​Australia is heading into an unusually warm, dry winter under El Niño. For batteries, milder winters compress revenues. Summer sees the opposite, if heatwaves drive volatility.

The Bureau of Meteorology's (BOM) June 2026 outlook forecasts above-average daytime temperatures and below-average rainfall in the NEM regions. The driver sits in the tropical Pacific Ocean, where sea surface temperatures have now crossed the El Niño threshold. Moreover, stronger development is forecasted over the remainder of the year into summer. Forecasted strength is "at least moderate, with the possibility of a strong event".

Modo Energy modelled El Niño conditions across 2026-27. NEM-wide, 4-hour battery revenues land 3.6% below the neutral baseline. That headline number is a blend of two distinct seasonal stories. First, a winter that sees revenue compression, concentrated in Victoria. Second, a summer that could swing either way, depending on heatwave activity.

In winter, BESS revenue compresses by 9% NEM-wide on a MW-weighted central estimate, with a 14% standard deviation (SD). However, impacts vary across states. Victoria carries the winter average, seeing 30% compression with ±3% SD.

Summer impacts are more uncertain. They depend on heatwaves and other weather-event volatility. The central estimate based on previous El Niño years sees a 2% increase, with a ±24% SD. However, Australia's already-dry baseline tilts probability toward the upper end of that summer range. Heat events become more likely under drought conditions, which have historically driven volatility revenues for BESS.

Executive summary

• NEM-wide revenues modelled under El Niño conditions land 3.6% below neutral (±9% SD) across the forecasted period, June 2026 to February 2027.
• Revenues compress in winter, but the impact is concentrated in Victoria. El Niño suppresses the cold and storms that normally create winter spreads. Victoria carries the winter compression at -30%. Other states observe minimal winter change.
• Summer is the wild card. The central estimate is a 2% increase, but with a ±24% SD. El Niño can drive either calm conditions that narrow spreads, or heatwave days that can trigger price spikes. Victoria and South Australia carry the widest summer bands.
• Australia’s current dry baseline tilts the probability toward summer heat stress. Drought conditions amplify the impact of heatwave events, suggesting summer volatility.

How El Niño influences the NEM

The El Niño Southern Oscillation (ENSO) is the cyclical Pacific Ocean climate pattern that influences year-to-year climate variation in Australia. An El Niño event occurs when eastern Pacific sea-surface temperatures rise above their long-term average. In Australia, this usually means less rainfall, warmer temperatures, and a higher risk of droughts, heatwaves, and bushfires.

Events typically last 9 to 12 months. They develop through late autumn and winter, peak across spring and summer, then unwind over the following autumn.

For the electricity grid, the weather signal shows up in generation, demand, and the variability of the atmosphere itself. So each driver pulls BESS revenue differently in winter than in summer, and differently by state.