A volatile power market, supportive government policies, and looming coal plant retirements are driving uptake of utility-scale batteries in Australia: BloombergNEF
Sydney, March 25, 2025 – Australia could be on the cusp of a utility-scale battery boom, propelled by sustained high volatility in the power market, government policies that support batteries, and expected coal plant closures. Uptake of utility-scale batteries in Australia could expand eightfold to 18GW in 2035 from 2.3 gigawatts in 2024, according to a new report published by research provider BloombergNEF (BNEF).
According to BNEF’s 2025 Australia Energy Storage Update, nearly 70% of Australia’s long-dominant coal fleet could retire by 2035 – forced out of the market due to old age and challenging economics in the face of greater competition from lower-cost renewables. As a result, batteries could be crucial in facilitating an orderly transition from coal toward cleaner alternatives.
The rapid rise of renewable energy in Australia’s National Electricity Market (NEM) means flexible power capacity is now more valuable than ever. An ever-growing fleet of wind and solar assets, particularly small-scale solar systems, suppresses wholesale power prices when they generate in abundance; conversely, more expensive dispatchable generators like coal and gas ramp up their output and push up spot prices when wind and solar output is low. Enough small-scale solar systems have already been sold in Australia to cover one in three rooftops – a world-leading rate of adoption.
As a result, exacerbated intraday volatility has created lucrative opportunities for batteries to arbitrage the wholesale spot price by charging when prices are low and discharging when prices rise. Utility-scale batteries in the NEM earned A$165.4 million in revenue from arbitrage in 2024 – a record high and more than triple the revenue earned in 2023.
Australia’s current federal government has also sought to incentivize uptake of batteries through its Capacity Investment Scheme (CIS) – a series of tenders held every six months between 2024 and 2027 to secure 23 gigawatts of new renewable capacity and 9 gigawatts of new clean storage capacity by 2030. This plan offers long-term underwriting contracts for an agreed revenue floor and ceiling to successful applicants. So far, at least 3.9 gigawatts of battery capacity have received some form of revenue underwriting support from federal or state governments in Australia. The future of government programs like the CIS, however, could hinge on the results of the upcoming federal election, due to take place in May 2025.
“Batteries are expected to play a major role in Australia’s power markets regardless of the outcome of the federal election,” said Sahaj Sood, BNEF Australia Senior Associate and author of the report. “The election is set to be a referendum on Australia’s pathway to a low-carbon power sector. A win for the incumbent Labor Party would see continued support for renewables, and the batteries to integrate them. A win for the Coalition would see the emphasis shift toward nuclear, a potential lifeline for some of the country’s aging coal fleet. Either way, batteries will be required to balance Australia’s volatile power markets by shifting power from times of low demand and high supply to times of high demand and low supply.”
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Oktavia Catsaros
BloombergNEF
+1-212-617-9209
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