Australia’s Solar Surplus: What Happens When Energy Stops Being Scarce?

At the beginning of November, Australia became the first country to introduce mandated ‘free energy hours’: a scheme requiring retailers to offer households at least three hours of zero-cost electricity during the solar-rich midday period. The policy, branded ‘Solar Sharer’, aims to address a structural challenge emerging across high-renewables grids – the oversupply of solar power in the middle of the day, combined with steep evening demand peaks. In essence, the Australian approach represents a real-world test of an increasingly common issue: what happens when renewable power becomes so abundant that its marginal cost drops to zero?

The immediate implications are largely positive. Free energy hours should reduce solar curtailment, making better use of the clean generation already flowing into the system. Many consumers stand to save money by shifting even small amounts of household activity into the free window. The policy also reinforces the role of digital infrastructure, such as smart meters (which the programme requires, for households to participate), automated appliance scheduling and managed EV charging, all of which become more valuable when households are incentivized to optimize their daily energy profile. For many consumers, this may be their first meaningful interaction with the concept of flexible demand, helping to normalize behaviours that will be central to the future grid.

While currently only targeted at residential customers, this policy has implications for commercial and industrial firms in the future. Manufacturers with flexible production lines, data centres and large facilities running energy-intensive processes could shift substantial portions of their load into free-energy windows, materially reducing operating costs. This creates an advantage for businesses able to invest in automation, scheduling software and behind-the-meter storage that can capture and reuse midday surplus. It may also accelerate the adoption of electrified processes, such as electric boilers, induction furnaces and hydrogen electrolysers, the economics of which improve dramatically when powered by abundant daytime renewables. At a grid level, commercial and industrial flexibility becomes a valuable asset: organizations that can offer demand response or contracts to absorb excess solar power become active participants in energy balancing.

For software providers in demand response, load management and energy optimization, Australia’s free-energy hours create a major commercial opening both now – and more broadly in the future, across additional markets that could follow the same path. As customers look to shift usage to zero-cost periods, the value of automated scheduling, smart appliance integration, EV charging management and real-time tariff optimization increases sharply. Energy providers will also need more sophisticated DERMS platforms to manage midday load spikes, coordinate distributed energy resources and ensure network stability. In a market suddenly incentivized to be flexible, software that can anticipate, shape and aggregate consumer behaviour becomes essential infrastructure.

Australia’s policy also raises important questions about long-term market stability and fairness. While free midday power benefits those able to shift their consumption, the fixed costs of the grid still need to be recovered, meaning that suppliers may raise prices at other times, pushing up evening or standing charges for households that can’t adjust their usage. The scheme also risks reducing the financial returns for people who have invested in rooftop solar – potentially discouraging future adoption if free grid power undercuts the value of generating your own. These effects could widen inequality between energy-agile households and those without the flexibility or appliances to take advantage of free periods. Underpinning everything is a fundamental question: if solar energy is ‘free’ to use, who pays for the infrastructure that makes it possible? And, crucially, can a model built on zero-priced electricity remain sustainable as grids evolve?

To learn more about the current state of Australia’s energy transition, see Market Insight: Australia Energy Transition In Focus and Market Insight: Australia Energy Transition Investment Trends.