Community Power Network Trial: Potential risks and market impact

Australia’s rooftop solar uptake has been a defining feature of the nation’s energy transition. With more than one in three households now generating their own electricity[i], Australia leads the world in rooftop solar[ii]. However, access remains uneven. Renters, apartment dwellers and low-income households often cannot install panels or batteries and are excluded from the associated cost savings. This inequity has prompted discussion about whether new models are needed to deliver energy benefits more broadly.

Ausgrid’s proposed Community Power Network[iii] (CPN) trial is one response to that challenge. Currently before the Australian Energy Regulator (AER), the trial would see Ausgrid install and operate up to 70 MW of solar capacity and 130 MWh of batteries across two regions, Charmhaven on the Central Coast and Mascot-Botany in Sydney[iv]. The company intends to manage these assets directly, using them to participate in the wholesale market, reduce peak demand, and provide grid services. Ausgrid has proposed that the value created be redistributed to customers in those areas via a “CPN dividend,” underwritten so that participants would not be worse off.

What makes this trial significant is not only its potential benefits for excluded consumers but also its implications for market structure. As a distribution business, Ausgrid is currently restricted from engaging in generation or retail. To proceed, it is seeking regulatory waivers, including exemptions from ring-fencing requirements. If approved, the trial would mark a departure from the traditional separation between monopoly networks and contestable market functions.

Regulatory Framework and Waivers

The AER’s Regulatory Sandbox[v] provides a pathway for testing new models by granting temporary regulatory flexibility. Ausgrid has applied through this framework for permission to own and operate solar and storage assets as part of the trial.

The regulator must therefore weigh two competing considerations. On one hand, the trial is framed as a way to extend renewable access to those unable currently to participate. On the other, approval could establish a precedent for networks entering areas traditionally reserved for competitive participants, raising concerns about market distortion and the appropriate boundaries of network activity.

Domestic and International Precedents

The proposed trial is not occurring in isolation though. Overseas, energy providers have experimented with similar models. In Spain, Iberdrola’s Solar Communities[vi] program allows residents to access solar from shared installations on public or commercial rooftops within about two kilometres of their homes. Participants sign up online and immediately share in the output, with savings of around 30 per cent reported across more than 1,000 communities serving over 100,000 households.

The Spanish model is notable for its simplicity and consumer-facing design. It demonstrates that shared renewables can be delivered at scale, but it is led by a retailer operating within competitive markets, not by a regulated distribution business.

Domestically, there are several examples of shared renewable initiatives that provide useful context for Ausgrid’s proposal. Earlier this year, AGL announced a program to build and operate community batteries across South Australia, including 11.2 MW of new capacity and the operation of 11.5 MW of existing assets.[vii] This initiative is part of AGL’s Community Power program[viii], which aims to extend the benefits of the energy transition to those who may be unable to afford solar or battery systems, such as renters and low-income households.

In Goulburn, a community-owned solar farm was established through a co-operative model[ix], raising $2.1 million alongside state government support to develop a 1.35 MW facility with battery storage. The project now supplies around 500 homes and reinvests benefits locally.

At the national level, the Commonwealth’s $200 million program for 400 community batteries[x] is providing shared storage infrastructure, allowing households to store their access generation for later use without owning a battery themselves.

Alongside these initiatives, governments at both federal and state levels are investing in programs aimed at households unable to install their own solar.

At the federal level, the $100 million Community Solar Banks Program[xi] will support more than 25,000 households, targeting renters, apartment dwellers and low-income families by allocating funding to state-led projects.

New South Wales and Victoria have both launched programs intended to encourage landlords and strata managers to install solar on their properties, through rebates and loans. Similarly, Queensland has introduced the Supercharged Solar for Renters program, which offers rebates to landlords who pass on solar benefits to tenants.

Battery incentives are also being expanded. The federal government’s Cheaper Home Batteries Program[xii], commencing 1 July 2025, offers households and small businesses a rebate of approximately 30 per cent on the upfront cost of installing eligible small-scale batteries (ranging from 5 kWh to 100 kWh) connected to rooftop solar. In addition, in New South Wales, the state’s Virtual Power Plant (VPP) incentive[xiii] offers eligible households up to $1500 upfront, depending on their battery size for households that install and connect their battery to a VPP. These measures reflect a growing policy focus on enabling broader access to solar and storage, though they operate through competitive and community channels rather than via networks.

Shared renewable programs have proven they can deliver large consumer savings and broaden access.  So exactly what will be revealed by Ausgrid’s trial that is not already apparent from credible, scalable solutions on a global scale is unclear.  But who delivers it matters, and a network led model risks crowding out competitive providers.

Goals of the Community Power Network Trial

Ausgrid has stated that the Community Power Network trial has three core objectives. First, it aims to extend the benefits of renewable energy to households who have historically been unable to install their own solar or batteries, including renters and apartment residents. Second, it seeks to test whether network-led coordination of shared solar and storage can improve local system performance by reducing peak demand and alleviating stress on the grid. Third, the program is designed to examine whether shared assets can defer or avoid the need for future capital expenditure on network upgrades, and potentially lower costs for all customers.

The trial will also gather data to help regulators and policymakers evaluate whether this type of model should have a role in the long-term energy framework. For the AER, the purpose is to understand if the Regulatory Sandbox can enable new approaches that improve outcomes without undermining regulatory separation between monopoly and competitive services.

