The Solar Sharer program, announced by the federal government on Tuesday, would give consumers free access to electricity for three hours each day as part of the default offer available.
Households in NSW, southeast Queensland and South Australia will qualify to access the program from July 2026, with negotiations under way to extend it to other states in 2027.
But a group representing electricity retailers has criticised the government's lack of consultation about the change.
The Solar Sharer program will be introduced to the Default Market Offer, which acts as a minimum standard for plans and prices offered by electricity retailers.
Free electricity will be provided during the middle of the day when solar power generation peaks and will deliver benefits across the network.
"People who are able to move electricity use into the zero-cost power period will benefit directly, whether they have solar panels or not and whether they own or rent," Energy Minister Chris Bowen said.
"The more people take up the offer and move their use, the greater the system benefits that lower costs for all electricity users will be."
Households would need to have a smart meter installed to access the offer but could use it to power air conditioners, swimming pool cleaners, electric cars or home batteries, he said.
Analysis from the federal energy department showed a single-person household that could move 10 per cent of energy use to the three-hour period could save nine per cent on bills.
Retailers including AGL, OVO and Red Energy offer free access to electricity during specified hours, and an AGL spokesperson said it would work with the government on the detailed design of the proposed reform policy.
But the announcement came as a surprise to many retailers, even though the firms had spent five months in talks with the government on other market reforms.
"We are disappointed that the government didn't consult with us ahead of time in announcing this decision," Australian Energy Council chief executive Louisa Kinnear said.
"This lack of consultation risks damaging industry confidence as well as creating the potential for unintended consequences."
Nationals senator Matt Canavan, a key proponent of his party's recent decision to ditch net-zero emissions targets, questioned whether consumers would be better off under the Solar Sharer plan or whether retailers would make people pay more at other parts of the day.
The proposed changes will be overseen by the Australian Energy Regulator and chair Clare Savage said the organisation would launch public consultation on the reforms and ensure fair, consistent pricing from providers.
"By establishing the proposal as part of the (Default Market Offer), more customers will have access to this type of offer but with the added confidence that they are not being overcharged outside the free power period," she said.
Organisations including Solar Citizens, Rewiring Australia and the Clean Energy Council welcomed the changes, with council chief executive Jackie Trad saying they would help energy users shift demand into cheaper periods and avoid high evening prices.
12°C