Article by Colin Packham, courtesy of The Australian.
28.09.2025
Ausgrid’s $180m plan to build community solar generation and battery projects across Sydney and the NSW Central Coast has been thrown into doubt after legal advice to the Australian Energy Regulator found the distributor cannot immediately recover the costs through customer bills.
The proposed Community Power Network would result in Ausgrid owning and operating about 130 megawatt hours of battery capacity and up to 70 megawatts of solar power generation in growth areas such as Mascot–Botany and Charmhaven.
The initiative, pitched as a way to cut household bills, reduce emissions and ease pressure on the network, would require the regulator to waive longstanding restrictions that prevent distribution businesses from directly investing in generation and storage assets.
Ausgrid, one of the nation’s largest poles-and-wires operators, has argued the scheme would allow it to manage the surge of rooftop solar panels more efficiently while sparing customers the cost of expensive network upgrades. But industry rivals say the project amounts to a significant overreach, giving the distributor an unfair advantage in competitive markets and saddling consumers with unnecessary risk.
The strongest opposition has come from AGL Energy, which claimed the plan would add almost $80m to Ausgrid’s regulated asset base. The RAB sets the value of assets on which networks are allowed to earn a government-approved return, recovered through charges levied on households and businesses.
AGL and other retailers argue that adding generation and storage assets to the RAB would entrench the distributor’s monopoly, and distort competitive markets for distributed energy and grid-scale batteries.
Ausgrid is half owned by the NSW government, and the remaining 50 per cent is held by a consortium of institutional investors, including IFM Investors, AustralianSuper and Dutch pension fund APG.
Any changes to its RAB have direct implications for long-term investor returns, given regulated assets provide stable, predictable cashflows.
The inability to roll the Community Power Network into its 2024–29 regulatory determination would leave Ausgrid bearing the costs until at least the next reset, in turn making the project less attractive to its owners.
Sources familiar with the process told The Australian the regulator has been advised that the current revenue determination cannot be reopened, effectively blocking Ausgrid’s effort to add the assets to its regulated balance sheet.
The advice is understood to have been provided after consultation with external counsel.
A spokeswoman for the AER declined to comment.
Ausgrid group executive market development and strategy Tim Jarratt said the company was steadfast in its belief in the merits of the project.
“We strongly believe that the concept provides an innovative and equitable solution to the major challenges currently being faced with rooftop solar and residential storage,” Mr Jarratt said.
It allows customers living in an apartment, or renting, or those who do not have the money to spend on their own solar and storage to access the benefits. Also, it incentivises commercial and industrial businesses to get value from filling their roofs with solar and selling surpluses into the grid, which they cannot do today.
“Ausgrid will engage further with all major stakeholders on ways forward once the AER’s final decision is announced, which we expect in November.”
Industry sources said the incident was “embarrassing” for the AER, which has been a leading proponent for so-called sandbox trials, which advocates insist will encourage innovation and assist with accelerating Australia’s energy transition.
The setback highlights the tensions facing network operators as the power system undergoes rapid change. Rooftop solar panels are installed on more than four million Australian homes, creating steep afternoon demand drops followed by evening peaks. Networks argue that without new localised storage they will be forced into costly infrastructure upgrades that ultimately fall back on consumers.
Ausgrid has pitched the Community Power Network as a cheaper and cleaner alternative, one that would harness solar generation during the day and release it during evening peaks, reducing strain on the grid. It has also sought to frame the initiative as consistent with government decarbonisation targets and the Australian Energy Market Operator’s Integrated System Plan, which emphasises distributed energy resources as a key pillar of the transition.
However, regulators have consistently resisted calls to relax ring-fencing rules that keep distributors out of competitive markets. The principle is that monopoly networks should be neutral, providing a level playing field for retailers, aggregators and third-party investors to develop generation and storage.
Analysts say making an exception for Ausgrid could invite similar applications from other distribution businesses, blurring the boundary between regulated and competitive activities.
Ausgrid has not withdrawn the application, but the legal advice presents a material obstacle. If the regulator upholds the advice, Ausgrid would need to consider funding the Community Power Network outside the regulated framework, taking on more commercial risk and potentially seeking joint ventures with private investors.
Such a shift would align the project more closely with market-led investment but would also reduce its guaranteed returns. For customers, the immediate effect would be to prevent the $180m from being recouped through higher bills, though the longer-term cost implications remain contested.
For policymakers, the dispute underscores the difficulty of adapting regulatory frameworks designed for a centralised, fossil fuel-powered grid to one increasingly dominated by rooftop solar panels, batteries and flexible demand.