Clean energy transition, Aussie rules

I’m visiting the University of Melbourne. Lucky me. During the first week of our visit, my son and I got to watch an AFL “footy” match at the Melbourne Cricket Grounds. If you haven’t had this experience, put it on your list: unbelievable athletes playing in the largest stadium in the southern hemisphere with a crowd that erupts in a team fight song after every goal.

We thought we’d quickly get a feel for the game. We play sports with balls on fields. But we were completely disoriented. Players were picking the ball up off the ground and bouncing it, scoring two different ways with four goal posts. The core objective of the game (outscore your rival) was entirely familiar.  The rules and strategies were completely foreign.

Learning about Australia’s clean energy transition has felt much the same.  In many respects, Australia is on the same decarbonization page as California. But market reforms and policy responses are unfolding quite differently which has made for some fascinating electricity nerd tourism. 

Similar duck, different playbook

The pictures below compare how the electricity generation mix has been evolving in Australia (right) and California (left). The broad patterns are similar: renewable energy is ramping up as fossil generation declines. But the mix of renewable sources is notably different. 

California’s solar buildout has leaned heavily on utility-scale projects (darker yellow). In Australia, rooftop systems (lighter yellow) account for roughly two-thirds of total installed solar capacity!  In other words, Australia is pushing much more of the clean-energy transition behind the meter.  As solar PV penetration has increased in both places, the infamous duck has been showing up. 

To manage the twin challenges of low net demand in the middle of the day followed by steep increases in net demand as the sun goes down, electricity markets can deploy more battery storage, better resource coordination, and/or more demand response. California and Australia are using these strategies in different ways.

Batteries: California has been focused on accelerating investment in utility-scale batteries. By the end of 2024, we had over 13 GW of mostly grid scale capacity. Australia has also seen a surge of battery storage investments, but a majority of the storage capacity is currently behind-the-meter. Australia’s Cheaper Home Batteries Program, launched last year, added more than 4.7 GWh of small-scale battery capacity in just six months.

Demand response and DER coordination. California has been experimenting with ways to harness flexible demand through managed EV charging and demand response programs. Australia’s rooftop-heavy transition has pushed this kind of distributed energy resource (DER) coordination – and related experimentation- to the center of electricity-market reform.  During my short stay in Melbourne, I heard about many examples along these lines (e.g.   Project Edith, Andrea LaNauze’s great work on virtual energy networks, South Australia’s flexible export rules). 

Ultimately, coordinating millions of distributed resources at scale will require coordinating millions of retail customers. That makes retail prices the connective tissue between household decisions and grid needs. Cue the not-so-glamorous but increasingly essential topic of retail rate reform…

Same broken rates, different regulatory regimes

We’ve been talking about California retail rate reform on this blog for years (see here and here). The core problem is straightforward to explain, even if it’s politically painful to fix. A significant fraction of power system costs are fixed, sunk, or driven by peak demand. These costs have historically been recovered through per-kilowatt-hour charges, which effectively taxes electricity consumption, discourages electrification, and disproportionately burdens lower-income households who can’t put solar on their roofs. 

Australia is confronting very similar problems. But the regulators play by different rules.  In California, regulators have a lot of control over the rates that investor-owned utilities charge their customers. Much of Australia has had full retail competition since the early 2000s. Australian regulators can reform the network tariffs and they can mandate that retailers offer certain products. For example, energy retailers will soon be required to offer households a rate featuring three hours of free electricity in the middle of the day. But the retailers ultimately retain significant control over the rate structures they offer customers.

The Australian Energy Market Commission recently released a sweeping draft reform proposal that would shift network tariffs toward a two-part structure: a larger fixed charge to recover most residual network costs, plus a dynamic per kilowatt-hour price that is zero most of the time but can increase (or decrease) during periods of network congestion. Will Australian retailers find ways to pass these dynamic signals through to customers? Or simply hedge them away and offer everyone a familiar flat rate?  On the one hand, the market is dominated by some large incumbents who may feel limited pressure to innovate. On the other hand, with over 40 percent of households equipped and engaged with solar and batteries, innovative retailers could see a real opportunity. 

An energy experiment the world should be watching

So here’s my takeaway from a two-week crash course in Aussie rules electricity markets. California and Australia are playing the same game: decarbonize the grid, electrify more of the economy, keep bills manageable. But Australia is playing with a different strategy. With more rooftop solar per capita than any country on earth, and a remarkable surge in distributed battery storage, it has no choice but to figure out how to coordinate millions of household devices through price signals, competition, and clever market designs.

To over-play my AFL analogy one last time: Australia has flooded the field with clean-energy resources. The challenge now is getting them to play as a team. California will likely face similar pressures in the future. Australia is running a decarbonization experiment we should all be watching.

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Suggested citation: Fowlie, Meredith. “Decarbonization Down Under ”,  Energy Institute Blog, June 8, 2026