Balancing Act

Role of energy storage in Australia’s transition to renewables

Australia is leading energy transition globally, moving swiftly from conventional energy sources to renewable energy sources. In 2019, renewable energy accounted for 30 per cent of the country’s total installed capacity. With steady investments in the sector, the country exceeded the government’s Large-Scale Renewable Energy Target of 33,000 GWh in 2019, a year ahead of the schedule. The benefits of these investments have started to trickle down to consumers, with renewable energy costs being driven down, resulting in reduced power bills.

However, the country is faced with an ageing grid and a growing number of coal power plant closures, which lack clear and sustainable replacements. The draft Integrated System Plan 2020 released by the Australian Energy Market Operator (AEMO) estimates that more than 30 GW of large-scale renewable energy is needed to replace coal-fired generation in the next 20 years, with 63 per cent of Australia’s coal-fired generation set to retire by 2040. In addition, about 21 GW of new despatchable resources are required to back up renewables. To sustain the long-term benefits of renewable energy and ensure it forms a major part of the despatchable resources, Australia’s energy policy calls for increased adoption of energy storage systems. The country is making significant progress at the household level, with about 22,661 batteries installed in 2019, taking its household storage capacity to over 1 GWh for the first time ever.

Storage solutions  

The territories of Victoria, Queensland and South Australia are at the forefront of adopting storage technologies. The two most common forms of energy storage in Australia are battery energy storage systems (BESS) and pumped hydro. Among battery storage technologies, lithium-ion batteries are the popular choice in the country. The AUD 90 million Hornsdale Power Reserve (Tesla big battery system) is the largest lithium-ion, grid-connected battery storage system in the world. It is co-located with the Hornsdale wind farm in the Mid North region of South Australia. It has been developed by Tesla Inc. and is owned and operated by France-based energy company Neoen.

Pumped hydro is another widely deployed large-scale energy storage technology. There are already three operational river-based pumped hydro facilities – Australia—Wivenhoe (500 MW), north-west of Brisbane; Shoalhaven (240 MW) in NSW; and the Tumut 3 power station (1,800 MW) in the Snowy Mountains.

Regulatory developments in energy storage 

While a strong, consistent national policy is needed to replace a patchwork of individual jurisdictions, state and territory policy measures have been crucial in driving investment in new and innovative energy solutions. State government investments are also supporting innovative renewable energy project trials, making solar more accessible for medium- and low-income households, and facilitating the establishment of large-scale battery storage. Some of the key recent developments and plans to speed up the adoption of energy storage in the country have been witnessed in the following regions…

New South Wales (NSW): The NSW government plans to deliver a 3 GW renewable energy zone (REZ) in the state’s Central-West Orana region. The government programme is designed to unlock a huge pipeline of large-scale renewable energy and storage projects in NSW’s first REZ around Dubbo in order to offset the planned retirement of its ageing thermal generation fleet. The Australian Renewable Energy Agency (ARENA) announced AUD 5 million in funding for a AUD 16.2 million scooping study by the state transmission network developer TransGrid in support of a major project that can demonstrate a pathway for future REZs.

Northern Territory (NT) and Western Australia (WA): The NT government has approved the procurement of a large-scale battery system to help balance the local Darwin-Katherine electricity grid, at a cost of AUD 30 million. The battery system will also help large-scale solar plants in the region to integrate their output into the grid in the future. Furthermore, the NT government launched the Household and Business Battery Scheme, under which households and businesses stand to receive a grant of AUD 6,000 for the purchase and installation of solar PV systems with inverters and battery equipment (with a battery capacity of at least 7 kWh) selected from an approved list of vendors.

The WA government took to a community approach in supporting energy storage solutions, announcing the roll-out of community power banks, which will be installed in 10 towns in the region by 2020. The community power bank allows a group of properties to own a share of the battery and store the excess solar energy, which they can draw out any time. The utility customers in WA will be able to access these community power banks.

