NSW Government
NSW Climate and Energy Action

Peak Demand Reduction Scheme

 

Peak Demand Reduction Scheme (PDRS) Updates

Future changes to the Peak Demand Reduction Scheme will be updated here. Sign up to receive email updates about battery incentives.

Notice to market: Peak Demand Reduction Scheme target review

Until its suspension on 1 July 2025, the Peak Demand Reduction Scheme battery installation activity (BESS 1) was the largest source of certificate creation in the Scheme. We intend to consult on new Scheme activities to deliver additional peak demand reduction capacity.

However, we have identified a risk that certificate creation from new and remaining Scheme activities cannot scale in the short term to match the volumes produced by the BESS 1 activity.  

We therefore intend to review the 2026-27 Peak Demand Reduction Scheme target and consider reducing the target ahead of the 31 October 2025 deadline. Any target reduction will be made only where necessary to reduce the risk that Scheme participants pay penalties.

We anticipate that the Australian Government’s Cheaper Home Batteries Program will deliver at least as much peak demand reduction capacity in NSW as the Peak Demand Reduction Scheme’s BESS 1 activity would have in the same period.  

Any changes to these targets will be updated here. Sign up here to also receive email updates about the Peak Demand Reduction Scheme and the Energy Security Safeguard. 

The latest 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 Friday 29 August 2025, with changes commencing on Friday 12 September 2025.

We have made changes to the Rule, including:

  • improving the VPP process, increasing the incentive, and allowing 6 years’ worth of incentives to be claimed upfront for connecting to a VPP
  • suspending battery installations under the 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 Scheme to support customers in making informed decisions and receiving high-quality upgrades.

Read the latest Rule

Read the position paper

Future changes to the Peak Demand Reduction Scheme will be updated here. Sign up here to also receive email updates about battery incentives. 

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:  

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 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. 

Get involved

We collaborate with industry through research and public consultation. Sign up below to receive updates and opportunities get involved.  

If you have questions about the Peak Demand Reduction Scheme email us at [email protected]. 




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