Batteries Are Rewriting Australia’s Electricity Market
For years, the energy transition has largely been discussed as a future event. Something coming down the track. Something that would eventually reshape Australia’s electricity system once enough renewable energy projects were built.
The latest Quarterly Energy Dynamics report from the Australian Energy Market Operator (AEMO) suggests that moment may already have arrived.
The report paints a picture of a power grid that is changing rapidly. Batteries are now influencing electricity prices more than gas generators. Coal generation continues to decline. Renewable energy penetration keeps setting records. Wholesale electricity prices are falling. Even the daily shape of electricity demand is being rewritten.
Batteries Move to the Centre of the Grid
AEMO reported that renewable energy supplied 46.5% of National Electricity Market generation during the first quarter of 2026, a new record for a March quarter. Coal-fired generation fell to another record low, while gas-fired generation dropped to its lowest quarterly average since 1999. (1)
At the centre of the shift is battery storage.
According to AEMO, more than 4,445 MW and 11,219 MWh of large-scale battery capacity has been added to the grid over the past year, more than doubling installed battery capacity across the National Electricity Market.
That additional storage is changing how electricity flows through the system.
During the middle of the day, batteries are increasingly charging using excess rooftop solar and renewable energy generation. Then, during the evening peak, they are discharging electricity back into the grid when demand rises and prices would traditionally spike.
AEMO noted that daytime battery charging rose by 300% year on year, while evening peak discharge increased by 275%.
Historically, expensive gas generation was often required during peak evening demand periods. Batteries are now increasingly competing for that role. The result is lower wholesale electricity prices and less volatility across the grid.
AEMO said batteries accounted for 32% of all price-setting intervals across the National Electricity Market during the quarter, making them the most frequent price-setting technology for the first time.
That is a remarkable statistic.
Wholesale Prices Begin to Shift
The Renew Economy in response to the report described batteries as having “reshaped demand patterns” and “forced wholesale prices down”. (2)
The Australian Financial Review response carried a similar theme, highlighting that record battery growth was “pushing power prices down” as renewable generation and storage displaced gas-fired generation. (3)
Wholesale electricity prices averaged $73/MWh during the quarter, down 12% from the same period last year.
Notably, South Australia was the only mainland state to experience higher average prices. However, AEMO attributed much of this to a single major weather event on January 26, which caused a sharp spike in volatility.
Without that event, prices in South Australia would likely have been lower as well.
The report also highlighted the increasingly dominant role of rooftop solar. Distributed PV output reached another quarterly record at 4,090 MW, becoming the single largest renewable contributor to the grid.
This is having a direct impact on fossil fuel generation.
Higher levels of rooftop solar, alongside increased wind and grid-scale solar generation, are suppressing daytime coal and gas generation across the market. Coal-fired generation fell 4.4% year on year, while gas-fired generation dropped 24%.
The emissions impact is also becoming increasingly visible.
AEMO reported that total National Electricity Market emissions fell to 26.0 MtCO₂-e during the quarter, down 4.8% from the previous year and another record low for a March quarter.
The Next Challenge is Demand Growth
At the same time, the report also exposed the next major challenge for the grid.
Data centres.
For the first time, AEMO revealed that 11 large-scale data centre projects representing 5.4 GW of maximum demand are currently progressing through the transmission connection process. Around 60% are located in New South Wales and 40% in Victoria.
Artificial intelligence, cloud computing and digital infrastructure are now emerging as major drivers of electricity demand growth globally. Australia is clearly not immune.
The AFR response noted that researchers now estimate data centres accounted for around half of all new power demand growth during the quarter.
That creates both opportunity and pressure.
On one hand, increasing electricity demand supports the need for more renewable energy, storage, transmission infrastructure and grid upgrades. On the other hand, it raises questions around whether the pace of grid development can keep up.
Transmission Becomes the New Battleground
The report already points to emerging bottlenecks.
AEMO noted that network curtailment of grid-scale solar and wind generation doubled during the quarter, largely because some projects are waiting for delayed transmission upgrades to be completed.
In other words, Australia is increasingly producing large amounts of renewable energy. The challenge now is moving it efficiently around the grid and storing it when needed. This suggests the energy transition is entering a new phase.
The early years focused heavily on building renewable generation capacity. The next stage appears increasingly focused on storage, grid management, transmission infrastructure and electrification.
Importantly, the latest AEMO report suggests this transition is no longer hypothetical or dependent on future projections.
Batteries are no longer experimental technologies sitting on the edge of the system. They are actively shaping prices, influencing supply patterns and reducing the role of fossil fuel generation across Australia’s main electricity grid.
That may ultimately prove to be one of the most important developments in Australia’s energy transition so far.
The Bottom Line
AEMO’s latest Quarterly Energy Dynamics report provides some of the clearest evidence yet that Australia’s electricity system is undergoing structural change. Batteries, rooftop solar and renewable energy are now materially influencing wholesale electricity prices, reducing fossil fuel generation and reshaping how energy flows through the grid. At the same time, rising electricity demand from data centres highlights the enormous amount of infrastructure still required to support the transition. The direction of travel now appears increasingly difficult to ignore.
References
Australian Energy Market Operator, Quarterly Energy Dynamics Q1 2026, April 2026, https://www.aemo.com.au/energy-systems/electricity/national-electricity-market-nem/data-nem/market-management-system-mms-data/quarterly-energy-dynamics-qed
Parkinson G, Renew Economy, Batteries both big and small have reshaped the grid and forced wholesale prices down, AEMO says, 30 April 2026, https://reneweconomy.com.au/batteries-both-big-and-small-have-reshaped-the-grid-and-forced-wholesale-prices-down-aemo-says/
Cropp R, Australian Financial Review, Record battery growth is pushing power prices down, 30 April 2026, https://www.afr.com/policy/energy-and-climate/record-battery-growth-is-pushing-power-prices-down-20260429-p5zs6s
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