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Electricity generation

Generators produce electricity from fossil fuels, such as coal and gas, as well as from renewable energy sources, including water (hydro-electricity), wind (wind power) and sunlight (for solar photovoltaics (PV) panels).

Although most of Victoria’s power still comes from coal, this is rapidly changing as we progress towards our Victorian Renewable Energy Targets of 40% by 2025, 65% by 2030 and 95% by 2035.

Distributed energy resources/consumer energy resources

Many households and businesses are now generating their own renewable energy, for example, by installing a solar PV system. These smaller points of electricity generation are called distributed energy resources. These smaller points of electricity generation, which supply renewable energy directly to the property they are installed on (and are located behind the electricity meter), are called distributed energy resources (DER), or are sometimes referred to as consumer energy resources (CER).

Households with small renewable generators, like solar panels, use the energy they generate to meet their own energy needs. Any excess energy can often be fed back into the grid or stored in batteries for later use, depending on their system setup. Customers with rooftop solar make most of their savings by using as much of their solar energy generated as possible. This can involve shifting usage of appliances such as washing machines, dishwashers or space heating and cooling, or charging electric vehicles, to the middle of the day when solar energy is most generated.

Microgrids and stand-alone power systems

The Victorian Government is supporting the roll-out of microgrids. A microgrid generally operates while connected to the main electricity grid. It can disconnect and function on its own - effectively becoming an ‘island’ powered by local energy generation.

These small electricity networks can also operate independently, or “off the grid”, primarily using renewable energy. Microgrids are often powered by renewable energy resources, such as solar and wind turbines, paired with storage solutions like batteries. These systems are particularly beneficial for communities in regional and rural areas, enabling them to meet their power needs through local generation, enhancing energy resilience and reliability.

If a microgrid operates in isolation and is never physically connected to the main grid, then it is considered a stand-alone power system (SAPS). SAPS can supply electricity to single premise or a small group of premises with a microgrid. Electricity distribution businesses can now own and operate SAPS, with the associated investment costs recoverable through network tariffs (i.e. supply charges) that appear on all customer energy bills.

Electricity transmission

Once electricity is generated at a power station, it is transported to load centres in metropolitan and regional areas by a network of high voltage transmission lines. Low voltage distribution networks transport it from the transmission lines to customers.

Victoria’s 6,600 kilometre high-voltage electricity transmission system is owned and maintained by AusNet Services. The Australian Energy Market Operator (AEMO), the national market and system operator, is responsible for planning and operating Victoria's electricity transmission network to ensure it meets future energy needs reliably and efficiently. It manages transmission upgrades, renewable energy connections, and real-time network operations.

The Victorian Government is working with AEMO to transfer transmission system planning responsibilities over to VicGrid to support building an improved transmission system to support the transition to renewable energy. This is expected to take effect from mid-2025. Learn more:

Once electricity is generated at a power station, it is transported to load centres in metropolitan and regional areas by a network of high voltage transmission lines. Low voltage distribution networks transport it from the transmission lines to customers.

Victoria’s 6,000 kilometre high-voltage electricity transmission system is owned and maintained by AusNet Services. However, the transmission system is subject to the operational control of the Australian Energy Market Operator (AEMO), the national market and system operator.

AEMO's broader role

AEMO's primary role is to plan and operate the National Electricity Market (NEM) to ensure the system operates in the interests of consumers and supports the market. The NEM is one of the largest interconnected electricity systems in the world. It allows electricity to be traded between Victoria and 5 other eastern and southern states and territories of Australia.

Electricity distribution

In Victoria, 5 electricity distribution businesses own and manage the low voltage power poles, wires, meters and SAPS which deliver power to homes and businesses across the state. Distributors have a responsibility to:

  • deliver reliable electricity supply to customers
  • connect homes to the grid
  • maintain infrastructure.

Distributors are therefore different to energy retailers, as retailers sell energy to customers.

Find your electricity distributor.

Electricity retail market

Electricity retailers sell electricity to household and business customers. Retailers are responsible for billing, customer service and helping arrange network services.

Retailers purchase electricity in the National Electricity Market (or NEM) using a combination of ‘hedging contracts’ or futures. This is where they negotiate the price they will pay for electricity in the future as well as from the ‘spot’ market (where they purchase a portion of electricity for immediate supply). Retailers also pay network costs. These are the costs to build and maintain the poles and wires that transmit and distribute electricity charged by electricity distributors. Retailers add these costs together with their own operating costs and profit margin and offer electricity contracts to customers.

Customers can choose to buy their gas and electricity from a range of different offers that have different prices and conditions. Customers can compare energy offers on Victorian Energy Compare. Find out more information about the gas sector.

Embedded networks

Electricity embedded networks are private networks that sell and supply electricity to multiple customers within a building or self-contained site. They are common in multiple occupancy developments, such as:

  • apartment buildings
  • retirement villages
  • social housing
  • caravan parks
  • shopping centres.

Generally, embedded network operators are customers of retailers and can purchase electricity at bulk prices from retailers to on-sell to their embedded network customers.

In Victoria, people or companies can sell or supply electricity if they have a licence or if they are exempt from the requirement to have a licence. Many embedded network operators are exempt from holding a licence. But there are still laws and regulations which apply to them.

To find out who your embedded network operator is, visit the ESC’s Register of Exempt Persons.

Page last updated: 22/01/25