News Center

【Core Summary】

Over the past few months, Australia's electricity market has witnessed a noteworthy turning point. Batteries — both grid-scale and residential energy storage — have for the first time replaced natural gas as the determining factor in wholesale electricity prices.

This is not a future forecast. It is a market reality that has already occurred.

I. From "Noon Price Crashes" to Households Managing Their Own Power

Australia has the highest rooftop solar penetration rate in the world. More than one-third of households have installed photovoltaic systems, totaling over 4 million homes.

But there has been a persistent problem: Every day at noon, a massive amount of solar energy floods into the grid simultaneously, frequently driving wholesale electricity prices to extremely low or even negative levels. Traditional coal-fired power plants cannot flexibly shut down and must operate at a loss.

The solution is energy storage.

Last July, the Australian federal government launched a 30% household battery subsidy. The policy's effect has far exceeded expectations. In just over a year, more than 400,000 households have installed batteries.

With batteries installed, household behavior has changed in three key ways:

① Store power during the day – Use it at night or sell it back to the grid
② Reduce solar feeding at noon – Not all solar generation is pushed onto the grid at peak times
③ Smooth overall power curves – The system's overall electricity curve has become significantly smoother

The result: Natural gas has been pushed out of its "marginal pricing" position.

II. Why Did Natural Gas Lose Its Pricing Power?

For the past decade, natural gas on Australia's east coast has been persistently expensive. Three large LNG export projects have drastically reduced domestic supply, keeping gas prices high for a long period.

In the electricity market, gas-fired generators — because they start quickly and can flexibly adjust — have long played the role of the "marginal supplier." Whoever generates the last megawatt determines the price. And natural gas happens to be the most expensive option.

But now, batteries — particularly behind-the-meter storage — have taken over this role with lower marginal costs.

The marginal cost of battery discharge is near zero (the electricity is already stored), whereas every kilowatt-hour generated by a gas turbine requires purchasing fuel.

According to the latest report from the Australian Energy Market Operator (AEMO), in an increasing number of time periods, batteries are determining electricity prices — not gas generators.

III. The Real Story on Battery Prices: Long-Term Cost Reduction vs. Short-Term Price Increases

Many articles like to cite the statistic that "lithium-ion battery prices have fallen 99% over 30 years." From the perspective of technological development and economies of scale, this long-term trend is real: between 1991 and 2024, cell costs dropped from nearly $10,000 per kWh to around $100 per kWh.

But a careful distinction is needed here:

Long-term cost decline does not equal sustained recent price decreases.

In fact, over the past two to three years, upstream raw material prices for lithium, cobalt, nickel, and lithium carbonate have experienced significant volatility, with an overall upward trend. Battery production costs have not continued to decline; instead, they have faced clear upward pressure.

The reason Australia's market has seen a residential battery installation boom is not simply because batteries have become cheaper than gas.

Rather, the key factors are:

① The government's 30% subsidy directly lowered the purchase threshold for users.
② The price gap between peak and off-peak electricity is large enough that users can sell power at high prices at night, shortening the payback period.
③ Decades of technological progress have made batteries affordable enough, even if recent raw material price increases have affected new battery costs — but they have not stopped installed systems from operating efficiently.

In other words: Even if new battery costs are rising, batteries that are already installed are still helping users save money.

IV. Why This Matters

Electricity prices are a significant driver of inflation. Over the past four years, electricity price increases in Australia have directly impacted the CPI and interest rate decisions.

The large-scale installation of residential batteries has already begun to have a tangible downward effect on electricity prices. Just last week, some benchmark electricity prices in Australia were announced to be reduced by 10% .

This is not because batteries have become cheaper. It is because:

• When enough behind-the-meter storage participates in the market

• When batteries become a flexible, dispatchable resource

• The "rigid pricing power" of natural gas will be gradually replaced

Australia currently accounts for nearly 60% of the global residential battery market outside of China (excluding China).

V. Key Takeaways for the Global Battery Industry

Australia's experience offers a real-world blueprint for other markets where solar penetration is high and grid flexibility is needed. When storage reaches critical mass, it doesn't just complement the grid — it reshapes the market's pricing foundation.