could be:

1. Community batteries owned by community groups and small not-for-profits, councils etc. such as the Yarra Energy Foundation.

2. Network-owned batteries, owned by distribution networks.¹

Network-owned batteries are a relatively new concept. This is because, in the NEM, the owners of the poles and wires are regulated monopolies. As regulated monopolies, they have been prohibited from participating in competitive markets. If you care about markets, this prohibition is both sensible and important. Allowing monopolies to participate in competitive markets would risk destroying competition as the monopolies have significant competitive advantages and conflicts of interest. Network businesses control the access to the network and set the prices for using the network.

As such, networks owning batteries that will participate in energy markets is controversial and was previously not allowed. However, this changed recently when:

1. The Australian Energy Regulator, who regulates these monopolies, gave them a hall pass.

2. The Federal Government committed $200M to supporting 400 batteries.

And so, networks were able to go and build a bunch of “community” batteries. While they are often called community batteries, it is a bit of a stretch when they are owned by multi-billion dollar companies. You wouldn’t call toll roads “community roads” (or if you do, you’ve got bigger problems).

Network batteries are typically somewhere from 100kW/200kWh to 2MW/4MWh (or the size of ~ 3-50 EV batteries). In theory, they offer a cheaper way to operate the distribution network. Instead of spending millions upgrading a substation, a battery could be installed to provide some extra capacity that helps cover peak periods.

A limitation that was put in place to somewhat preserve competition (despite allowing networks to build and own batteries) is a prohibition on the network-owned batteries being traded in the wholesale market by the network. To manage this, they instead lease the battery capacity to someone else who will trade it in energy markets.

Down to my local

Looking at the example closest to where I live, Ausgrid have built a battery at Blackwall, supported by government funding. Ausgrid have leased some (or all) of the battery to Origin Energy² who decide what the battery does, earn revenue trading the battery in the wholesale market and pay some fee back to Ausgrid. There may also be a network support agreement where Origin Energy commits to managing some operational constraints such as saving the battery for local peak demand. Origin Energy will then need to separately pay Ausgrid a network tariff when the battery draws energy from the grid (in the same way that network tariffs work for everyone else). In summary:

1. Ausgrid and taxpayers via the federal government paid for the battery. Taxpayer funding came in through the Federal community battery program.

2. Origin Energy pays Ausgrid a fee to lease part of the battery. This fee would be based in part on how much Origin Energy expects to make back trading the battery in market and using it to sign up customers.

3. Origin Energy pay Ausgrid a network tariff for using the network to charge up the battery. This tariff reflects the costs of utilising the network to consume electricity.

4. Origin Energy can earn money by using the battery. The battery would earn wholesale revenue.

5. Ausgrid ratepayers pay Ausgrid back for some portion of the costs of the battery. At least part of the battery costs are included in the regulated asset base, which is funded by Ausgrid rate payers through their regular network tariffs.

6. Origin Energy can use the battery to sign up customers. The network costs are set by the DNSP, charged to your retailer as a network tariff, who will typically pass those costs straight through you. It is through the network tariffs that Ausgrid is able to offer the special community battery deal to households near their batteries. In my local example, Origin Energy can sign up local customers to a special community battery tariff. Origin charges it to local customers that sign up, then pays Ausgrid the same tariff.

Source: Me (note the trademark low-qual Powerpoint layout).

When I saw this special community offer (and as no stranger to electricity retail hijinks), I tried to sign up. Ausgrid put the good sell of this offer, with Ausgrid’s Group Executive of Distributed Services at Ausgrid, Rob Amphlett Lewis saying:

“Customers using this service will have a lower network charge due to reduced demand on the transmission, sub-transmission, and high-voltage networks”

Sign me up! However, when I was trying to work out if I could join I stumbled down a bit of a rabbit hole I probably could have anticipated.

I have to talk about network tariffs

I live in the Ausgrid network and the tariff they charge my retailer is called EA116, the bottom row in the table below:

Source.

On this network tariff, I pay (via my retailer):

• 61c/day

• 2.67c/kWh for peak and off-peak energy (i.e. a flat rate for energy)

• A demand charge of 42c/kW/day in peak season (i.e. my highest demand between 3 - 9pm on weekdays sets this price for the month).

The other tariff I could be on is the EA025 time-of-use tariff (the second row in the table above) which is:

• 60.8c/day

• 5.7c/kWh for off-peak energy

• 32.2c/kWh for peak energy.

This network tariff is ~40% of my electricity bill. It is through network tariffs that Ausgrid offers a special community battery linked deal. If I lived a few measly suburbs over (see trial area below), I would live close enough to a community battery to be eligible for a different network tariff.