What we are sceptical of in the trial structure justifications is the absence of clear data on failed tenders, rejected proposals, or unmet demand in specific locations.  Ausgrid claims it does not seek to restrict, or prohibit, other providers from participating in the CPN market. They expect, and assume, other providers will have their own plans and strategies for deploying infrastructure.  However, this intent is not relevant.  What this proposal risks is the creation of autonomous path dependency, where the future development and regulation of CPNs is influenced by the pre-existing regulatory frameworks and practices of the systems they are built upon, rather than a purely optimal, autonomous approach to future development such as Iberdrola’s model.

Risks and Considerations

The Ausgrid proposal raises a wide range of risks, extending beyond the trial’s immediate objectives.

• Market Distortion: Network businesses operate as regulated monopolies with guaranteed revenue and universal customer access. Allowing them to develop and operate generation or storage assets risks crowding out competitive retailers and aggregators, potentially undermining innovation and product diversity in the market.
• Precedent risk: Approving this trial would be the first case under current rules of a distribution network owning generation assets exposed to the market. Even if limited, it risks setting a precedent that erodes the established separation between regulated infrastructure and contestable markets.
• Cross-Subsidy Risk: The underlying assets would be funded through regulated expenditure, meaning customers across the entire network could end up subsidising benefits enjoyed only in trial areas. There is also a risk that regulated revenues might indirectly support contestable market activities if strict ring-fencing, accounting, and invoicing controls are not applied. The sandboxing route has been chosen to avoid the scrutiny of applying for a ring-fencing waiver and being required to reach a higher hurdle.  This further undermines competitive neutrality and raises equity concerns for customers outside the trial zones.
• Benefit distribution: The trial aims to support renters and low-income households, but it is unclear how dividends will be delivered in practice. If financial benefits instead accrue to landlords or property owners, the intended recipients may see little relief, complicating efforts to achieve equity objectives.
• Dispatch Conflicts: Storage assets may be required to balance both network support and market participation. Without clear and enforceable priority rules, there is a risk that dispatch decisions could favour one use over another, distorting outcomes and undermining either system reliability or competitive neutrality.
• Unclear Exit Path: Although the trial is positioned as temporary, there is no certainty about how the assets would be treated once it concludes. Without well-defined sunset clauses and exit conditions, there is a risk that trial assets migrate into the regulated asset base by default. This would effectively convert a temporary waiver into a permanent shift in market structure.
• Reporting and Compliance: Effective governance will be critical to managing risks and ensuring compliance. Without robust reporting templates, transparent disclosure, and ongoing monitoring, it would be difficult to demonstrate that the trial remains within its intended boundaries.
• Weak oversight: Increasing the likelihood of unintended impacts, like autonomous path dependency, going unnoticed until they are entrenched.

Conclusion

The AER’s decision on Ausgrid’s application will be closely watched across the sector. For networks, the trial represents an opportunity to test new roles in the energy transition. For retailers and generators, it raises concerns about competition and the future boundaries of the market. For policymakers, it is more than a test of how to balance equity.  It is a test of their commitment to efficiency and market integrity.

International examples such as Iberdrola’s Solar Communities show that inclusive renewable access can be delivered at scale through competitive markets. Local programs, from community solar farms to government-backed batteries, demonstrate that Australia has multiple pathways to address inequity. The Ausgrid trial will test whether risks blurring the lines that underpin the market’s design lead to a flourishing market in CPNs. 

The outcome will shape not only the future of sandboxing trials but also inform the broader debate about whether these short-term economies of scope lead to anything other than long term monopoly entrenchment

[i] https://www.energy.gov.au/news/australia-hits-rooftop-solar-milestone

[ii] https://reneweconomy.com.au/australia-leads-the-world-on-rooftop-solar-now-it-needs-to-catch-up-with-how-to-manage-it/#:~:text=It%20is%20an%20irony%20of,generation%20provided%20by%20distributed%20PV.

[iii] https://www.ausgrid.com.au/About-Us/Future-Grid/Community-Power-Networks

[iv] https://energyinnovationtoolkit.gov.au/sites/default/files/2025-08/Ausgrid%20Trial%20Waiver%20Issues%20Paper%20-%20August%202025.pdf

[v] https://energyinnovationtoolkit.gov.au/

[vi] https://www.iberdrola.com/about-us/what-we-do/solar-photovoltaic-energy/solar-communities

[vii] https://www.agl.com.au/about-agl/news-centre/2025/july/agl-to-build-11-2mw-and-operate-11-5mw-community-batteries-across-south-australia-agl-community-power?srsltid=AfmBOooSTAp6nnpjDT1h59e45OkSRqR1r6oMcdocuEwhFYEKbYgD5F64

[viii] https://www.agl.com.au/residential/energy/community-power?srsltid=AfmBOopiK9DhdU7yXFS3fRc31XjV_ZcFwu9qX6NAxGS1SJAwFoMLu7Ao  

[ix] https://goulburnsolarfarm.com.au/

[x] https://www.dcceew.gov.au/energy/renewable/community-batteries

[xi] https://www.dcceew.gov.au/energy/renewable/community-solar-banks

[xii] https://www.dcceew.gov.au/energy/programs/cheaper-home-batteries

[xiii] https://www.energy.nsw.gov.au/households/rebates-grants-and-schemes/household-energy-saving-upgrades/connect-your-battery-virtual