The Australian Renewable Energy Agency says it has seen "unprecedented" demand from communities for its Community Batteries Funding Program, which aims to lower energy bills, cut emissions and reduce pressure on the electricity grid through community battery projects.

The agency received 140 eligible applications with a total grant request of $1.3 billion.

This represented more than 10 times the $120 million available under the program's first round of funding.

Thirty-one applicants, representing a total grant request of $231 million and more than half a billion dollars overall, have been shortlisted and invited to submit their full applications.

The agency will determine if these plans meet the required minimum of five community batteries, between 50kW and 5MW in size, which are connected to the energy network.

Community batteries can store excess solar energy for later use, putting downward pressure on household electricity costs and easing pressure on the electricity grid.

Agency chief executive Darren Miller said the unprecedented demand highlighted the significant opportunities for shared local energy storage.

"Through these initial projects we hope to see community batteries enable cheaper, cleaner energy storage to communities and provide valuable knowledge that can be shared across Australia to fast-track the implementation of these local batteries," he said.

The federal government allocated $200 million in its 2022/23 budget to deploy 400 community batteries across Australia.

Of that funding, the renewable energy agency received $171 million to deliver at least 342 batteries.

The Department of Climate Change, Energy, the Environment and Water will roll out an initial 58 community batteries, which have already been commissioned in Cabarita and Narara in NSW.

Australian Associated Press