Battery boom softens electricity price volatility amid Iran war

30 April 2026 — 12:01 am

A boom in battery installations across Australia is outpacing even the most optimistic industry forecasts, smoothing volatile swings in electricity prices and making the grid more resilient to the threat of global shocks as the Iran war drives up energy costs in other countries.

In an update to be published on Thursday, the Australian Energy Market Operator reveals that the total capacity of domestic and grid-scale batteries across the country has more than doubled in the last 12 months, giving technology an increasingly important role in shaping the electricity market.

Batteries are exceeding expectations and transforming the electric grid.

Because batteries can store the cheap and abundant solar energy flowing into the grid during the day to be discharged after sunset, the boom helped dampen sharp increases in wholesale electricity prices around 6 p.m., when solar production wanes and demand spikes as millions of people begin coming home to turn on lights and appliances.

AEMO’s figures reveal that the volume of energy successfully transferred by batteries from daylight hours to evening peaks has tripled in the last three months compared to the same period in 2025.

AEMO said this reduces the need for the grid to resort to expensive gas-fired generators or hydroelectric dams to plug supply gaps after dark, lowering the cost of electricity.

It was stated that grid-scale batteries determined prices by almost a third in the March quarter, while gas-fired generation fell to the lowest quarterly average since 1999 and the first quarter contribution of coal-fired electricity fell to a record low.

Renewable energy, including batteries, provided nearly half of the east coast’s electricity in the quarter.

“The significant increase in large-scale and household battery capacity is changing how electricity is produced, consumed and priced throughout the day,” said Violette Mouchaileh, AEMO’s chief policy officer.

He added that by replacing high-cost energy sources, batteries have contributed to “lower wholesale prices on an annual basis in most regions.”

AEMO said wholesale electricity prices, which retailers pay to generators before selling the electricity to customers, fell 12 percent compared to the same period last year, falling to an average of $73 per megawatt-hour.

Wood Mackenzie, a global research firm, said on Wednesday that growth in Australia’s battery storage capacity and renewable energy had “materially reduced” the country’s exposure to international fossil fuel markets.

Despite conflict in the Middle East that has caused oil prices to rise by more than 60 percent and international gas prices to double, Australian wholesale electricity prices remain relatively low, it said. Wood Mackenzie senior research analyst Natalie Thompson said this was in stark contrast to the 2022 energy crisis, when fuel price shocks following Russia’s invasion of Ukraine increased the wholesale energy price on Australia’s east coast by 200 per cent to around $250 per megawatt-hour.

“Australia’s energy transition now delivers tangible energy security benefits alongside emissions reductions,” he said.

“Battery storage has emerged as a critical factor in this transformation.”

But experts note that the growth in renewables and batteries doesn’t mean the grid is ready to cope without the fossils still needed to support weather-dependent renewables.

“Today’s batteries are extremely effective for short-term storage, but they cannot sustain the system for low-renewable periods of several days.”

The electricity grid operates as an open market, and coal, gas, wind, solar and battery power compete to provide energy at the best prices.

“[Batteries] Mouchaileh said the increasing reliance on gas and hydropower generation during evening peaks has contributed to lower wholesale prices on an annual basis in most regions.

UNSW energy researcher Dylan McConnell He said batteries are exceeding expectations as technology advances rapidly.

“It wasn’t that long ago that the first megabattery (Tesla Hornsdale battery in late 2017) was installed in South Australia, which was 100 megawatts and much larger than anyone had anticipated at the time.

“We’ve now added 4,500 megawatts of batteries to the grid in the last 12 months. That’s a remarkable increase in the rate of change.”

Alison Reeve, director of energy and climate change at the Grattan Institute, said battery consumption “exceeded my expectations” and that the technology’s dominant price-setting role would contribute to lower electricity bills.

“One reason for this is that you’ve changed who the price maker is, who determines the overall price as well as how prices are set and hopefully locks in peaks in demand at the end of the day.

“This determines how many poles and wires we need, and if we need a system that is smaller overall, with fewer transmission lines, that’s good news because it saves us money.”

The Albanian government has set an ambitious goal of increasing the share of renewable energy to 82 percent by 2030. Experts have questioned whether the target can be reached by the deadline, especially as the rate of installation of new wind farms has slowed, partly due to rising construction and labor costs.

However, Energy Minister Chris Bowen said the rapid proliferation of household batteries was a significant contribution to the transition to renewable energy.

“We can also see the impact of the Cheaper Home Battery revolution, with over 350,000 home batteries now replacing gas in the evenings with cheap solar power, helping the grid for everyone.”

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