Australia’s energy sector is primed for an unprecedented expansion of utility-scale battery storage, driven by volatile electricity markets, proactive government policies, and the impending retirement of coal-fired power plants, according to BloombergNEF’s 2025 Australia Energy Storage Update.
The report forecasts an eightfold increase in battery capacity to 18 gigawatts (GW) by 2035, up from 2.3 GW in 2024, as renewables reshape the grid.
Nearly 70 per cent of Australia’s coal fleet, long the backbone of the National Electricity Market (NEM), could shut down by 2035 due to aging infrastructure and competition from cheaper renewables.
This transition creates a critical need for grid flexibility, with batteries emerging as a key solution to balance intermittent solar and wind generation.
Rising renewable penetration — including rooftop solar on one in three Australian homes — has intensified intraday price swings, enabling batteries to capitalise on arbitrage opportunities by storing cheap midday solar and discharging during evening peaks.
In 2024, utility-scale batteries in the NEM earned a record $165.4 million from arbitrage, more than triple the 2023 figure.
Regional price disparities highlight this potential: Queensland’s average intraday arbitrage reached $538.88/MWh in 2024, compared to $88.04/MWh in Tasmania.
The federal government’s Capacity Investment Scheme (CIS), aiming to deploy 9 GW of storage alongside 23 GW of renewables by 2030, has accelerated project commitments.
At least 3.9 GW of battery capacity has already secured revenue underwriting through federal or state programs.
However, the upcoming May 2025 federal election could influence policy trajectories.
A Labor victory would likely sustain renewable and battery incentives, while a Coalition win might pivot toward nuclear energy, potentially extending the lifespan of some coal plants.
“Batteries will remain indispensable,” said Sahaj Sood, BNEF Australia Senior Associate and report author.
“They’re needed to shift power from periods of low demand and high supply to the opposite — a role critical under any political scenario.”
Newer, longer-duration batteries are outperforming older systems.
Projects like the two-hour Lake Bonney battery have recouped 33 per cent of their capital costs through arbitrage, eclipsing the returns of earlier short-duration installations.
Developers are increasingly pairing batteries with renewables, with 95 per cent of the 16.8 GW pipeline featuring durations of two hours or more.
Private firms dominate the pipeline, though government tenders continue to spur growth.
With 7.3 GW of battery capacity under construction at the end of 2024, Australia’s storage boom is already underway.
Analysts project 12.5 GW will be operational by 2027, a sevenfold increase from 2024 levels.
As coal exits accelerate, batteries are poised to become the linchpin of a more dynamic and resilient grid.
