Since 1 September 2026, a New South Wales incentive has covered shared battery installations in apartment buildings for the first time. Known as BESS3, it sits under the NSW Peak Demand Reduction Scheme and is designed for buildings of four or more dwellings, a group that existing battery incentives have largely passed by.
Eligibility comes down to three tests, the incentive is calculated from three capped figures, and one installation requirement is the one most likely to catch a strata committee out.
TL;DR
- BESS3 has supported battery installations in NSW apartment buildings since 1 September 2026.
- Your building must be an apartment building with at least four dwellings, with no existing battery at the same National Metering Identifier (NMI). Townhouses and villas are not included.
- Eligible batteries are over 20 kWh and up to 200 kWh of usable capacity.
- The battery must be installed outdoors. This rules out basements and plant rooms, and it is the requirement most likely to derail an otherwise sound project.
- Installing the battery within 90 days of new solar generates roughly 41% more certificates than installing it outside that window.
- The building must pay at least $1,000 excluding GST per item of equipment, and that payment cannot be refunded or offset.
- The activity is open — it commenced on 1 September 2026 — and the decisions that determine eligibility are worth resolving before a design is paid for.
What is BESS3?
BESS3 is a new activity definition under the NSW Peak Demand Reduction Scheme (PDRS), created by the Peak Demand Reduction Scheme Amendment (No. 2) Rule 2026. It commenced on 1 September 2026.
The PDRS is a certificate scheme, not a cash grant. Peak Reduction Certificates (PRCs) are created by a nominated Accredited Certificate Provider, not automatically on meeting the criteria. A Peak Reduction Certificate equals 0.1 kW of peak demand reduction capacity, calculated as an hourly average across the 2:30pm to 8:30pm (AEST) window that applies each day between 1 November and 31 March. The building is the original Capacity Holder for an eligible installation, and must nominate an Accredited Certificate Provider on or before the installation date before that provider can create any certificates. In exchange, the provider generally offers the building a discount on the installation.
That distinction is important. No money is paid to your owners corporation by the NSW Government. The benefit arrives as a reduced price on the installation, funded by the certificates the project creates.
Until now, NSW battery incentives have effectively been designed around standalone houses. BESS3 is the first activity written specifically for shared batteries in apartment buildings.
Does my building qualify?
A building qualifies for BESS3, the NSW Peak Demand Reduction Scheme’s shared-battery activity for apartments, only if it meets three tests together. It must be a Class 2 apartment building comprising at least four individual dwellings, with no maximum dwelling count. It must have no existing Battery Energy Storage System installed at the same National Metering Identifier. And it must not be a townhouse or villa complex. The NSW Government’s position paper expressly excludes townhouses and villas at this stage, because those dwellings can already access the federal Cheaper Home Batteries Program. All three tests apply together, and now that BESS3 has commenced, failing any one of them rules the site out.
The Rule states the dwelling-count test directly: the site must be an apartment building “comprising not less than four individual dwellings”, with no maximum set. On the third test, the exclusion is explicit: the NSW Government’s position paper states that townhouses and villas “are not included at this stage as the barriers are much lower”, because those households can already access the federal Cheaper Home Batteries Program.
If your strata plan is a townhouse or villa complex, BESS3 is not the pathway, but individual dwellings may still be eligible under the federal battery rebate.
A commercial or industrial site does not qualify for BESS3 at all; the Class 2 apartment building test rules it out. See the large-scale battery incentive (BESS5) for the activity that covers those sites.
What size battery is eligible?
The battery’s Usable Battery Capacity must be greater than 20 kWh and up to 200 kWh, and it must not exceed six times the Battery Inverter Output.
Two things are easy to get wrong here. “Usable” is not “nominal”. Under the PDRS, usable capacity is calculated as 90% of nominal capacity, so a battery advertised at 55.56 kWh nominal counts as 50 kWh usable. The six-times test deliberately mixes units: it compares energy capacity (kWh) against inverter power output (kW), and a 100 kWh battery needs at least a 16.7 kW battery inverter to satisfy it.
