Fears the Iran conflict would trigger a surge in power prices have been unfounded. Why? One factor is the very rapid rollout of home and grid-scale batteries.
As a result, Australia's reliance on expensive gas has fallen and power prices have stayed steady or even fallen .
Now it's time for policymakers and households to look beyond batteries to hot water systems. For the average Australian home, water heating is still the biggest contributor to greenhouse gas emissions (25%). Reliance on gas is a key reason.
Our research has shown efficient electric hot water systems could provide energy storage equivalent to 2 million home batteries while saving billions in energy bills.
Focusing on hot water makes sense. Helping households switch to new systems with much cheaper running costs would act as a powerful lever for energy affordability and equity, while reducing our dependence on fossil fuels.
From batteries to hot water
In the 18 months to June, more than 450,000 home batteries and several grid-scale batteries were installed across Australia.
These removed the need for the equivalent of two large gas-fired power stations during the evening peak, when power prices are highest.
As a result, Australia's reliance on expensive gas has fallen and power prices have stayed steady or even fallen .
Hot water systems account for a surprisingly high portion of home energy use - about 25%. But this energy use is flexible, as many water heaters can be set to charge when power is cheap.
Each Australian uses about 50 litres of hot water a day . For a family of four, heating this water with a conventional electric storage system uses about 13 kilowatt-hours per day - about the same amount of energy stored in some home batteries.
Costs vary wildly. That same household of four with electric hot water and rooftop solar could pay nothing for hot water. But 40% of Australian homes still rely on gas to heat water, which can cost A$1,000 or more a year.
Newer technologies such as heat pumps have radically reduced how much energy it takes to heat water, cutting running costs up to 72% . Heat pumps draw heat from the air and work even in very low temperatures.
When connected to timers, smart meters or other controls, heat pumps and other electric hot water systems can be set to run during the day. These smart hot water systems provide a simple and cheap way to store large amounts of solar energy.
Pairing smart hot water with the Solar Sharer scheme, which began on July 1 in some states, will mean renters and apartment dwellers without solar could heat water during the hours of free power, substantially cutting their energy bills.
Building on Australia's strengths
Australia is particularly well placed to make the transition.
Decades of experience have made Australia one of the cheapest places to install rooftop solar.
And when the government announced home battery subsidies and consumer demand soared, the home energy industry was able to quickly pivot.
A national hot water push could build on this momentum.
What would an incentive program look like?
Successive Australian governments used subsidies to accelerate the rooftop solar rollout. The current government has used the same approach for home batteries. These programs are typically designed to offer subsidies which decline over time before ending as the industry matures.
Policymakers could do the same for smart electric water heaters. Households are already shifting away from gas, but the pace has been slow.
Replacing gas appliances is often cheaper than developing new gas supply , while cutting emissions immediately.
To accelerate the shift, policymakers could introduce four changes:
extend existing modest subsidies for heat pump water heaters in New South Wales and Victoria to cover other states and other smart electric water heaters, coupled with a strong public information campaign
create a scheme to retrofit existing electric water heaters with timers or rewire them to smart meters. This would turn older models into smart water heaters able to run when electricity is cheapest and respond automatically to price signals or grid needs
improve standards to ensure all new systems have to include timers or smart controls. Raising minimum energy performance standards would also allow smaller units to be flexible and more efficient
focus on renters and apartment residents. Too often, clean energy programs benefit standalone owner-occupied homes. It will be essential to support owners' corporations, social housing providers and local governments to replace shared gas infrastructure
Councils and community organisations could help engage hard-to-reach households. Existing local initiatives are good starting points, but scaling efforts nationally will require coordination and funding.
Targeted support for industry could accelerate development of compact and lower-cost heat pump designs so homes with limited outdoor space can also benefit.
Hiding in plain sight
Australia's extremely rapid uptake of home batteries shows how quickly households can move when the economics stack up and supply chains are ready.
Hot water systems could be the next wave - cheaper than batteries or solar, more inclusive, and hiding in plain sight.
David Roche has received funding from the Australian Renewable Energy Agency, the RACE for 2030 Cooperative Research Centre and Dux Industries for hot water systems and flexible demand research.
Chris Briggs has received funding from the Australian Renewable Energy Agency for research and knowledge-sharing for the Energy Masters program.
Ed Langham has received funding from the RACE for 2030 Cooperative Research Centre and the Australian Renewable Energy Agency for home energy upgrades and demand flexibility research.
