Explore Energy

Whether you live in a small community or a thriving smart city, smart grids are changing the electricity market in Australia and around the world. As technology continues to evolve, so does the way electricity is supplied to our homes and businesses. This guide explores smart grids and how they’re changing the electricity market.

What is a smart grid?

Smart grids offer two-way communication between electricity providers and users. Electricity and information can be transported both ways between providers and you. Information can also be shared between you and distribution networks, power plants and retailers.1

Essentially, a smart grid is an evolution of the traditional electricity grid that uses improved technology to offer this two-way communication.

Electricity grid vs smart grid. What’s the difference?

In the past, electricity grids offered one-way interaction. Power could be supplied to businesses and homes through transformers, transmission lines and substations, but the grid couldn’t respond energy consumption and demand changes. Meanwhile, smart grids offer two-way communication between electricity providers and users.

Smart grids are electricity systems that can support renewable technology, help distributors (who are responsible for delivering electricity) better manage service issues and outages and give you more control over the electricity you use. The main difference between traditional electricity grids and smart grids is that smart grids allow electricity and information to be transported both ways between providers and you.

What do smart grids do?

Offering two-way communication is a major function, but what else are smart grids capable of? In a nutshell, smart grids make the electricity industry more efficient, more reliable and improves electricity availability by reacting to changes or disruptions quicker than distributors could in the past.

Smart grids can:

  • work with smart meters so you have access to a wide range of products and services, such as energy storage and energy management services;2
  • allow you to alter your energy use to your advantage (for example, you could spread demand from peak to off-peak and take advantage of off-peak rates if you’re not on a flat tariff);3
  • increase sustainability of the electricity network and make the power grid more resilient to outages and other problems;3
  • allow electric power to be saved when it’s needed most through energy storage and batteries;3
  • help with the integration of renewable energy systems, such as wind, hydroelectricity and solar power;4
  • improve the efficiency of electricity transmission;3 and
  • manage issues (such as power outages) in real time.5

Similar to how we use communications technology to connect online, smart grids are a complex network of new technologies, computers, equipment, automation and controls that work together and with the electricity grid to improve the service offered to you and the community.

Smart grids are already a part of the Australian energy sector,4 intended to benefit the environment, improve the power grid as a whole and give more control to the consumer.

two men working on a smart grid

What are the pros and cons of smart grids?

The benefits of smart grids

Smart grids have many benefits for you, electricity consumers, the environment and other stakeholders in the wider community. In addition to smarter power generation, they can:

  • benefit the environment by smoothing power flow and demand;6
  • rely more on renewable energy generation, which can reduce carbon dioxide emissions and allowing more Australians to generate their own power;7
  • give you more control of your electricity usage and the option to take advantage of smart devices and technologies;3
  • prevent blackouts and reduces disruptions to an electricity supply if there’s an issue on the network;
  • replace outdated infrastructure with new frameworks, improved digital technologies and improved power quality;3
  • meet energy demand as Australia’s population grows and electricity consumption increases; and
  • help distributors and providers offer you an improved service, with real-time information, reliability, lower prices and more.

The downsides of smart grids

​While there are many benefits of smart grids, there are also some challenges. These include:

  • a threat of cybersecurity attacks, as more aspects of the electricity grid move online;
  • the need to update existing policies, as electricity rules change with the transforming electricity grid;
  • a lack of guidelines and standards; and
  • high costs to implement changes.

Smart grid technology and smart homes will work together

As the electricity grid changes, so will your home, so you have greater control and choice over the power you use. Primarily, it will be a home area network (HAN) that connects your electricity use to the grid. A HAN is a network within your home that connects smart appliances, electric vehicles, thermostats and other electric devices to one energy management system.8

A HAN is almost like a mini-Internet of things (IoT), which describes the many global devices connecting to the internet to share information, technology and data.

Here are some changes many Australian homes have already undergone to connect to the smart grid.

