Australia’s home battery rollout is no longer marginal to wholesale markets. In the first 6 months of the Federal Government's Cheaper Home Batteries Program, installed home battery capacity reached 6.4 GWh, almost tripling the previous 5 years of build-out. This means the distributed fleet is now growing so quickly that it will begin to compress spreads and reduce revenues for grid-scale systems.

The recent increase in the subsidy budget to $7.2 billion supports continued subsidised growth with the ambition to hit 40 GWh of small-scale capacity by 2030.

This scenario, which could see the power capacity of the small-scale fleet overtake grid-scale, would cause 4-hour price spreads in the National Electricity Market (NEM) to fall by 26% in 2030 compared to Modo Energy’s central case.

Even if installation momentum slows as early adopters saturate, household network charges rise, and subsidy values decline, merchant four-hour grid-scale BESS IRRs could still fall by up to 2.3 percentage points.

Executive summary

• Small-scale BESS capacity reached 3.8 GW / 6.4 GWh at the end of 2025. This represents 67% of operational grid-scale energy capacity in the NEM.
• The expanded $7.2 billion Cheaper Home Batteries Program supports hitting 40 GWh of small-scale storage by 2030. This would be an estimated 24 GW of power capacity.
• Under continuing deployment rates, 2030 merchant NEM BESS spreads fall 26% below those in Modo Energy’s Central forecast scenario.
• A scenario that tapers the subsidy pace would reach 15 GWh by 2030, and limit 2030 spread reductions to 11%.
• VPP coordination is projected to grow, and determines how much distributed storage competes directly in market arbitrage and FCAS.

Scope: NEM regions only (NSW, QLD, SA, VIC, TAS). Excludes the WEM.

Tapered scenario sees IRRs fall by up to 2.3 percentage points

Revenue declines in the scenario that tapers home battery build-out could translate into material reductions in IRR for grid-scale BESS.

Modo Energy’s modelling looks at three scenarios of household BESS deployment: