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Australia’s energy system is shifting to one that is much more decentralised, increasingly consumer-centric and in which new forms of energy production are rapidly entering the mix. This shift is most advanced in the electricity sector, with other sectors just at the start of their transitions.

The Energy Security Board’s second Health of the National Electricity Market report1 states that “the fundamentally different characteristics of variable distributed energy resources to traditional generation mean that changes to the way the National Electricity Market operates must be made”.

One of the main requirements to enable an increasing share of renewable electricity is to have a suite of enabling technologies available to support an overall reliable, secure and affordable electricity system. ARENA recognised this early on and, from 2015, began to develop and implement funding initiatives and support activities focused on integrating renewables and grids.

System security is becoming increasingly important as the generation mix changes. The machinery that generates electricity in a coal-fired, gas-fired or hydro-electric plant has the in-built capability to manage frequency and voltage fluctuations. Solar PV and wind power technologies do not possess the same inherent capability. As the proportion of electricity generated by solar PV and wind increase, system services such as inertia, frequency control and system strength will need to be explicitly provided for, or alternative techniques for maintaining stable power system operation will need to be developed.

Another important area of change is flexible capacity: resources that can balance variable renewable energy supply with variable demand for electricity. This includes storage technologies like batteries and pumped hydro, as well as technologies and mechanisms that not only reduce demand (lower electricity consumption at times of high stress on the grid) but shift demand for electricity to periods of high renewable energy supply. These new technologies are projected to provide 31 GW of flexible capacity by 2050.2

As the needs of the National Electricity Market (NEM) have evolved, ARENA has devoted significant resources to finding and funding projects and activities that would deliver secure and reliable electricity. ARENA’s 2017 Investment Plan identified new flexible capacity and grid stability technologies (and associated business models) that could balance the electricity system with higher shares of renewable energy, ensuring electricity is available where and when it is needed, as an area of particular interest.

The largest share of ARENA’s funding commitments to date has been in the electricity sector and this is reflected in the outcomes and impact seen in 2018-19. It is in this context that our Annual Performance Statement for 2018-19 focuses primarily on the electricity system and ARENA’s activities aimed at addressing electricity system security and reliability needs. In reporting our results we use a combination of quantitative and qualitative performance measures.


  1. The Health of the National Electricity Market, 2018 Annual Report, Energy Security Board
  2. New Energy Outlook 2018, Bloomberg New Energy Finance