Australia’s NEM will see a massive increase in grid-scale battery energy storage capacity in the next three years. There are 16.8 GW of battery projects that could come online in the National Electricity Market (NEM) by the end of 2027. This would result in a ninefold increase in battery energy storage capacity in just three years - with 2 GW operational today.
We project that 12.5 GW of this will actually begin commercial operation by this point. Even so, this buildout would result in a sevenfold increase in operational battery capacity. So what is driving this battery build? And how are the new batteries different from what we have seen in the NEM so far?
The pipeline is a database of battery projects in the NEM. This is sourced from the Australian Energy Market Operator’s (AEMO) Generation Information file and other resources. Each project has a specific estimated commercial operation date based on press releases and reporting, company websites, or direct confirmation from the companies responsible for the project.
The projection is Modo Energy’s expectation of how much capacity will actually come online. This is based on the development status of projects in the pipeline, alongside historic project trends, including delays and cancellations.
If you’re interested in a copy of our NEM Battery Energy Storage pipeline then drop us an email at team@modo.energy.
Queensland, New South Wales, and Victoria are building battery energy storage to replace coal
The pipeline of battery projects is concentrated in New South Wales, Queensland, and Victoria. Together, these states make up 88% of the NEM’s annual energy demand. Of the 16.8 GW in the pipeline by the end of 2027, 6 GW is located in New South Wales, 4.8 GW in Queensland, and 3.9 GW in Victoria.
If constructed, this would make New South Wales the state with the most operational battery capacity. At the end of 2024, with the exception of Tasmania, it was the state with the least.
Surge in big batteries to drive growth in capacity
This transformation is aided by the construction of some very big batteries in the state. This includes the 850 MW Waratah Super Battery, due to begin commercial operations in 2025. In comparison, the largest battery currently in operation in the NEM is the 300 MW Victorian Big Battery.
There are 20 projects with a capacity of 300 MW or greater - making up over 50% of the total capacity in the pipeline.
Tasmania currently has no grid-scale battery energy storage in operation, and only one project—the Great Lakes BESS—is planned to enter operation by the end of 2027. This is due to the dominance of hydropower, which currently supplies 80% of the state’s electricity.
South Australia led the way in building out big batteries before being overtaken by Victoria in 2024. By the end of 2025, it looks set to be overtaken by both New South Wales and Queensland.
Shift in big battery capacity driven by anticipated coal retirements
The expected growth in battery capacity in the larger three states is driven by the start of a phase out of coal generation. The 2.8 GW Eraring power station in New South Wales is set to close in 2027 (pushed back from 2025). A further 2.1 GW of coal capacity will retire in 2028, with Yallourn West in Victoria and Callide B in Queensland scheduled to close.
This means that, despite the rapid growth in battery power in the NEM, dispatchable power in the NEM could stay flat between 2026 and 2028. The requirement of battery capacity to replace retiring coal generation is behind a shift in the duration of these projects.
The duration of battery energy storage in the NEM is becoming longer
So far, grid-scale batteries in the NEM have all been two hours or less in duration. This is set to change in the next few years. Currently, batteries have a weighted average duration of 1.5 hours, but based on the buildout of the battery pipeline, this would increase to 2.5 hours by the end of 2027.
95% of batteries in the pipeline are 2-hours or greater, and it includes 4 and even 8-hour batteries. These longer-duration batteries will be able to discharge during longer peak periods to augment or replace existing dispatchable capacity.
The total energy capacity of batteries in the pipeline to the end of 2027 is 42.8Â GWh - 14x the 3 GWh operational at the end of 2024.
Over 5 GW of batteries in the pipeline are co-located with solar or wind generation
Another changing aspect of the NEM’s battery energy storage pipeline is the large amount of co-located capacity: 5.4 GW in the next three years, around one-third of the total pipeline.
Three main factors drive the increase of co-located battery projects in the pipeline.
First, adding a co-located battery can boost project economics by reducing the adverse impacts of network dynamics on the solar or wind farm:
- A co-located battery can charge with energy that would otherwise be curtailed.
- A co-located battery can improve Marginal Loss Factors (MLFs) for the renewable project, increasing the value received for selling energy.
Second, companies can bundle the planning and development of the battery with the planning of a solar or wind farm. This streamlines the planning process compared to a separate renewable and battery project and can improve the chances of being approved.
Finally, the Capacity Investment Scheme (CIS) has incentivised co-location and has so far backed 1.4 GW of co-located projects. Co-located battery projects can receive agreements through CIS generation tenders.
Private-sector developers continue to dominate the NEM battery development pipeline
Private equity and independent power producers (IPPs) dominate the battery pipeline. These companies comprise over three-quarters of the build pipeline’s rated power. Gentailers and utilities make up an additional 20% of capacity in the pipeline. The remaining 5% comes from projects directly owned by network companies.
These proportions resemble those of the current operational fleet, but many new companies are preparing to enter the market. For instance, Akaysha Energy and Equis have battery pipelines of 1.6 GW and 1.5 GW, respectively, but neither currently have commercially operational systems.
New companies entering the pipeline also show international interest in Australian renewables. Spark Renewables was acquired in October 2023 by the Malaysian state-owned electricity utility Tenaga National Berhad, while Lightsource BP is the renewables arm of a major multinational energy company.
The government provides some support for batteries, but the private sector bankrolls most of the development.
There are various state and federal policies supporting the growth of battery energy storage in the NEM. The two most impactful policies are the federal Capacity Investment Scheme (CIS) and the New South Wales Long-Term Energy Service Agreement (LTESA). These are financial instruments guaranteeing minimum cash flows for wind, solar, and storage projects.
However, 75% of capacity in the pipeline is progressing without any government support.
This is a shift from the direct funding support that has played a role in the fleet operational today. Funding from the Australian Renewable Energy Agency (ARENA) has played a significant role in funding the currently operational battery fleet. However, funding to future big battery projects is negligible.
98% of pipeline capacity due in 2025 has reached financial close and therefore secured funding. However, this falls to just 24% for projects due online in 2027. This raises the question of just how much of this future pipeline will be built against planned timelines.
Projects further in the future still face uncertainty in delivery timelines
While the development pipeline is ambitious, most projects are credible and have a strong chance of being built on schedule. This is especially the case for projects expected to start commercial operation in the next year - over 25% of which are already in commissioning. However, as we move further into the future, projects are in earlier stages of development and, therefore, have greater uncertainty.
Modo Energy’s projection for battery buildout assesses projects based on their development status. Over 6.2 GW of batteries are currently under construction or in commissioning, triple the power of the current operating fleet. A further 4.6 GW of batteries in the pipeline have also reached financial closure or are in advanced planning stages.
This means that 10.9Â GW of batteries are in advanced stages of development. We believe that these batteries will almost certainly be constructed and will likely be completed on schedule.
Another 5.6Â GW of projects in the pipeline are in earlier planning stages or are still tentative projects. These projects face a greater risk of delay, downsizing, or cancellation, and our projections of buildout reflect this risk.
Coal retirements make successful buildout of the pipeline critical
The broader picture of the energy transition in the NEM - with a shift from coal generation to variable renewables - makes successful buildout of the battery pipeline essential for maintaining security of supply.
Overall, despite some uncertainty in future projects, we project that total operational battery capacity will reach 14.5 GW by the end of 2027. Although this would be 4 GW lower than the 18.5Â GW based on the pipeline, this would still mean a sevenfold increase in NEM battery energy storage capacity in just three years - transforming how the NEM operates.
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If you’re interested in a copy of our NEM Battery Energy Storage pipeline then drop us an email at team@modo.energy.