Australia’s National Electricity Market (NEM) is undergoing a profound transformation. As coal-fired power generation gradually phases out and renewable energy’s share rapidly increases, Battery Energy Storage Systems (BESS) have become a core pillar of the energy transition. In the first quarter of 2025, over A$2.4 billion was invested in large-scale battery storage projects, marking the second-highest quarterly investment record in history and signaling an accelerated phase in the restructuring of Australia’s energy landscape.
Three Major Drivers of Soaring Storage Demand
Firstly, the accelerated retirement of traditional coal-fired units creates grid stability needs. According to energy market forecasts, nearly 70% of Australia’s existing coal-fired generating capacity could be retired by 2035. The exit of these baseload power sources compels the grid to seek new flexible resources to ensure power supply security. BESS, with its millisecond-level response characteristics, has become a key solution for filling power gaps and maintaining grid stability.
Secondly, increased renewable energy penetration leads to heightened market volatility. By the end of 2024, renewable energy’s share of electricity generation in Australia had approached 40%, with distributed solar PV penetration leading the globe. The intermittent nature of renewable generation causes peak-to-trough price spreads in the wholesale spot market to continually widen, creating an ideal arbitrage opportunity for battery storage. In 2024, large batteries in the NEM realized A$165.4 million in revenue from energy arbitrage, more than triple the figure from 2023.
Thirdly, strong policy support provides a foundation for industry development. The federal government’s “Capacity Investment Scheme” (CIS) plans to facilitate the grid connection of 9 GW of new storage capacity through regular tenders between 2024 and 2027. State governments have also introduced supporting policies, such as Victoria’s “Big Battery Initiative” and New South Wales’ “Grid Infrastructure Fund,” collectively building a comprehensive policy support system.
Exponential Growth Trend in Storage Capacity
The Australian energy storage market is undergoing a transformation from demonstration projects to large-scale development. According to the latest data, the capacity of independent battery storage projects currently awaiting connection to the NEM has reached 20.5 GW, an 86% increase compared to the same period last year. More notably, by the end of 2027, the anticipated grid-connected large-scale storage capacity could reach 16.8 GW, equivalent to seven times the current installed capacity.
Regarding project scale, the new generation of storage stations is evolving towards larger capacities and longer durations. Major projects like the Waratah Super Battery (850 MW / 1680 MWh) and the Eraring Battery (460 MW / 920 MWh) have commenced construction successively. These projects are not only record-breaking in scale but also play a substantive role in the grid: in May 2025, the discharge power of batteries in the NEM exceeded 1371 MW, surpassing 5.1% of the total grid supply for the first time; in regions with high renewable energy penetration like South Australia, the peak contribution from batteries reached 34%. Wood Mackenzie predicts a substantial 28% increase in Australia’s battery storage capacity between 2021 and 2032.
Future Outlook and Market Prospects
Analysts point out that the rapid development of battery storage is reshaping Australia’s energy market landscape. By 2030, batteries are expected to meet up to 40% of electricity demand, becoming a key technology for ensuring grid security and promoting renewable energy integration. With technological advancements and continuously declining costs, battery storage not only supports Australia’s achievement of its 2050 net-zero target but also maintains its leading position in the global energy transition.
The Australian Energy Market Operator indicates that the current construction progress and investment scale of storage projects have exceeded expectations, demonstrating that market consensus has formed regarding the commercial value and systemic role of energy storage. Driven by policy support, market mechanisms, and technological progress, battery storage is becoming an indispensable component of Australia’s energy system, providing a reference model for other countries undergoing their own energy transitions.
