SARAH FERGUSON, PRESENTER: While Federal Parliament is still debating the future of the carbon tax, a major shake-out of Australia's energy sector is already under way.

Many Australian households have taken action to lower their carbon footprint, dramatically reducing their energy consumption by switching to rooftop solar.

At the same time, taxpayers are carrying the costs for recent unnecessary investments in State-owned electricity networks and the experts warn of the potential for billions of dollars of stranded assets.

Matt Peacock reports.

(Music: The Power by Snap)

MATT PEACOCK, REPORTER: A revolution is now sweeping Australia's electricity industry.

PENNY FORD, SNAP (sings): I've got the power!

GREG HOUSTON, HOUSTON KEMP CONSULTANTS: This is a once-in-a-generation shift. I don't think there's been anything like this that's affected the energy market in the last 50 years.

DAVID LEITCH, FINANCIAL ANALYST, UBS: Electricity is now becoming very like the telecommunications industry, the print media industry in that a lot of the existing players are at risk of seeing their business models no longer appropriate.

MATT PEACOCK: What's driving the change is an unprecedented fall in demand for electricity that, as energy consultant Greg Houston shows, has defied official predictions.

GREG HOUSTON: These are the energy projections in each year, year after year since 2006. And this red line shows the actual energy demand and how it's just fallen well short of any of the predictions.

MATT PEACOCK: So it kept going down. They kept predicting it going up.

GREG HOUSTON: That's right.

DAVID LEITCH: We've already seen electricity consumption in Australia decline by a total of about 13 per cent over the past three or four years, something that would have astonished people if you'd said that five years ago. And to this day electricity consumption is still declining.

MATTHEW WARREN, ELECTRICITY SUPPLIERS ASSOC. OF AUSTRALIA: Five years ago the guesses were wildly off the mark.

And there's been a widespread recognition that what we perceived was this inalienable relationship between economic growth and energy demand has been broken. It's been broken in Australia, in the United States, all across Europe. So developed economies no longer need energy growth to keep growing.

(Music: Everybody Loves the Sunshine by Roy Ayers)

MATT PEACOCK: Australia's slump in demand has been driven partly by an industrial slowdown: the closure of high-energy aluminium smelters and the car industry.

But half has been driven by ordinary people, many frightened by a mere doubling in power prices, who flocked to solar PV panels on their rooftops.

GREG HOUSTON: Solar has gone from nothing to eight per cent of installed capacity in four years. That is an incredible uptake.

MURIEL WATT, AUSTRALIAN SOLAR INSTITUTE: South Australia has very high penetration levels. More than 25 per cent of the houses have PV on the rooves. And in Queensland about 20 per cent. So the uptake is still going up, even though feed-in tariffs and other subsidies have come off.

MATTHEW WARREN: New South Wales has more industrial load so it's higher but then it falls during the weekends and then it spikes more if there's cold weather.

MATT PEACOCK: For Matthew Warren, representing Australia's generators and the retailers who sell us electricity, these are scary times.

MATTHEW WARREN: Six years ago solar panels were seen as a boutique, expensive technology. Now there's more than a million households that have solar panels on their roof. So nobody predicted the proliferation and the rate at which that technology would deploy.

MARK DANIELS, HOUSEHOLDER: As you can see, this is just a normal suburban home with a family of seven.

Mark Daniels lives in a typical house in Sydney's west, near Penrith, complete with pool, kids and all the mod cons.

Three months ago he spent $12,000 installing a solar system.

MARK DANIELS: So this is a 4.4 kilowatt system and it's generating that power back into the house. So at the present time it's doing... we're actually not using any power at all off the grid. We're fully, actually at this point in time - even during a winter month - we're actually fully powering the house up.

MATT PEACOCK: And so what's that doing to your bill?

MARK DANIELS: For the bill for that point it's absolutely zero.

MATT PEACOCK: Around the corner is the thing that industry fears the most: batteries that make solar work at night.

MARK DANIELS: The solar panels are actually powering the batteries.

MATT PEACOCK: And they're just normal, like, car batteries, really? Lead batteries?

MARK DANIELS: Yes, they are. They're a normal 12-volt battery that we use. They're what we call deep-cycle.

MATT PEACOCK: So how far away from you are you from being totally off the grid?

MARK DANIELS: I would need to have another battery cell for that to happen and I would say I'm probably another six months away. But I could do it tomorrow if I wanted to.

MATT PEACOCK: And I'm told you don't even need the solar right now. Anybody could get an array of batteries, take the power off the grid during the off-peak period and then live off it during the peak period?

MARK DANIELS: That's correct.

MATT PEACOCK: Coming soon are more efficient, cheaper lithium batteries as electric cars like the Tesla take off in the US.

DAVID LEITCH: We've had, like, the ultimate fear factor starting to get on the radar: that the cost of battery storage is also falling reasonably sharply as lithium batteries, in particular, grow in importance. And that's making grid defection closer and closer to being an economically sensible proposition.

MATTHEW WARREN: We think those cars have the right DNA to become ubiquitous in the 21st Century, but it requires a critical mass and the right consumer market for them to take off.

(David Leitch and Matt Peacock walk through an electrical appliance store)

MATT PEACOCK: Increased energy efficiency of home appliances is also driving down demand, according to UBS analyst David Leitch.

DAVID LEITCH: The consumer walks into the shop. They see energy efficiencies about the second thing after price that they look at. The fridge is the most energy-intensive device in the house and there's a lot of attention. You can make money out of replacing your fridge at current electricity rates.

MATT PEACOCK: Even light bulbs?

DAVID LEITCH: Yes, LED light bulbs use 20 per cent of the previous electricity. Televisions: and again an energy efficient sticker. It's the consciousness that the consumer's got about energy efficiency these days: it's just completely different to what we had 10 years ago.

MATT PEACOCK: So for the same thing we're using less energy and then we're going solar on the roof?

DAVID LEITCH: Like the flat screen televisions, solar gives you more for less. It's a good deal.

MATT PEACOCK: More for less is also possible with Victoria's mandatory smart meters that enable households to match electricity use with cheaper prices.

Energy retailers can even foresee localised grids.

MATTHEW WARREN: Where you've got, say, a lot of solar in the street, it might be easier and cheaper to put a large battery at the end of the street, store the solar power during the day and then release it in the evening when everyone's cooking dinner and watching television and demand is at its highest.

MATT PEACOCK: But in the State-owned grids of NSW and Queensland consumers are likely to go on being slugged for a multibillion dollar mistake.

DAVID LEITCH: The average household is paying twice as much for their electricity now as they were four or five years ago and that in turn is largely due to higher prices being paid for wires and poles.

MURIEL WATT: We've just spent more than $50 billion upgrading networks, some of which may not be useful going forward and they may end up being stranded assets.

MATT PEACOCK: Those left to pay for these grids may be driven off, causing what's known as a "death spiral."

GREG HOUSTON: The more you raise the costs then the more the demand shrinks.

MATT PEACOCK: Because people move to their solar PV or whatever?

GREG HOUSTON: That's right. People switch to other forms of technology. People are looking for off-network solutions, batteries, PV cells and so on.

MATT PEACOCK: And that's happening?

GREG HOUSTON: That is certainly happening.

SARAH FERGUSON: Matt Peacock reporting.