NEM Spot Prices Nearly Halve as Battery Storage Displaces Gas Peakers
Australian batteries have driven average NEM wholesale prices to A$74/MWh, but repeated weather stress events show how quickly structural gains unravel.
Wholesale spot prices in Australia's National Electricity Market averaged A$74 ($51.71) a megawatt-hour last quarter, nearly halving from the prior period, Bloomberg reported on Monday (2026-07-27), as battery storage increasingly displaced natural gas as the grid's balancing fuel.5
The quarterly average conceals sharp within-period moves. Batteries and renewables, which generated a record 42% of NEM power covering more than 80% of Australia's electricity demand, drove the structural decline. But the same grid that produced those subdued averages was twice forced this year to lean on expensive gas when renewables faltered, and those stress episodes set a floor on how consistently low prices can go.5,2,4
BloombergNEF analyst Sahaj Sood put the displacement dynamic plainly: "Batteries are increasingly usurping gas as the primary balancing technology for intraday variability in renewable generation."5 The capacity behind that shift has grown fast. AEMO CEO Daniel Westerman told Australian Energy Week in June (2026-06-11) that consumer resources, including rooftop solar on more than 4 million Australian homes, now exceed the generating capacity of the entire remaining coal fleet. At peak moments they supply more than 60% of NEM demand.3
That coal fleet is shrinking and ageing. AEMO data show nearly 40% of NEM coal capacity has retired since market start, with the average age of remaining stations at 38 years.3 Rystad Energy data show large-scale solar and wind generated 4.6 TWh in May 2026, up 10% from 4.2 TWh in May 2025, even as May 2026 featured the worst renewable drought on the main grid since 2022.1
The summer heatwave earlier this year exposed the limits of the battery transition. A two-day extreme temperature event depleted battery reserves and pushed gas dispatch costs sharply higher, nearly doubling quarterly NEM prices during that period, RenewEconomy reported in June (2026-06-12).2 A separate cold snap, combined with generator outages, forced AEMO to issue around 500 directions to more than 5 GW of generation and then to suspend the entire market to maintain supply, a step Westerman characterised as unprecedented at Australian Energy Week (2026-06-11).3
The June wind drought reinforced that vulnerability. During the week of June 22 (2026-06-22), an extended period of low wind combined with winter's reduced solar output left the NEM heavily dependent on gas, with grid analysis at the time observing that electricity infrastructure must be built to handle the worst moments, not averages.4
Western Australia's divergence shows what insufficient battery depth looks like in practice. The state's Wholesale Electricity Market averaged a record A$117/MWh last quarter, up 30% year on year, as reduced coal and wind generation pushed prices in the opposite direction from the NEM.5 That two-speed outcome shows the battery-driven price deflation visible in the NEM has not yet spread across Australia's fragmented grid.
For gas traders, the structural pressure is clear. Batteries are capturing the intraday price spread that once underpinned peaking gas economics, and if that spread narrows persistently, marginal gas capacity will only clear during stress events. Those events will carry larger spikes as coal retirements accelerate and backup options thin. NEM quarterly averages have trended down, but the gap between average and peak has widened. With the Southern Hemisphere winter in its final weeks, each cold front meeting a low-wind evening is a live test of whether the battery fleet has accumulated enough depth to prevent another episode like those that defined January and June of this year.2,4,5