Installing smart meters

Smart meters are power-monitoring devices that provide you and your electricity provider with greater insights into your electricity usage. They can record and send information about your usage in regular blocks to your provider so you both understand how you’re consuming electricity. Depending on the type of smart meter you have, you may be able to save electricity by changing your electricity habits or using power differently (known as a demand response). Read more about how changing habits could reduce electricity bills in our electricity tariff guide.

Utilising smart devices

Smart devices allow you to adjust appliances to improve energy efficiency remotely. In some cases, these types of devices can be set so they only operate in off-peak times, when electricity can cost less and there’s a lower demand on the electricity grid. For example, a smart fridge may be able to increase its temperature on cold days, smart lights may automatically switch off when it’s light, or heating appliances may only operate when it hits a certain temperature. Smart devices can work alongside smart meters.

Investing in solar power systems

Installing solar power panels on your roof allows you to harness power from the sun and convert it into electricity. You’re able to use this electricity, send it back to the grid (to receive credit on your electricity bill through solar feed-in tariffs) or store it in batteries for later use. However, it should be noted that solar feed-in tariffs are reducing as more people take up solar.

Some solar owners are also opposed to a reform by the Australian Energy Market Commission (AEMC) that will see demand-based pricing introduced for solar panel owners who export electricity back to the grid. This change has been labelled as a “sun tax”, as solar owners could be paid differently for the power they export, based on electricity demand.

man connecting his smart meter to the smart grid

Are microgrids the same as smart grids?

You may have heard about microgrids, but they are not the same as smart grids. While they can connect to smart grids, microgrids differ as they can break off and can operate solely on electricity they produce without relying on the primary grid.9 Microgrids, also known as distributed energy resources (DER), are usually powered by renewable energy sources and are common in rural areas and communities.

Solar already installed? We can help.

If you’ve already installed solar or you’re looking for more ways to save on your energy bill, we may be able to help. Our energy comparison tool asks questions about your solar use and allows you to compare a range of plan features, including feed-in tariff prices. Our tool is free and easy to use and allows you to compare a range of plans and providers in one place.

Meredith O'Brien

Tips from our Head of Energy, Meredith O’Brien

  1. Invest in solar panels and batteries to reduce the strain on the network and allows you to have back up power when there is an outage.
  2. Switch to a smart meter and take advantage of a time-of-use-tariff to better manage your usage by spreading non-time critical usage from peak demand times to off-peak times (such as turning on your dishwasher or washing machine on weekends, overnight or early in the morning)
  3. Only use your air conditioner when necessary. If you do use it, ensure you keep the cool air in by sealing gaps, closing windows and doors and setting the thermostat to between 25 and 27°C (each degree higher you set your air conditioner’s temperature can cut your energy use).10


1. Victorian Government Library Service – ‘Victoria’s Energy Future – Smart grids’ – Accessed 09/11/2021
2. Australian Energy Regulator – ‘Smart meters’ – Accessed 09/11/2021
3. Australian Energy Market Commission and Smart Grid Australia – ‘Submission for the Review of Demand-Side Participation Stage 3 review In response to the Issues Paper (page two)’ – Accessed 09/11/2021
4. Australian Trade and Investment Commission – ‘Microgrids, smart grids and energy storage solutions (page 10)’ – Accessed 09/11/2021
5. Australian Energy Market Commission and Smart Grid Australia – ‘Submission for the Review of Demand-Side Participation Stage 3 review In response to the Issues Paper (page three)’ – Accessed 09/11/2021
6. Australian Trade and Investment Commission – ‘Microgrids, smart grids and energy storage solutions (page 14)’ – Accessed 09/11/2021
7. Parliament of Australia – ‘Renewable energy policy: retreat, renewal and revitalisation?’ – Accessed 10/11/2021
8. Victoria State Government – ‘Electricity – Executive Summary’ – Accessed 10/11/2021
9. Australian Trade and Investment Commission – ‘Microgrids, smart grids and energy storage solutions (page 6)’ – Accessed 09/11/2021
10. Department of Industry, Science, Energy and Resources – ‘Summer’ – Accessed 09/11/2021

single alexksander portrait in bottom global block

Ready to look for a better deal? It’s easy to compare with us.

Compare energy plans
single sergei portrait in bottom global block