Big and small batteries “fundamentally changing” the grid, and its planning blueprint, says AEMO boss

Batteries – big, small and in-between – are “fundamentally changing” the electricity system, the head of the Australian Energy Market Operator says, while also changing the outlook for AEMO’s grid blueprint, the Integrated System Plan.

In a speech to Australian Energy Week in Melbourne on Wednesday, AEMO chief Daniel Westerman took stock of the nation’s booming battery storage markets, and the impact they are having on electricity supply, demand, pricing and planning.

Westerman says there are now around 7 gigawatts of grid-scale battery capacity installed on the National Electricity Market (NEM), which – with peak demand of about 33 GW – is enough capacity to meet roughly 20 per cent of peak demand.

At the small end of the scale, the more than 420,000 batteries installed through the federal rebate scheme over the past year means there are now around 600,000 Australian homes with storage – nearly three times the number in California.

“And these batteries, large and small, are fundamentally changing the way electricity is produced, consumed and priced across the day,” he told the conference.

“During the first three months of this of this year, grid-scale batteries in the NEM more than tripled the amount of energy they shifted from daytime to the evening.”

Westerman says that on average, large-scale batteries are delivering more than 1,000 MW – or 1 gigawatt (GW) – into the evening peak over the first quarter of the year, “reducing the need for more expensive peaking gas generation,” he adds.

“Grid scale batteries were the most frequent price‐setting technology, setting prices in around 32 per cent of trading intervals.”

Meanwhile, the “new wave” of home batteries is also starting to have a real impact on the grid, Westerman says, “emerging as another game-changing force” alongside rooftop solar.

To illustrate this effect, he offers the example of a January 2026 heatwave that sent peak demand to a new all-time high in Victoria.

“At 6pm [on January 27], Victoria’s 17-year-old record for peak demand was broken by nearly 200 MW. But for us at AEMO, neither the new demand record nor the sweaty night were the most remarkable part of that day.

“It was the window into the future provided by households with new home batteries.”

Westerman says that despite most of these batteries operating in “passive mode” – that is, not orchestrated as part of a virtual power plant – at the time of peak demand, households with solar and storage were each drawing 1.4 kilowatts (kW) less that homes with solar only.

“That’s an 80% reduction during a record demand, and the impact of those batteries extends beyond the peaks,” he told the conference.

“In fact, on average, across the first quarter, households with batteries reduced the amount of energy they drew from the grid during the evening peak by nearly a kilowatt.” That suggests total peak reduction of nearly 600 MW from 600,000 households.

“That demand reduction the household directly through lower energy bills, and it benefits the wider energy system by reducing demand overall.  That’s a win for consumers everywhere,” Westerman said.

This message is a timely endorsement of federal Labor’s Cheaper Home Batteries policy – and a welcome rebuttal of claims by Labor’s political opponents that its support of renewables is driving up power bills, creating energy haves and have nots, and destabilising the grid.

Westerman says that despite a few largely battery-driven updates that will be made to the final draft of the 2026 ISP – due for release on June 25 – the fundamental conclusion remains the same: “that renewable energy, firmed with storage, backed up by gas and supported by upgraded networks, remains the least cost way forward for Australia.”

“There is a real opportunity for a lower cost energy system for everyone, if demand-side technologies can participate in the market where it makes sense, while the necessary investment continues in large scale generation, storage and networks,” he told the conference.

“That means embracing a whole-of-system approach, where every available resource has the opportunity to fully participate. It means solving some difficult technical, policy and engineering challenges, some of which go back to the birth of the NEM.

“And it means empowering consumers to make the most of their resources for their own needs, and also for the grid.”

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