The NSW Peak Demand Reduction Scheme (PDRS) introduced a new round of changes from 1 July 2026. Eligible NSW energy storage projects can once again access PDRS upfront incentives under BESS1, while households can continue to receive VPP incentives under BESS2. Eligible systems can also be combined with the federal Cheaper Home Batteries Program (CHBP), increasing the total financial support available. For example, a 15-kWh residential battery system in Mosman (Ausgrid) can generate about 1,077 PRCs in upfront incentive calculation under the new PDRS, equivalent to roughly $3,608 in gross certificate value at an illustrative PRC price of $3.35.
Upfront Installation Incentive
From 1 July 2026, BESS1 returned the upfront incentive for eligible single-dwelling residential battery installations. Under the updated rules, qualifying battery systems generally fall within the 2–28 kWh usable-capacity range and must satisfy other PDRS equipment and installation requirements. Importantly, BESS1 is not available to every single-dwelling household: residential installations must generally be delivered through an approved Exempt Energy Program (EEP) to qualify.
What Are BESS1-BESS5
BESS1–BESS5 are activity codes for five different battery-related incentive pathways. BESS1 applies to eligible battery installations for single dwellings and certain small business or government sites; BESS2 relates to onboarding eligible batteries with a demand response aggregator, such as through a VPP; BESS3 is for battery installations in apartment buildings; BESS4 targets small and medium businesses; and BESS5 covers larger commercial and industrial battery installations.
How BESS1 Usable Capacity Is Calculated
From 1 July 2026, the calculation is standardised: Usable Battery Capacity is defined as 90% of Nominal Battery Capacity.
What Are PRCs
Peak Reduction Certificates (PRCs) are tradable certificates created under the PDRS for eligible activities that reduce electricity demand during peak periods. The upfront incentive is generally based on the number of PRCs generated multiplied by the market value of each PRC. More eligible battery capacity generally means more PRCs and a higher potential upfront incentive.
Combining PDRS and Federal CHBP Incentives
From 1 July 2026, eligible residential battery installations under BESS1 may now receive both PRC-based PDRS and Small-scale Technology Certificates (STCs)-based CHBP incentive support, potentially increasing the total upfront incentive available for a residential battery.
VPP Incentive (BESS2)
From 1 July 2026, BESS2 continues with broader and simpler eligibility requirements. Batteries (should have VPP capability) with capacity of up to 50 kWh can now qualify, although PDRS incentives apply only to the first 28 kWh. By contrast, a system at or above 28 kWh was completely ineligible in old PDRS. Solar connection and certain battery warranty requirements have also been removed, and the onboarding and nomination process has been made more flexible.
VPP Onboarding Process
Under PDRS, an Accredited Certificate Provider (ACP), the organisation responsible for creating PRCs for the battery, should be selected.
From 1 July 2026, the VPP onboarding and ACP nomination process becomes more flexible: the ACP can be nominated within 90 days of onboarding, provided it has been formally nominated as the designated certificate-creating party when the PRCs are created.
Apartment Battery Storage System Installations
From 1 September 2026, the new BESS3 activity creates a dedicated incentive pathway for Class 2 apartment buildings with at least four dwellings. Eligible systems must have a combined usable capacity of more than 20 kWh and up to 200 kWh (battery capacity is capped at 5 kWh per dwelling for PRC calculations). Batteries must also be CEC-listed, installed by a Solar Accreditation Australia (SAA)-accredited installer, located outdoors, and comply with AS/NZS 5139, the Australian/New Zealand standard governing the safe installation of battery energy storage systems.
How Is the New PDRS Different from the PDRS 2025?
The following is a side-by-side comparison focused specifically on old and new PDRS for residential battery storage systems.
| Area | Old PDRS, before 1 July | 2026 New PDRS 2026 changes |
| Upfront incentive | Suspended from 1 Jul 2025. | Restored from 1 Jul 2026 for eligible 2–28 kWh single-dwelling systems. |
| Federal + NSW incentives | Could not combine PDRS BESS1 with CHBP support. | Eligible systems can receive both. |
| BESS2 VPP incentive | Available with tighter timing requirements | Continues with simpler, broader rules. |
| BESS2 VPP battery size | >2 to <28 kWh | Up to 50 kWh; incentive applies to first 28 kWh. |
| BESS2 VPP solar requirement | Solar required. | Removed. |
| BESS2 VPP warranty rules | Specific warranty rules applied. | Removed. |
| BESS2 ACP nomination | Tighter timing | Up to 90 days after onboarding. |
| BESS1 usable capacity | Based on CEC-listed usable capacity. | 90% of nominal capacity. |
| BESS3 apartment battery systems | No dedicated apartment battery activity. | BESS3 from 1 Sep 2026 for Class 2 buildings with 4+ dwellings, >20–200 kWh. |
| BESS3 apartment battery systems requirements | Not applicable. | CEC-listed, SAA installer, outdoor installation, AS/NZS 5139. |
Notes:
Variables of PRC calculation for upfront incentive: PRCs = Usable Battery Capacity × Demand-Shifting Factor (0.0853 kW/kWh) × Firmness Factor (1) × Peak-Period Duration (6 hours) × Activity Lifetime (15 years) × Network Loss Factor (depending on electricity distributor) × PRC Conversion Factor (10).
Variables of PRC calculation for VPP incentive: PRCs = Usable Battery Capacity × Demand-Response Factor (0.0734 kW/kWh) × Firmness Factor (0.8) × Peak-Period Duration (6 hours) × Activity Lifetime (6 years) × Network Loss Factor (depending on electricity distributor) × PRC Conversion Factor (10).