Big battery boom could deliver 18 GW of grid-scale energy storage by 2035

A new report has predicted that Australia is on the cusp of a big battery boom that could deliver 18 gigawatts (GW) of installed energy storage capacity by 2035 – an eight-fold increase on the 2.3 GW installed at the end of 2024.

In its 2025 Australia Energy Storage Update, published on Friday, Bloomberg New Energy Finance says electricity market volatility, supportive government policies and expected coal plant closures are driving potentially huge growth in big battery capacity as Australia shifts to renewables. 

Such is the momentum, according to the report’s lead author, BNEF Australia senior associate Sahaj Sood, that a battery boom is looking likely “regardless” of the outcome from the federal election, which is now set for May 3.

“The election is set to be a referendum on Australia’s pathway to a low-carbon power sector,” says Sood.

“A win for the incumbent Labor Party would see continued support for renewables, and the batteries to integrate them. A win for the Coalition would see the emphasis shift toward nuclear, a potential lifeline for some of the country’s aging coal fleet.

“Either way, batteries will be required to balance Australia’s volatile power markets by shifting power from times of low demand and high supply to times of high demand and low supply.”

Government backs 3.9 GW of BESS

Although the report didn’t include specific predictions on expected battery durations, it did state that longer duration assets are earning more revenue (as a percentage of their capex) from arbitrage – suggesting developers will look to deploy batteries with longer durations.

The Albanese Labor federal government has boosted investment for renewable energy and storage through the deployment of its Capacity Investment Scheme (CIS) initiative. 

The scheme is made up of a series of tenders held every six months to procure 32GW of firmed renewable capacity – including storage – for Australian Energy Market Operator’s (AEMO’s) two wholesale electricity markets.

Successful applications to the CIS give developers financial security, offering support to projects if net revenue falls below an agreed floor or above an agreed ceiling.

The initiative aims to procure 23GW of renewable capacity alongside 9GW of dispatchable capacity to reduce electricity prices, and help Australia reach its target of 82% renewable energy by 2032.

BNEF notes that revenue underwriting initiatives offered by state and federal governments, such as the CIS, have so far provided support to at least 3.9 GW of battery storage capacity across the country.

Most recently, the federal Labor government announced that four battery storage projects set for Western Australia, with a cumulative capacity exceeding 650MW, had been successful in the most recent CIS tender.

And while the future of schemes like the CIS might very well hinge on the results of the upcoming federal election, Sood believes the current market settings mean battery storage will continue to attract investment.

Coal retirements present opportunities for BESS developers

According to BNEF’s recent report, with the generation capacity of Australia’s coal fleet set to reduce by up to 70% by 2035, BESS will play an ever-increasingly important role as the country transitions to a cleaner grid.

Increased intraday volatility, caused by Australia’s rapid renewable deployment in its National Energy Market (NEM), has also created “lucrative opportunities” for batteries.

Currently, when wind and solar generation is high, wholesale energy market pricing is suppressed due to the abundance of energy. Conversely, when generation is low, dispatchable fossil fuel generators increase their output pushing up spot prices.

Through arbitraging the wholesale spot price, batteries can charge during times of low pricing discharge when prices are high.

According to the Australian Energy Market Operator (AEMO), utility-scale batteries earned a record-breaking $165.4 million from arbitrage in 2024 – more than triple the amount earned in 2023.

With this sort of opportunity and potential continued support from the government, it’s no wonder BNEF predicts such an increase in BESS deployment. 

Even in the short-term, the report predicts Australia will reach 9.9GW of deployed BESS by 2027, up from 2.3GW at the end of last year.

Coalition’s stance on utility-scale storage remains unclear

As mentioned in the BNEF report, the energy storage stance of Peter Dutton’s Coalition is still unclear. At the expense of more solar and wind, the Coalition is running on a platform to introduce nuclear energy to Australia by the late-2030s and burn more coal and gas in the interim.

“Any plans to introduce nuclear and hinder renewables may entail extending the lives of Australia’s coal plants”, said Sood in the report.