Recent volatility in global energy markets has underscored the importance of energy security, resilience and cost control. In Australia, that volatility has translated into higher prices for emissions-intensive coal and gas in the electricity market.
While new renewable generation is essential to reducing costs over time, it is only part of the solution. Demand-side resources, including smart charging of customer batteries and electric vehicles (EVs), flexible appliance use and energy efficiency upgrades, influence how and when electricity is consumed, and are also key to reducing electricity bills.
While supply-side investments are well understood and increasingly well costed through work such as CSIRO's annual GenCost Report , decision makers have had much less visibility on the potential and cost of demand-side policies and investments, making it harder to design initiatives that bring down power prices.
In response, CSIRO has partnered with Energy Consumers Australia and consulted with industry experts to develop FlexCost, a new methodology 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.
Demand-side resources when they matter most
FlexCost recognises that the nature of system constraints is changing. Rather than just focusing on peak demand, the study also examines constrained periods when supply may be limited and costs are most likely to spike.
FlexCost project director Dr Chris Dunstan said this required moving beyond traditional peak demand analysis.
"FlexCost shifts this focus to what we call constrained energy periods – times when the system comes under pressure because of a combination of demand, supply availability, weather conditions or outages," Dunstan said.
"These periods vary from year to year, by location and season, and are increasingly shaped by the interaction of renewable generation, legacy coal and gas assets and weather extremes."
While the timing and drivers of system constraints are changing, the most constrained periods continue to shape system planning and investment decisions. To capture their impact, FlexCost focuses on those critical hours each year when constraints are most acute and electricity prices are highest.
CSIRO chief energy economist Paul Graham said the cost impact of these short windows is often underestimated.
"A relatively small number of constrained periods can account for a disproportionate share of annual electricity system costs," Graham said.
"By analysing what it would cost to address these constrained periods with demand-side actions, FlexCost will provide a clearer picture of when it is most cost-effective to deploy demand-side resources."
By putting a price on demand-side solutions, FlexCost is designed to support practical decision-making across the electricity sector.
For governments, the framework can inform policy design by identifying which demand-side investments deliver the greatest system benefit and when incentives are most effective.
For regulators and market bodies, it provides a basis for comparing demand-side options with traditional supply-side solutions when addressing system reliability and affordability.
For industry, including retailers, network businesses and service providers, FlexCost clarifies how demand-side resources could be valued, accessed and deployed to reduce costs during periods of constraint.
EVs, batteries and more efficient air conditioners
EVs, consumer batteries and energy efficient technologies are often discussed in terms of the benefits they deliver to individual owners. FlexCost
reframes these as system resources with measurable economic value for all electricity customers.
EVs, for example, are expected to become a significant source of electricity demand as uptake accelerates and more owners charge their vehicles. Flexible charging can allow EVs to draw power when supply is abundant, while Vehicle-to-Grid technologies could soon enable EVs to act as "batteries on wheels", supplying power back to the grid during constrained periods.
More than 500,000 home batteries have already been deployed in Australia, supported by government incentive programs. While many batteries have the technical capability to respond directly to system needs, participation in virtual power plants (VPPs), where batteries are coordinated to operate collectively in response to grid conditions, remains limited and uneven.
Energy efficiency plays a different but equally important role. While not dispatchable in the same way as batteries or EVs, efficiency measures can reduce overall electricity demand throughout the year and help lower system stress during both summer and winter extremes.
"Space heating and cooling is a key driver of peak demand," Dunstan said.
"Improving the efficiency of buildings and heating and cooling appliances – through insulation and more efficient air conditioners – can reduce costs for individual households and businesses, while also reducing the pressure that creates price spikes across the system."
FlexCost examines how each of these options perform during constrained periods, and what it would cost to access them at scale.
Implications for the energy transition Australia's energy transition is often framed as a supply challenge – building enough renewable generation, storage and transmission to replace ageing and emissions intensive coal and gas. Increasingly, it is also a demand challenge, shaped by how and when electricity is used.
As the electricity system becomes more decentralised and more dependent on rooftop solar, consumer batteries and EVs, the timing and location of electricity demand is just as important as the volume of new supply.
CSIRO's electricity transition research reflects this system-wide reality, spanning supply-side cost modelling through GenCost, national planning and coordination such as the National Energy Analysis Centre (NEAC) , work on integrating consumer energy resources and strengthening building energy performance.
"Improving visibility on demand-side costs is critical as Australia manages rising complexity in the electricity system ," Graham said.
"We must recognise flexibility and efficiency as core system assets, not secondary considerations.
"Once we understand their cost and role, they can be integrated more strategically into planning, markets and policy alongside generation, storage and networks."
Energy Consumers Australia executive manager – advocacy and policy Lotte Wolff said FlexCost provides important insight into the role consumers can play in reducing system costs.
"FlexCost shows which technologies – when deployed across homes and businesses – can support the electricity system at the lowest cost," Wolff said. "This clarity can inform better targeted programs and policies that lower energy bills for consumers while also delivering value for the system as a whole."
Looking ahead
As Australia's electricity system becomes more decentralised, distributed and flexible, better visibility on the cost and role of demand‑side resources will be increasingly important for managing reliability and affordability through the transition.
"FlexCost is about putting demand‑side resources on the same footing as generation, storage and networks when we think about system costs," Dunstan said.
"By understanding when these resources matter most – and what it costs to access them – we can make better decisions about how to deliver a reliable and affordable electricity system as Australia moves towards a highly renewable future."
This article was originally published in Energy Magazine .
