Australia’s electricity sector is demonstrating increased resilience to global energy shocks, even as escalating geopolitical tensions in Iran push fuel prices sharply higher, according to new analysis from Wood Mackenzie.
Despite oil prices rising more than 60 per cent and Asian spot gas prices doubling compared to last year, Australian wholesale electricity prices have remained relatively stable at around $70/MWh during the first half of 2026.
This marks a stark contrast to the 2022 Russia-Ukraine crisis, when similar global fuel disruptions drove National Electricity Market (NEM) prices up by approximately 200 per cent to exceed $250/MWh on average.
“The divergence reflects a structural shift in Australia’s power system,” said Natalie Thompson, senior research analyst, energy storage and solar at Wood Mackenzie.
“Growth in renewables and batteries, reduced reliance on gas-fired generation, and the rise of distributed energy resources are materially lowering exposure to international fossil fuel markets.”
“Australia’s energy transition is now delivering tangible energy security benefits alongside emissions reductions.
“While vulnerabilities remain, particularly from extreme weather events and supply-demand imbalances, the country’s power sector is steadily decoupling from global fossil fuel market volatility.”
Battery storage has played a central role in this shift. Wood Mackenzie reports that batteries’ share of price-setting in the NEM increased from around 2 per cent in early 2022 to roughly 20 per cent by late 2025.
Over the same period, gas-fired generation’s influence dropped from 10 per cent to less than 5 per cent.
The data shows battery output tripled in the December quarter of 2025 compared to the same period in 2024, while gas generation fell nearly 30 per cent year-on-year.
At the same time, renewable energy reached record penetration levels, with midday solar oversupply increasingly pushing wholesale prices close to zero — or even into negative territory in some regions.
This dynamic allows battery systems to charge at minimal cost during the day and discharge during evening peaks, effectively replacing traditional gas-fired generation.
Australia’s rapid uptake of rooftop solar has also reached a critical scale.
More than 4.3 million systems are now installed nationwide, with total residential solar capacity exceeding that of the country’s coal-fired power fleet.
This widespread adoption is reducing daytime grid demand and strengthening what Wood Mackenzie describes as Australia’s “energy sovereignty.”
The current fuel price surge may also accelerate electrification in the transport sector.
In March 2026, battery electric vehicles accounted for more than 14 per cent of new car sales, with total electric vehicle share surpassing 20 per cent, which is double the level recorded a year earlier.
However, challenges remain. Periods of low wind and solar generation, known as “dark doldrums”, continue to expose gaps in the system’s ability to maintain a reliable supply without fossil fuels.
“Today’s batteries are highly effective for short-duration storage, but they cannot sustain the system through multi-day low renewable periods,” Thompson said.
“Longer-duration storage solutions, such as pumped hydro and extended-duration batteries, will be critical to ensuring reliability.”
She added that maintaining the current pace of energy transition will be crucial as coal-fired power stations approach retirement.
“The key question now is whether Australia can maintain the momentum of renewable and storage deployment to address remaining vulnerabilities before scheduled coal plant closures, to ensure the energy security dividend can be sustained.”
Wood Mackenzie emphasised that coordinated investment in generation, storage and network infrastructure (including longer-duration technologies such as eight-hour batteries and pumped hydro) will be essential to secure the next phase of Australia’s energy transition.
