Latest changes to the Peak Demand Reduction Scheme Rule
NSW households and businesses can now access a larger incentive for connecting their battery to a Virtual Power Plant (VPP), as well as the larger battery installation discount under the Australian Government’s Cheaper Home Batteries Program.
The previous NSW battery installation incentive cannot be combined with the Cheaper Home Batteries Program.
The latest Peak Demand Reduction Scheme Rule was published on 29 August 2025, with changes commencing on 12 September 2025.
We have made changes to the Rule, including:
- improving the Virtual Power Plant process, increasing the incentive, and allowing 6 years’ worth of incentives to be claimed upfront for connecting to a Virtual Power Plant
- suspending battery installations under the Peak Demand Reduction Scheme due to the Australian Government’s Cheaper Home Batteries Program becoming available.
- banning unsolicited door-knocking to promote and sell energy-efficient and demand reduction upgrades under the Peak Demand Reduction Scheme to support customers in making informed decisions and receiving high-quality upgrades.
About the Peak Demand Reduction Scheme
The Peak Demand Reduction Scheme (the Scheme) aims to reduce peak electricity demand in NSW. It started in 2022 and will end in 2050.
To reduce demand on the grid, the Scheme is providing financial incentives to households and businesses to reduce energy consumption during periods of high demand. Incentives are available for activities involving eligible:
- Virtual Power Plants (VPPs)
- air conditioners
- refrigerated cabinets
- pool pumps
- battery installations (suspended from 30 June 2025)
- commercial heat pump water heaters (suspended from 19 December 2024).
By reducing the electricity consumption of households and businesses when demand is high, we'll help lower the cost of electricity and reduce the risk of power outages in NSW. This will help households and businesses in NSW save around $1.2 billion on their bills between 2022 and 2040.
By shifting the times when electricity is used and using more renewable energy generation in the system, we’ll help hit NSW targets of reducing emissions by 70% by 2035 and achieving net zero by 2050.
Peak Demand Reduction Scheme Compliance Rule
We published the Peak Demand Reduction Scheme Compliance Rule (Compliance Rule) in October 2022, which is different from the Peak Demand Reduction Scheme Rule. The Compliance Rule provides more detail on how the Independent Pricing and Regulatory Tribunal (IPART), as the Peak Demand Reduction Scheme's administrator, calculates certificate targets. The Compliance Rule also details how electricity retailers and large users must estimate individual liability.
How the Peak Demand Reduction Scheme works
The Peak Demand Reduction Scheme incentivises the reduction of peak demand during summer afternoons and evenings when demand for electricity is highest in NSW.
The Scheme sets a peak demand reduction target for electricity retailers and large electricity users. To meet their targets based on their contribution to peak demand, energy retailers and large energy users are required to create or buy Peak Reduction Certificates (PRCs).
Peak Reduction Certificates are created for eligible activities that reduce electricity demand during peak periods. These activities include installing select energy-efficient appliances, such as battery energy storage systems, pool pumps and air conditioners. The Peak Demand Reduction Scheme Rule details how certificates are created.
To ensure the Rule remains relevant to current technical and market conditions, we consult with industry stakeholders regularly. This ensures the Scheme continues to deliver in alignment with the objectives of the Energy Security Safeguard.
How we developed the Peak Demand Reduction Scheme
We outlined a plan to introduce a new certificate scheme in the NSW Electricity Strategy. This new scheme, which would become the Peak Demand Reduction Scheme, was developed to encourage dependable peak demand reduction as part of the Energy Security Safeguard.
Following the publication of the Energy Security Safeguard position paper in 2021, the NSW Electricity Supply Act 1995 was amended to establish the Peak Demand Reduction Scheme.
Following public consultation, we decided that peak demand would be measured over the summer period. These measurements are used to set the Peak Reduction Certificate targets for energy retailers and large energy users.
The Scheme operates alongside the Energy Savings Scheme under the Energy Security Safeguard. Together they incentivise households and businesses to reduce both overall energy usage and during periods of peak demand.
You can read more about the establishment of these schemes in the Energy Security Safeguard position paper.
We consulted with stakeholders in 2022 to get industry feedback that was used to inform the Peak Demand Reduction Scheme Rule. Learn more about our consultation process and Rule changes here.
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If you have questions about the Peak Demand Reduction Scheme email us at [email protected].