[Episode #263] – The Role of Distribution Utilities

What is the role of distribution utilities in the energy transition?

Consider this paradox: Marc England, CEO of Australian distribution utility Ausgrid, has two batteries at his home but no solar panels. Instead, he buys grid power at 5 cents per kilowatt-hour during midday solar surplus, stores it, and then sells it back to the grid when prices are high, sometimes making $100 profit in a single day. Similarly, over 100,000 customers in Australia have installed batteries in their homes under a federal incentive program in just the past three months. But commercial players aren’t building battery arrays on his network, despite slashing connection charges. And every time he flies into Sydney, he sees miles of empty warehouse rooftops that could host far more solar capacity if tariffs and other regulatory structures were reformed.

These market dislocations are part of an ongoing debate about who should build and own distributed energy assets (DERs). Should distribution utilities do it in order to maximize their integration? Or should they primarily provide a platform for consumer-owned DERs to connect and transact on an equal footing with utility-scale systems? Is it more practical and cost-effective for distribution utilities to build assets like battery storage systems and public EV chargers, especially where private-sector companies are not, or would it be cheaper and faster to maximize customer investment and rebuild the grid from the bottom-up?

For this conversation, Chris traveled to Sydney, Australia to debate these questions with Marc England in person. As Chris discussed with grid expert Lorenzo Kristov in Episode #205 and our Australia 2024 miniseries, there’s no perfect answer, but these market structure questions will partly determine the speed of our response to climate change.