The lucky few in Blackwall from the Origin Energy sign up page.

It would be great if I could get on this tariff, it’s a cracking deal. For a household, the network tariff is EA956 - Local use of system trial - Residential (second row in the table below). This is one of Ausgrid’s trial tariffs.

Source.

According to Ausgrid, this tariff is:

“for customers participating in our ‘storage as a service’ program. The tariff will provide benefits for local use of the distribution network and feature a time of use pricing structure. It will be available to customers located near a community battery.”

If you compare the three options, it clearly pays to be on the EA956 tariff (i.e. community battery linked tariff). If you’re on EA116 (like me), you’re not always paying more by default, but in my experience, it would be very difficult to get a cheaper outcome (plus, you are dealing with demand tariffs which can be nightmarish). If you’re a customer on the time-of-use tariff (EA025), you are always worse off than those on the local use of system tariff.

That’s jarring - no matter what you do, if your network tariff is EA025, you cannot get a better deal than someone living near a community battery who has signed up for the special deal and got EA956.

Looking at an average household using 25kWh/day and estimating an annual bill based on the network component and this clearly shows the local use of system tariff is significantly cheaper.

This is by no means definitive,³ but a representative customer could be paying almost 60% more on their network costs because they don’t get the community battery tariff.

This is not how it should work

Having a trial tariff that effectively gives customers a discount for signing up is not how this should work. My main issues with using a tariff like EA956 are:

1. Nothing seems to be being trialled

2. It’s a only good deal for some very engaged customers

3. Customers with home batteries can’t participate

4. It could inadvertently increase the revenue paid back to Ausgrid.

Trial? What trial?

Ausgrid say this trial tariff will allow them to:

“(1) assess customer participation in a community battery retail offer; (2) test price responsiveness to cost reflective tariffs that reflect the network costs of residential customers located in a neighbourhood with a community battery.”

This feels like an exceptionally low bar for a trial.⁴ What could Ausgrid or the AER possibly learn? Participation in the trial depends on Origin Energy and EnergyAustralia signing up customers. How is Ausgrid measuring the effect of this network tariff specifically?

And how are these tariffs more cost-reflective? They’re exactly the same structure as the regular TOU tariffs, just cheaper. Going back to what Ausgrid’s Rob Amphlett Lewis said:

“Customers using this service will have a lower network charge due to reduced demand on the transmission, sub-transmission, and high-voltage networks”

The specific customers signed up to this tariff aren’t reducing demand on the network. There’s no new incentive to change when they use power and if they are somewhat price responsive, they might use more power at peak times because its now cheaper!

However, if this is considered more cost-reflective, why are 400,000 Ausgrid customers onto the complex and widely detested residential demand tariffs? There’s no way this tariff allows a test of price-responsiveness apart from customers seeking out a discount.

Community? What community?

To benefit from this tariff, you need to live in a specific area and sign up for Origin Energy’s special tariff. It would take an engaged customer to get onto this plan. Unless you were there for the ribbon cuttings (admittedly, there did seem to be a lot of these), it’s tough to find this offer without googling it. As far as I can tell, you can’t even navigate to the community battery tariff from Origin’s main page.

Ausgrid says:

“Our hypothesis is that consumers will elect to subscribe to a retailer product for a community battery, rather than invest in a behind the meter battery. Local use of system tariffs feature lower residual costs and reflect the benefits of avoided use of the upstream components of the network.”

In practice, you could live right next to the battery and get no benefit. You might be paying 60% more than your neighbour because they are better at finding this obscure offer. Alternatively, you might be one of the many customers suffering on a demand tariff (cue 15 articles from Daniel Mercer at the ABC). As Ausgrid explain explicitly, this tariff is lower cost because it’s passing on some benefits of avoided use of the upstream network. But why lower residual costs? This battery is not reducing the sunk network costs.

At present, this tariff is better characterised as a discounted rate for a select group of very engaged customers.

Your batteries are not invited

Ausgrid has set this up so customers are not eligible if they have a behind-the-meter battery.

Why is this allowed? There’s no need to bifurcate customers into those that have batteries at home and those that don’t. It’s a good thing for the network to have residential and front-of-meter batteries. If this network tariff was actually cost-reflective as Ausgrid suggest, wouldn’t you want customers with batteries responding to it?

The cynical take is that networks would much prefer it if they get to own the batteries. The peak body representing networks has said as much. In a report published last year, they (via consultant L.E.K) said:

“Batteries installed behind-the-meter require subsidies that are inequitable – the greatest benefits flow to the battery owner. Front-of-meter batteries benefit all energy consumers.”

