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Batteries powered by renewables are pushing gas plants off the electricity grid, proving that green energy will reduce fuel bills driven higher by shocks to the global fossil fuel market such as the crisis being driven by the Iran war.
The oil price has spiked 60 per cent since the conflict began on February 28. Gas prices, which are linked to the oil market, are also on their way up, with Asian and European countries bracing for fuel shortages.
When Russia invaded Ukraine in 2022, the last time a crisis like this caused a global energy crunch, soaring oil and gas prices contributed to Australian electricity price hikes of 25 per cent.
But a remarkable shift is under way across the electricity grid.
The volume of battery capacity installed in 2025 was greater than the combined total of the previous eight years, the Clean Energy Council said. Batteries tripled their supply to the grid in the final three months of last year, while gas fell nearly 30 per cent and coal was reduced to its lowest ever quarterly level.
Grattan Institute senior fellow Tony Wood said the growing viability of batteries could rewrite the current principles of the electricity system.
“Batteries are enabling us for the first time to store electricity in the same way we store everything else,” he said.
“Previously, we couldn’t store electricity efficiently, except maybe by a few pumped hydro projects, which meant we had to build the grid to meet peak demand and we had huge amounts of the system being utilised for a small number of hours of the year.”
Large-scale and home batteries, which are powered solely by renewables, are viewed by many as an opportunity for a country to achieve energy sovereignty.
If rolled out on a large enough scale, renewables backed by batteries could supply nearly all the electricity a nation needs from the free inputs of sun and wind, said the Australian Energy Market Operator.
Batteries soak up excess renewable output and supply power when the sun is not shining and the wind is not blowing. They compete directly with gas peaking plants, which are designed to fire up at short notice and supply bursts of electricity during periods of high demand, such as a cold snap or a heatwave.
Uptake of batteries had not matched their potential during the eight years since the first were installed in late 2017.
But falling costs are driving a battery boom. It was 20 per cent cheaper to build a battery in the 12 months from mid-2024 compared with the previous year. The costs are expected to reduce a further 15 per cent during the current financial year.
At present, significant amounts of solar power energy goes to waste during the middle of most days of the year, when peak solar output around lunchtime coincides with a period of relative low electricity demand.
However, that solar power is not available as the sun sinks during the evening’s peak demand periods, which means coal and gas plants power the nation for just a few hours a day.
Grattan Institute deputy energy director Hamish McKenzie said the data from the electricity grid showed a new pattern had taken hold over the past six months.
“It’s obvious that batteries are discharging much, much more, especially in peak demand times, in the morning and evening. The mirror image is happening to gas.”
McKenzie said batteries can be recharged at extremely low cost during the middle of the day, when a flood of power from solar farms and rooftop panels inundates the grid with almost free electricity.
“If you are an electricity generator, and you can choose between dispatching your gas and your batteries, of course you would dispatch your batteries first, because you can do it for free as opposed to paying expensive prices for your gas,” he said.
Wood said while the rise of batteries is “absolutely positive”, governments and industry still needed to invest in new gas plants to replace ageing infrastructure.
That’s because until coal is replaced by renewables, there needs to be a contingency for rare periods of constrained renewable generation – on cloudy and windless days known as the “dark doldrums”, akin to those that hit the grid in the second half of 2024.
“The role of gas is becoming increasingly fraught,” Wood said. “It’s difficult for those gas plants we see today to make money, but we are going to need them into the future.”
The Australian Energy Market Operator warned in 2025 that gas supply to NSW and Victoria could run short as soon as winter this year, as the giant gas fields in Bass Strait are depleted. However, in its annual gas forecast published on Thursday, it said forecast shortages had been delayed until at least 2029.
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