The Australian Renewable Energy Agency (ARENA) and the Australian Energy Market Operator (AEMO) have announced that consumers will be paid to cut their power usage.

It's part of a plan to free up temporary supply during unplanned outages and extreme weather conditions — such as prolonged summer heatwaves.

So how will this impact you, and could you actually get a free day of electricity if you switch off your pool pump?

Here's what's been announced

ARENA will fund 10 pilot projects to manage Australia's electricity supply during extreme peaks.

These "pilot projects" will be trialled in three states — Victoria, South Australia and New South Wales — over three years.

Who is involved in the scheme?

The funding recipients vary across NSW, Victoria and South Australia, but EnergyAustralia has been granted funding in all three states.

AGL, EnerNOC and Progressive Green, Flow Power have been awarded funding in NSW, while Zen Ecosystems and Intercast and Forge will receive funding in South Australia.

In Victoria, funding has been granted to United Energy Distribution Pty Ltd, EnerNOC, Zen Ecosystems and Powershop Australia.

Will I really be paid to cut my power usage?

Yes. The demand management program will involve paying an incentive for energy users to:

Reduce their power consumption,

Reduce their power consumption, Switch to backup generation, or

Switch to backup generation, or Dispatch their energy storage for short periods when electricity reserves reach critically low levels.

But it's only voluntary so you'll have to register your interest if you want to be a part of the program.

Energy and Environment Minister Josh Frydenberg said this could translate to a household being paid $25 each time it switched off power at a peak demand time.

If that happened 10 times in a year (the most amount of days the program is expected to be used) they'd be $250 richer.

That's on top of the savings on their power bills, as well as the reductions in carbon emissions.

What other incentives could I get?

Powershop Australia says it will be offering its customers a discount on their bill, while Energy Australia says incentives could include credits on energy bills, movie tickets and gift vouchers.

"Ultimately it has to be an arrangement that provides value for the customer so they want to participate," a spokesperson for Energy Australia said.

The incentives depend on the various electricity companies participating in the trial.

So how will I know when it is peak time?

Victorian power company Powershop Australia will text customers who have registered their interest in the program asking them to reduce their usage at a certain time.

However, it will be up to different companies to alert customers when they should turn off their power.

According to Origin Energy, periods of peak demand tend to occur when "temperatures hit extremes, industry is operating, and millions of households are using fans and air-conditioners all at the same time".

While times vary between each state, AEMO data shows peak periods seem to occur in the early morning from 6:00am onwards and later in the afternoon from 4:00pm.

How long will I have to switch off for?

The time could vary between one to four hours, or even a couple of minutes, as the Prime Minister indicated this morning.

"It might only be for five minutes at a particular time," Malcolm Turnbull said.

And we're only talking about a handful of days each year.

"The agencies say it will be for no more than 10 times a year," said an article about the trial on the Australian Renewable Energy Agency's website.

When will this be rolled out?

AEMO managing director and chief executive officer Audrey Zibelman said consumers can expect the projects to be up and running by December 2017.

That will follow a round of testing by AEMO in November.

Will consumers really do this?

Tens of thousands of households across the three states are expected to voluntarily sign up.

How will this help ease the strain on the grid?

Mr Frydenberg says it could be enough to save enough power to support more than 100,000 homes — or as much as is generated by a small power station.

Ms Zibelman says the move will address "a lot of wasted energy where you are using too much and you don't need it".

"We would say, 'boy, if you would just cycle your pool pump, we get everyone to cycle at the same time', and nobody really knows what's going on but suddenly what happens is we can avoid building a generating plant and there is no discomfort so it is actually using technology to be smarter about energy," she said.

Where has this program been used?

A similar program called PeakSmart already operates in Queensland.

It offers financial incentives for people who agree to limit air-conditioners to 26 degrees Celsius and have pool pumps turned off during peak demand.

Its also being used in nations including the United States and New Zealand to avoid unplanned or involuntary outages.

Ms Zibelman pointed out the example of Texas, which saved $600 million over a weekend with the scheme.