Annual Renewables Report 2025 - The role of battery energy storage in Australia's net-zero transition
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Australia is making notable progress toward its net-zero emissions target by 2050, with an interim goal of a 43 per cent reduction below 2005 levels by 2030. Achieving this requires a multi-pronged strategy that includes scaling up renewable energy, improving energy efficiency, and embracing technological innovation. One technology gaining prominence is battery energy storage.
The 2025 Annual Renewables Report, published by BDO UK, underscores the critical role of storage in managing the intermittency of renewables, balancing the grid, and ensuring a reliable electricity supply. In the UK, battery storage capacity grew by 93 per cent in just one year, yet further investment is needed to meet Clean Power 2030 targets. As Australia accelerates its own energy transition, lessons from the UK’s approach to battery energy storage offer valuable insights into how this technology can support both stability and scalability in a renewables-led future.
Renewable energy and its challenges
The growth of Variable Renewable Energy (VRE) sources, including solar and wind, has been central to reducing Australia's reliance on fossil fuels. However, a critical challenge associated with VRE is reliability, both in terms of consistent supply and network security.
Capacity factors, which measure the ratio of actual energy generated versus potential output at full capacity, indicate that onshore wind farms typically achieve between 30 per cent to 35 per cent, while utility-scale solar plants operate with even lower efficiency at around 17.5 per cent. During extreme conditions, such as the energy ‘drought’ reported by the National Electricity Market (NEM), the overall capacity factor for VRE dropped to 14 per cent, highlighting the volatility of these renewable sources.
Another complication tied to high renewable energy penetration is reduced inertia in the power system. Traditional thermal power plants provide inertia by virtue of their rotating turbines, which help stabilise frequency fluctuations. In contrast, renewable sources like wind and solar lack these stabilising mechanical elements, making power grids more susceptible to sudden disruptions. This was reportedly a contributing factor in the 2025 Iberian Peninsula blackout, where the grid's low inertia left it vulnerable to frequency instability.
Battery energy storage as a solution for stability and efficiency
Battery Energy Storage Systems (BESS) are emerging as a vital solution to address the intermittency of renewables and enhance grid security. By storing excess energy generated during peak daylight hours and discharging it during periods of high demand, such as the evening peak after sunset, BESS can alleviate price volatility and improve overall reliability.
Australia is witnessing a rapid surge in large-scale BESS projects. The number of new installations is expected to grow to match the expansion of large-scale VRE assets in an almost 1:1 ratio. This shift signals the increasing recognition of battery storage as an integral component of the country's clean energy transition.
Beyond energy reliability, BESS also contributes to grid stability through ‘synthetic inertia’. Advanced battery inverters mimic the stabilising effects of traditional rotating generators, ensuring that the system can quickly respond to frequency changes and prevent large-scale outages.
The economics of battery storage
While the financial investment required for battery storage systems is substantial, typically costing between $2.5 million and $5 million for a 10MWh system, the economic benefits are equally compelling.
Australian electricity markets are increasingly experiencing low or negative prices during peak solar generation hours, followed by sharp price increases in the evening. This disparity underscores the financial potential of BESS, as energy providers can store power during low-price periods and sell it at a premium during peak demand windows.
For instance, the highest electricity price recorded in 2023 reached $16,599.89 per MWh in New South Wales and $15,500.00 per MWh in Queensland during evening peak times, demonstrating the lucrative potential for battery operators.
While declining energy generation costs may lead to a gradual flattening of price peaks in the future, the incentive for renewable energy investors remains strong, reinforcing the essential role of BESS in Australia's energy landscape.
Looking ahead
Australia's journey toward a net-zero future hinges on the successful integration of renewable energy sources and the parallel expansion of battery storage solutions. With large-scale BESS deployment accelerating, the country is well-positioned to overcome the intermittency and grid stability challenges associated with variable renewable energy.
As Australia advances its clean energy ambitions, battery storage stands as both a technological necessity and a financial opportunity, delivering reliability, sustainability, and long-term economic gains for investors and the broader energy market. As global energy systems evolve, Australia’s proactive stance on battery storage could position it as a leader in clean energy innovation and resilience. For further information, contact us.
