AGL has welcomed a grant through the Victorian Government's Neighbourhood Battery Initiative to investigate the feasibility of neighbourhood-scale batteries on the Mornington Peninsula.

The grant will enable AGL to study whether neighbourhood-scale batteries in the region can support system reliability and meet network needs, while enabling greater production of solar energy by households and businesses.

AGL Chief Operating Officer, Markus Brokhof said this is an important project that will allow AGL to identify the optimal battery strategy to maximise value for the energy ecosystem at large, as well as for network services and the energy market.

"We are excited by the prospects of neighbourhood-scale batteries to facilitate further uptake of rooftop solar in communities like the lower Mornington Peninsula," Mr Brokhof said.

"As Australia's largest energy retailer, we have been driving the development of more decentralised energy resources and believe we are well placed to maximise the value of neighbourhood-scale batteries.

"Smaller than grid-scale batteries and larger than household batteries, these batteries remove the need for more poles and wires, alleviate network constraint and create a more efficient and low-emission system which will be beneficial for the customer.

"By soaking up energy generated by existing rooftop solar and releasing that energy later, these batteries can help the system accommodate more capacity.

"Currently, our customers use household scale batteries to contribute to and participate in our Virtual Power Plant; this project will investigate the technical viability of integrating neighbourhood-scale batteries in a similar way.

"We are committed to innovative projects like this which enable customers to make informed decisions on how and when they use their assets to optimise energy use and better manage costs.

"We want to continue to unlock the benefits of new energy storage models which will help to drive the energy transition, while meeting both AGL's Climate Statement commitments and the Victorian Government's vision of a sustainable and secure energy future for Victorians.”

Victorian Minister for Energy, Environment and Climate Change, Lily D'Ambrosio said neighbourhood batteries are an important part of the transition to renewable energy.

"Neighbourhood scale batteries can soak up energy from local solar and make it available to the whole community," Minister D'Ambrosio said.

"Through programs like the Neighbourhood Battery Initiative, we are building an electricity network that will make sure that every Victorian benefits from the transition to renewable energy while delivering our commitment to halve our carbon emissions by 2030 and creating new jobs."

AGL's grant is part of the $1.6 billion clean energy package announced by the Victorian Government and aims to fund projects demonstrating the role neighbourhood-scale batteries play in Victoria's transitioning electricity system.