The changes, announced by Energy Minister Chris Bowen on Tuesday, will give consumers free access to electricity for three hours each day when solar power is abundant.
But only households in NSW, southeast Queensland and South Australia will qualify for access to the offer from mid-2026, with negotiations under way to broaden the program to other states in 2027.
The announcement comes a month after renewable energy took over from coal as the major source of power generation in Australia, and as political debate over the nation's energy future rages.
The Solar Sharer program will be introduced to the Default Market Offer, which acts as a minimum standard for plans and prices offered by electricity retailers.
Free electricity will be provided during the middle of the day when solar power generation peaks, Mr Bowen said, and would deliver benefits across the network.
"People who are able to move electricity use into the zero-cost power period will benefit directly, whether they have solar panels or not and whether they own or rent," he said.
"The more people take up the offer and move their use, the greater the system benefits that lower costs for all electricity users will be."
Households would need to have a smart meter installed to access the offer, Mr Bowen said, but could use it to power air conditioners, swimming pool cleaners, electric cars or home batteries.
Analysis from the federal energy department showed a single-person household that could move 10 per cent of energy use to the three-hour period could save nine per cent on bills.
Retailers including AGL, OVO and Red Energy offer free access to electricity during specified hours, and an AGL spokesperson said it would work with the government "on the detailed design of the proposed reform policy".
Other changes proposed for the default offer include restricting marketing and competition costs embedded in prices.
The proposed changes come after the government announced a Default Market Offer review in June and will be overseen by the Australian Energy Regulator.
The regulator will launch consultation on the changes on Wednesday.
Chair Clare Savage said the changes could help to address peak demand on Australia's energy network.
"Shifting more demand to the middle of the day would lower the cost of the electricity system for all consumers as we don't need to build as much generation or poles and wires to meet the evening peak," she said.
More than 4.2 million households have solar panels installed in Australia.
Renewable energy contributed 48.8 per cent of Australia's power during September, according to Rystag Energy, while coal represented 47.6 per cent.
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