The 200 kWh ceiling is not arbitrary. NSW set it to align with the maximum threshold for systems governed by AS/NZS 5139, keeping these installations inside a defined fire-separation and structural risk profile. The department has signalled it may be reviewed as safety standards evolve.
How is the incentive calculated?
Battery Capacity sets the certificate count. It is the figure the NSW Peak Demand Reduction Scheme uses to calculate BESS3 certificates, and the Rule sets it as the lesser of three separate figures. The first is the battery’s usable capacity, which under the PDRS is calculated as 90% of nominal capacity. The second is 5 kWh per individual dwelling, multiplied by the building’s total number of dwellings. The third is four hours multiplied by the battery inverter’s output. All three caps apply at once, and whichever produces the smallest number becomes the Battery Capacity used in the certificate calculation. In practice, an oversized battery in a small building is usually capped by the per-dwelling limit, while an undersized inverter caps the four-hour test instead.
The department’s worked example
For a 12-dwelling building with a 55.56 kWh nominal battery, 20 kW of solar PV and a 15 kW inverter:
| Cap | Calculation | Result |
|---|---|---|
| Usable capacity | 90% of 55.56 kWh | 50.0 kWh |
| Per-dwelling cap | 5 kWh × 12 dwellings | 60 kWh |
| Four-hour cap | 4 hours × 15 kW | 60 kWh |
| Battery Capacity | The lesser of the three | 50 kWh |
That configuration produces 5,616 PRCs across a 15-year lifetime.
We have deliberately not converted that into a dollar figure. Certificate prices move, and any quoted value is only meaningful alongside a price band and the date it was quoted. If a provider gives you a dollar number, ask what certificate price they used and when.
The new-solar bonus: about 41% more certificates
The Demand Shifting Component is the multiplier in the BESS3 certificate calculation. It is what generates roughly 41% more certificates when a battery is installed within 90 days of new solar PV capacity. Installed within that 90-day window, the Rule sets the component at 0.12 kW/kWh. Installed at any other time, it is 0.0853 kW/kWh. 0.12 divided by 0.0853 works out to about 1.41, which is where the roughly 41% figure comes from. There is an exclusion strata committees should not miss. The higher 0.12 kW/kWh rate does not apply where NSW Government funding has been received for the new solar PV installation. A building whose solar was funded by a NSW program falls back to the lower rate, even if the 90-day timing test is met.
The Demand Shifting Component has two rates:
| When the battery is installed | Demand Shifting Component |
|---|---|
| Within 90 days of new solar PV capacity | 0.12 kW/kWh |
| Any other case | 0.0853 kW/kWh |
That is the same maths behind the certificate uplift described above; the two rates in the table are what produce it.
The design logic behind it: NSW assumes a battery discharges about 51.2% of its capacity during the peak window when it is installed outside the 90-day window, consistent with the existing BESS1 method, rising to about 72% when it is installed within 90 days of new solar PV capacity.
Check where any percentage you are quoted comes from. Figures of around 29% have circulated in industry material. The number above is derived directly from the two coefficients written into the Rule, 0.12 and 0.0853, which is the only calculation that governs.
Where the battery has to go, and why it probably cannot be in the basement
BESS3 requires the End-User Equipment to be installed outdoors. No indoor exception. The NSW Peak Demand Reduction Scheme Amendment (No. 2) Rule 2026 states plainly that the End-User Equipment must be installed outdoors. That rules out the basement and the plant room, the two locations a strata building would most naturally choose for a shared battery. The NSW Government’s position paper explains the reasoning: locating batteries in well-ventilated outdoor areas proactively mitigates the risk of thermal runaway and off-gas events in multi-unit developments. This is also where BESS3 departs from the existing BESS1 activity, which does allow indoor installation, so BESS1-based advice does not carry over. A strata committee should confirm a viable outdoor location before committing to any other part of a BESS3 project.
The position paper explains why: “To proactively mitigate risks associated with thermal runaway and off-gas events, all battery installations within multi-unit developments must be located in well-ventilated outdoor areas.”