I’ve written previously about that report, including taking issue with how happy the ENA was to talk about equity on behalf of its multi-billion dollar monopoly members. Looking at how the benefits of network-owned batteries are shared, it’s hard to see the equity in these front-of-meter batteries flowing to all consumers after all.⁵

In the network’s interests

As I understand it, Ausgrid gets lease payments from Origin Energy for this battery.⁶ Origin Energy would base what it’s willing to pay for this lease based on two things: 1) how much revenue can it earn by trading the battery?; and 2) can this battery help Origin Energy win customers in the residential retail market?

If this tariff was an effective tool for signing up residential customers, it would make the lease more valuable.

This risks creating a situation where discounted network tariffs can be used as a tool to increase the lease payments back to Ausgrid. These lease payments are mostly likely returned to Ausgrid as unregulated revenue i.e. going to shareholders, not back to ratepayers.

There’s a better way

How should Ausgrid pass on the benefits of a lower-cost network? I think there’s quite a simple alternative to the approach Ausgrid have taken here. If these batteries lower the cost of operating the network or if Ausgrid is earning revenue that it should be sharing back with its customers, those benefits should shared as widely as possible. All Ausgrid customers should see some reduction in their bills, rather than the select few who sign up. As far as I can tell, there’s no good reason to keep those benefits for the customers who happen to live near the battery itself.

The fact is, we don’t have locational pricing in the distribution network. If your local zone substation needs upgrading, you won’t be paying more than people connected to a nearby substation with plenty of spare capacity. Why take a different approach with network-owned batteries?

If a network-battery can only reduce network costs if the customers nearby are able to change their consumption, either:

• Propose a tariff structure that is actually cost-reflective that’s open to all nearby; and/or

• Factor the battery into the rollout of dynamic operating envelopes and other localised network tariffs.

Can I convince you that this matters?

As of February 2025, only ~100 customers had signed up to these tariffs across 13 locations. That’s less than 10 per community battery. Small fry right? Well, kinda. But if you were to ask Ausgrid, this is the future:

“Currently 13 neighborhoods in our network area have a community battery installed, and we expect to install additional batteries in other localities throughout next year and beyond. To ensure the future success of the storage as a service tariff trial, we want to allow as many customers as possible to be eligible to participate. This will enable Ausgrid to collect more data on the energy patterns of small customers located near a community battery.”

This post has focussed on Ausgrid, but Endeavour Energy has a similar tariff. Doing the same analysis, the normal ToU tariff offered by Endeavour is ~50% more expensive than their special tariff for customers who are linked to their network batteries.

Setting aside the question of whether Ausgrid or Endeavour or other DNSPs should own batteries, there are some serious questions here:

• What does success of this trial even look like to Ausgrid or the AER? They’re not trialing anything that’s discernible from the tariff itself. Who’s going to measure the outcome of this trial? Is ensuring the future success of a “storage as a service” tariff a good thing?

• Why are they allowed to offer discounts to customers who sign up to their projects? If someone else builds a battery in Ausgrid’s network, can they sell power to customers using this tariff?⁷ If not, why not?

• Is this really how we want the benefits of tax-payer subsidised batteries to be returned? To a group of savvy customers? Excluding customers who have batteries? This is a problem that’s broader than network tariffs, but that’s a poor justification here.

• What’s the linkage between regulated network tariffs and commercial returns on the batteries? This is a murky area that can only really be guessed at from the outside looking in. However, it highlights the difficulties arising when you have assets and market participants in the grey area between competitive markets and regulated monopolies.

In the scheme of climate change and the energy transition, how much does this really matter? The rollout of storage across the NEM is critically important to the energy transition. For the next few years, there will no doubt be an ongoing debate about to best do this. Networks have lost part of the debate with the Federal government agreeing to support residential batteries, but no doubt they will continue to argue strongly in favour of network-owned batteries. Undoubtably, the number of customers who’ve signed up to these subsidised network tariffs will be a measure of success. Hopefully if you’ve made it this far, you’ll at least be somewhat skeptical of whether that’s a good measure of success.

I don’t expect too many people to care deeply about an issue this niche. However, I do hope that the people setting up battery funding programs or reviewing the success of the community battery rollout or running the AEMC’s pricing review do find some time to think a little but longer about where this is all headed and ask some similar questions.

1. You might think a battery would need to be owned by a community to be called a “community” battery. You would be wrong! Like the words equity and CER, “community” gets used with some liberty.

2. And maybe EnergyAustralia?

3. An actual bill all depends on how much power you use and when you use it and how your retailer passes on network tariffs.

4. In the NEM, anything can be a trial if you just believe!

5. Cue private equity riffs.

6. I can’t find anything about this, so my apologies if I’ve got this wrong.

7. Genuinely curious!