Tasmania: The Tasmanian government has launched its draft action plan to reach a target of 200 per cent renewables by 2040. Under this, the government has plans to double its current annual renewable energy output from 10,500 GWh to about 21,000 GWh by 2040. The target is based on the state’s goal to become the “Battery of the Nation”, utilising its abundant hydropower and wind resources, and to provide despatchable renewable power to Victoria via subsea links.

In December 2019, the state’s transmission network developer TasNetworks released the Business Case Assessment for Project Marinus (Marinus Link). It is expected to deliver up to 2.5 GW of renewable hydropower to Tasmania and Victoria, including 16 GWh of storage. The project will also unlock a cumulative AUD 5.7 billion worth of additional investment in renewable energy and long-duration energy storage in Tasmania.

Upcoming projects and initiatives 

According to energy research and consultancy firm Wood Mackenzie, Australia is set to add 1.2 GWh of energy storage capacity in 2020, more than double the 499 MWh installed in 2019. This will increase the country’s cumulative storage capacity to 2.7 GWh in 2020. An emerging segment where battery energy storage is being used is electric vehicles (EVs). In an innovative move towards promoting driverless EVs, which will utilise a solar PV roof and lithium-ion battery system, ARENA announced AUD 2 million in funding for the Australian start-up Applied Electric Vehicles Private Limited. The driverless EVs will meet 60 per cent of their energy requirements through solar energy.

Another initiative being planned by the NSW government is to create a virtual power plant (VPP) network. A VPP is a network of batteries and power generating assets, such as solar panels, which are physically spread out but centrally controlled. These networked batteries can charge or discharge at the most opportune time for the grid, collectively acting as a large power plant. The NSW government announced its plans to install smart batteries on government buildings to boost energy security by providing up to 13 MW of energy via a VPP.

Private developers are increasingly assuming a leading role in energy storage solutions. Singapore-based developer Vena Energy has recently announced that it will soon begin the construction of Queensland’s largest grid-scale battery, which will be located near Wandoan in the Western Downs. The 100 MW/150 MWh project will be delivered under a 15-year power purchase agreement with Australia’s biggest power producer, AGL. In April 2020, work was finalised on the network connection of the Tesla-developed Hornsdale Power Reserve in South Australia, which is being expanded with an additional 50 MW/64.5 MWh of capacity. The expanded battery installation is expected to soon provide support during periods of very low demand and tackle an increased risk of outages.

In June 2020, AEMO published energy storage technology provider Fluence’s proposal to use two large-scale BESSs to ease electricity transmission issues between the states of Victoria and NSW. The BESS would serve as a virtual transmission system between the two states and allow an additional power transfer capacity, thus reducing network congestion. In addition, Snowy 2.0, a pumped hydro expansion of the existing Snowy Scheme located in NSW, is due in 2025. It will add 2,000 MW of generation capacity (roughly equivalent to a new coal plant). The project is expected to contribute significantly to large-scale storage capabilities, linking two existing scheme dams, Tantangara and Talbingo, through underground tunnels and an underground power station with pumping capabilities. Snowy 2.0 has the ability to generate energy quickly when the demand for energy soars.


When the country is experiencing significant growth in solar and wind energy generation, it becomes imperative to address the issue of grid congestion. According to industry experts, grid congestion is threatening to stall about 67 GW of planned renewable energy projects. Moreover, the frequent occurrence of heatwaves and bushfires in parts of the country causes damage to transmission lines, in turn creating an unprecedented strain on the grid. South Australia’s government, via its Department of Human Services, has offered free BESSs to homeowners affected by the recent bushfires.

There is an urgent need for a plan to spur investment in grid infrastructure and address the deployment of storage solutions at grid scale. However, storage systems lack revenue certainty and thereby need to be further incentivised. There is a lack of regulatory incentives for network service providers to support storage as a non-network solution.


Backed by energy storage, Australia is making an effort to utilise its abundant renewable energy generation in an efficient manner. The considerable amount of new wind and solar capacity has pushed down the cost of clean energy generation, which is now lower than the cost of new coal generation. While the country has some significant projects lined up, the pace of transmission work still lags behind. Grid challenges need to be addressed as the country moves towards adopting storage solutions to sustain the benefits of renewables.


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