How behind-the-meter storage is reshaping the energy market
The energy industry faces a new challenge as the surge in household battery uptake gives consumers more control over when they store, use and export electricity.
Home battery uptake is surging in Australia, thanks to government subsidies, lower technology costs and consumers who are more engaged with their energy usage.
The batteries not only help homeowners store and make better use of electricity generated by rooftop solar panels; they could also help Australia manage the energy transition.
While there is now a critical mass of batteries, they will need to be coordinated so they can work together to support the shift to a renewable energy system, including the ongoing withdrawal of coal-fired generation and the need to manage grid stability.
Uptake of home batteries rapidly accelerated after the government introduced its Cheaper Home Batteries Program, which reduces the upfront cost of installing solar and batteries.
Record numbers of behind-the-meter batteries and small-scale solar generation were installed in the second quarter of this year. More than 111,000 home batteries were installed with the government subsidy, and small-scale solar capacity exceeded 1 gigawatt (GW) for the first time in a quarter, according to data from the government’s Clean Energy Regulator.
A little over a year after the Cheaper Home Batteries Program began on 1 July 2025, more than half a million batteries had been installed in Australian homes.
Australia has historically lagged on home battery take-up, despite the proliferation of rooftop solar generation. That has changed over the past 12 months, with batteries installed in around 700,000 homes, according to the latest report from the Clean Energy Council – that equates to about 7 per cent of Australian households – and puts the nation in the lead for residential battery storage uptake globally.
Bringing on the transition
The price of batteries has also come down sharply. Electricity generator and retailer AGL says that for some customers the payback period for a home battery is now five to seven years. Like many other retailers, AGL is also offering batteries, solar panels and energy plans to consumers.
Alongside government subsidies, battery uptake is being driven by consumers who are more energy-aware than they were a few years ago. “A lot of people are now looking at what they can do themselves, and how they can manage their energy exposure,” says Alastair McKeown, Executive General Manager Australia of Intellihub.
Intellihub installs and operates smart electricity and gas meters and is also helping homeowners who can’t afford the AUD 15,000 to AUD 20,000 it may cost to install home solar and battery storage. Zelora, Intellihub’s joint venture with hardware giant Bunnings, instead offers solar and batteries via a fixed monthly payment plan.
“We will put the solar and the battery on your house. We will optimise it as well through our Evergen platform, a software company that looks at how you can best manage your battery to minimise the cost of energy for the homeowner,” McKeown says.
“For most people, what you save in energy is more than you pay us.”
During the next decade, McKeown expects most people who are able to will have solar panels and batteries on their homes, as well as an electric vehicle in the driveway. Once there is a critical mass of home batteries, those resources can form a sizeable virtual power plant.
At the end of 2025, there were more than 4.29 million PV installations in Australia, with a combined capacity of more than 45.1 gigawatts, according to data from the Australian Photovoltaic Institute. That equates to about four in 10 homes, higher than anywhere else in the world.
While this rooftop solar capacity has substantially increased the amount of renewable energy Australia produces, it also depresses wholesale electricity prices in the middle of the day, when solar production is at its peak. In turn, lower midday prices can make grid-scale commercial solar projects less attractive for investors by reducing expected returns.
The Australian Energy Market Operator notes that wholesale prices were at their lowest level for a June quarter since 2020, driven down by more renewable generation, increased discharge from grid-scale batteries and reduced evening peak demand.
However, the widespread uptake of home batteries is starting to alleviate this issue, says David Scrivener, Global Head of Energy, Infrastructure and Resources at Westpac Institutional Bank. By allowing households to store solar power and use it in the evening, home batteries are helping to shift some demand away from peak periods and flatten the demand curve for grid-supplied electricity.
They are also helping to support daytime wholesale power prices by storing solar-generated electricity for later use rather than exporting all of it into a market already awash with excess power.
“One of the unintended consequences of all this renewable energy going on roofs is that it depresses power prices, which causes quite a lot of strife for commercial generators,” Scrivener observes.
“The ingress of the batteries absorbing that additional generation to then release it in the evening flattens that curve and helps the overall transition of the market.”
Consumers take control
Gary Brown, Chief Financial Officer of electricity generator and retailer AGL, expects residential and larger grid-scale batteries will play an important role in the electricity system of the future.
Currently, around 70 per cent of AGL’s customers rely on traditional energy supply, but AGL expects that in five to ten years more than half of its customers will have energy needs that include solar panels, batteries and electric vehicles.
Brown doesn’t want to overstate the effect home batteries are currently having on the electricity market, saying they are more likely to be shaving the top off peak wholesale prices than driving prices down on their own.
Even so, he says: “Consumer energy resources are going to increasingly become part of our energy system. There's no question. For customers, they obviously provide choice. They provide customers with control and also value from these technologies like solar and batteries.”
The electricity system will also need the ability to orchestrate household batteries collectively, so it can draw on them when needed to help stabilise the grid or meet demand.
“The issue that we've got at the moment with residential batteries is how much of that power can we actually access as and when it is needed for the grid, and that's something that we and the industry continue to work on with customers,” Brown says.
“It’s having access to that energy when it's in the batteries, so number one our customers can use it when they need it; and number two, if the customers don't need it, then can we utilise it back within the broader National Electricity Market (NEM) to help support other customers.”
Importantly, a condition of using the Cheaper Home Batteries Program is that batteries must be virtual power plant (VPP) ready. However, they do not have to be connected to a VPP, and the decision to connect remains with individual consumers.
A virtual power plant is a network of small, distributed energy resources, such as home batteries, rooftop solar systems and potentially electric vehicles, that are digitally linked and coordinated to operate like a single power plant.
The challenge of orchestration
Tim Nelson, an energy economist who conducted a government-commissioned review of the National Electricity Market last year, says Australia has already hit a critical mass of home batteries to create virtual power plants, but they require orchestration so that they benefit the electricity system as a whole – and not just the individual user.
In his review, Nelson raised concerns that home energy resources such as solar and batteries can respond to wholesale electricity prices without visibility for the Australian Energy Market Operator (AEMO), creating potential inefficiencies in the market.
It could lead to a scenario, for instance, where homeowners discharge their batteries into the NEM to take advantage of AUD 10,000 per megawatt hour wholesale prices, but the market operator is not aware of it until it happens.
“The market operator doesn't know the households are going to discharge their batteries because they are not required to submit offers at various prices like the large-scale generators are. So, in their demand forecast, the market operator may overestimate demand,” says Nelson, an Associate Professor at Griffith University.
“They've already got a large-scale battery discharging at the same time, which means they not only have residential and large-scale batteries discharging, but they also have to then direct a battery to charge at the same time to collect way too much supply that they weren't anticipating.”
Nelson’s review recommended that the operators of virtual power plants be required to notify AEMO of their intentions to discharge and charge at different price points.
Like AGL’s Brown, he doesn’t think home batteries will be the single solution to help Australia transition from fossil fuels to renewables, but he says they will help.
Because the batteries are relatively short duration – typically with enough capacity to power a household through the evening and overnight – they cannot solve long periods of low wind and solar generation on their own.
“They certainly have a positive impact in smoothing the price curve, but they don't deal with all of the risks because of that duration just not matching the length of renewable droughts,” he says.
Overall, however, Nelson is positive.
“It's a time to be optimistic,” he says. “For years we thought we needed to see technology develop to deal with the energy transition, but we're now at a point where the technology's there, so we just need to harness it and get on with the job.”
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