Australia's battery boom is rewriting NEM price formation — and gas peakers are losing their edge
Surging utility-scale battery capacity is compressing intra-day NEM volatility and challenging the economics of gas-fired generation.
Australia added a record 2 GW of utility-scale battery capacity in 2025, a 233% increase on 2024, lifting the country to third-largest big battery market globally behind only China and the United States, the Clean Energy Council reported.1 The rapid buildout is fundamentally altering how the National Electricity Market prices electricity, compressing the intra-day volatility that gas peakers have long depended on for revenue.
The Australian Energy Market Operator now reports 2.8 GW of behind-the-meter batteries responding to prices but not centrally dispatched, the equivalent power capacity of Eraring Power Station, the country's largest coal plant.2 WattClarity has observed that intra-day volatility appears to be compressing in some periods, while inter-day and event-driven volatility may be growing in importance as battery fleets flatten price spikes.2
The 2025 additions were dominated by large projects. The AGL Energy-owned 500 MW, 1,000 MWh Liddell Battery began its first-stage commissioning (250 MW and 500 MWh) at the site of the retired coal station.1 The Melbourne Renewable Energy Hub, a 600 MW, 1,600 MWh first stage jointly developed by Equis and the Victoria government-owned State Energy Corporation, also came online.1 Akaysha Energy's Ulinda Park battery near Millmerran in Queensland commissioned its 55 MW, 298 MWh first phase, which was trading on the NEM by December (2025).1
The upstream pipeline is larger still. Another 4.3 GW and 13.5 GWh of big battery capacity was financially committed over the year, representing A$4.8 billion of investment, a 67% increase on 2024 levels.1 The Clean Energy Council's report states that "we expect this trend to continue as batteries start to compete more often with each other rather than with gas peakers."1
The structural implication for gas generators runs in two directions. Batteries are absorbing the short-duration spikes that gas peakers need to cover fixed costs, while behind-the-meter units are smoothing demand before it reaches the wholesale market. The CEC's own language suggests competitive pressure will intensify as the battery fleet scales toward internal saturation rather than displacing gas alone.1
Yet a countervailing force is emerging on the demand side. Data centre load in the NEM is accelerating sharply. Average data centre demand through the first quarter of 2026 in the NEM was nearly 600 MW, the AEMO chief executive said at Australian Energy Week.3 In that same quarter, 11 data centres totalling 5.4 GW of ultimate load were working through transmission network connection processes.3
Rising data centre demand is pushing up the cost of gas-fired generation, according to the CSIRO's annual GenCost report published 15 July 2026.5 Batteries are increasingly becoming Australia's preferred technology for flexible generation, but the same data-centre buildout driving battery deployment also creates a new baseload demand slice that gas plants could serve if they can compete on cost.
For gas traders and peaker operators, the residual question is whether the remaining inter-day and event-driven volatility, including weather systems, coal outages and transmission constraints, will be sufficient to justify keeping gas capacity online. South Australia's day-ahead power spot stood at A$111.68/MWh as of Monday's close (2026-07-20), a level suggesting the market is not yet pricing chronic tightness.4
The next AEMO Electricity Statement of Opportunities and Gas Statement of Opportunities, both flagged for expanded demand-side analysis, will show whether data centre growth has been reflected explicitly enough to shift planning assumptions.3 If those projections shift materially, gas peakers will face more baseload demand arriving while price spikes grow rarer, and a battery fleet that is beginning to compete primarily with itself rather than with gas.