This is the single most likely reason a well-planned apartment battery project fails to qualify. The basement or plant room is exactly where most buildings would naturally put a shared battery: secure, out of sight, and close to the main switchboard. Under BESS3, none of those siting options are eligible.
The practical consequence for a strata committee is straightforward. Identify a viable outdoor location before committing to anything else. It needs to be ventilated, accessible, with acceptable separation distances, and something the owners corporation can approve. That single decision governs whether the rest of the project is possible.
What the building has to pay: the $1,000 rule
Under BESS3’s $1,000 rule, the purchaser must pay a Net Amount of at least $1,000 excluding GST for each item of End-User Equipment. Only once that payment is made can an Accredited Certificate Provider rely on the Implementation to create certificates. It applies per item of equipment, not per site, so a project using several battery units can trigger the requirement more than once. The Rule states the payment must not be reimbursed. Non-cash inducements and in-kind payments do not count toward it either. A narrow exemption applies only to implementations delivered through a Low-income Energy Program or an Exempt Energy Program. General hardship or pensioner status does not qualify. An offer to refund the $1,000 in any form does not comply with the Rule.
The stated intent behind the requirement: participants should “make a meaningful financial contribution to the installation and have a clear stake in the decision to proceed.”
What else is required
| Requirement | What it means |
|---|---|
| Product listing | The End-User Equipment itself must be on the Scheme Administrator’s approved product list. This is separate from the installer list below: correctly sized, correctly sited equipment that is not on the approved product list does not qualify. |
| Warranty | At least 10 years on all equipment other than a pre-existing inverter, guaranteeing that 70% of usable capacity remains at 10 years |
| Duration caps | Four hours under the incentive cap, six hours under the eligibility cap |
| Installer | Must be on the Scheme Administrator’s approved installer list, and the work done by a suitably licensed person. That list is separate from the accreditation used under the federal scheme, so an installer may hold one and not the other. It is worth asking which. |
| Approvals | All required planning and network approvals must be in place. Scheme compliance does not substitute for development consent or your network operator’s connection approval. |
| Lifetime | BESS3 uses a 15-year lifetime in the certificate calculation |
Can BESS3 be combined with the federal battery rebate?
Yes, within a limit. BESS3 can be combined with the federal Cheaper Home Batteries Program for batteries under 100 kWh nominal capacity. Note the change of unit. The federal ceiling is measured on nominal capacity, while every BESS3 figure on this page is usable capacity, which is 90% of nominal. A battery of 100 kWh usable is around 111 kWh nominal, so it sits above the federal ceiling and will not stack, even though it reads as “under 100 kWh” by the usable-capacity convention used elsewhere here. Above that nominal-capacity threshold, the federal program’s eligibility band no longer applies.
Bear in mind that the federal program’s value is not fixed either. Its STC factor steps down twice a year on a published schedule, so the combined position depends on when the installation happens. We cover that in more detail in our guide to the 2026 federal battery rebate changes.
What strata committees should do first
BESS3 commenced on 1 September 2026, so the activity is open. Three decisions still determine whether a building qualifies, and each is worth resolving before a design is paid for. Find the outdoor location. If there is not a viable one, that changes the entire conversation, and it is far better to know now than after a design has been paid for. Decide whether solar goes in at the same time. The 90-day window is where the certificate uplift covered above comes from; if the building was already considering solar, sequencing the two together is the single largest lever available. Check the meter configuration and existing equipment. An existing battery at the same National Metering Identifier rules the site out entirely.
Committee decisions in strata take time. Motions, quorum, sometimes a general meeting. Starting the feasibility work now is what makes a post-September installation realistic.
BESS3 is one of several changes to NSW battery incentives during 2026. For the full sequence, including what changed on 1 July and which incentives apply to houses and business sites, see what changed for NSW battery rebates in 2026.
Thinking about a shared battery for your building?
Solar Galaxy installs solar and battery systems across NSW under electrical contractor licence 333947C. We can assess whether your building has a viable outdoor location, what battery and inverter sizing works against the three caps, and how the timing of a solar installation affects the outcome.
Call 1300 339 596 to arrange an assessment for your building, or get in touch online. You can also read more about battery rebates available in NSW.
