When AEMO chief executive officer Daniel Westerman spoke at last week’s Australian Energy Week, he forecast changes to the upcoming 2026 Integrated System Plan (ISP).
Westerman acknowledged that things have changed since the draft ISP was released in December 2025, particularly on the battery storage front.
“I don’t think I’m releasing too many secrets when I note that we have had to update a few things between the draft and the final, including the strong uptake of home batteries,” Westerman said during his address.
“But the fundamental conclusion of the ISP remains: that renewable energy, firmed with storage, backed up by gas and supported by upgraded networks, remains the least-cost way forward for Australia.”
With virtual power plants (VPPs) a key fixture of the draft ISP, Westerman acknowledged that VPP uptake isn’t where it needs to be to support least-cost projections for Australia’s energy transition.
“The Draft 2026 Integrated System Plan showed that the total cost of the energy system can be reduced by $7.2 billion if consumer energy resources respond to market signals,” he said.
“That benefit assumes that roughly half of all household and commercial batteries respond to market signals through virtual power plants. But let’s not make ‘perfect’ the enemy of good progress.”
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Despite this, Westerman said non-VPP home batteries were still playing an important role in supporting grid stability.
On January 27 this year, Victoria’s 17-year-old record for peak electricity demand was broken by nearly 200 megawatts.
For AEMO, “neither the new demand record nor the sweaty night were the most remarkable part of that day”.
“It was the window into the future provided by households with new home batteries,” Westerman said. “For the most part, these were not sophisticated virtual power plants with central control over the home battery’s activity.
“Most batteries were operating in a passive mode; soaking up self-generated solar power during the day, while some supplemented that during periods of free power from their retailer.
“That stored energy was then used to power their home during the evening peak, meaning they drew less power from the main grid.”
Demand-side factors
Westerman said the upcoming ISP, set to be released on June 25, would include a ‘Demand Side Factors Statement’ which looks at how demand-side technologies – such as rooftop solar and home batteries – could change power-system needs in the future.
“When you combine these insights with the plans prepared by distribution companies, a clear window into some of the opportunities sitting within distribution networks begin to emerge,” Westerman said.
“Distribution companies know their networks best, and retailers know their customers best, while AEMO has the best view of the operations of the system and market overall.
“You can probably tell that AEMO is very much looking forward to working with everyone involved to consider the whole system more effectively.”
This follows on from the release of CSIRO’s FlexCost, a new methodology – developed with Energy Consumers Australia – that aims to quantify the cost of using demand-side technologies to support the electricity system during periods of high demand or supply shortages.
Put simply, FlexCost helps to answer whether unlocking demand-side opportunities can meet system needs at lower cost than just building more supply infrastructure.
Read FlexCost here.
