Australia’s biggest gas advocates are quietly swapping out peaking gas plans for big batteries
Kwinana gas fired power station. Credit: Sumitomo.
Rachel Williamson
Aug 18, 2025
Battery, Storage
Big batteries are rapidly displacing plans for gas peaking plants, as cost and commercial factors prompt a rethink on how much the owners of these sites want to spend.
Two of the country’s biggest battery projects announced in the past weeks are both to be built on sites previously earmarked for gas turbines and peaking power plants.
But the difficulty in obtaining turbines, their soaring installation and fuel costs is opening the door for big batteries, where costs are falling rapidly and where developers and owners are putting high values on their speed and flexibility – and lack of emissions.
An analysis of data sourced from RenewMap shows there are a number of sites where batteries have already been swapped in for a planned gas generator, or battery construction has superceded much older plans for gas.
“It’s certainly the case that we’re seeing connecting points being sized up for batteries across the board… [where] they’ve essentially transitioned it to a battery project,” prominent energy systems researcher Dylan McConnell told Renew Economy.
“You also have a phasing change where people were proposing simply to put in a gas peaker [and now] they’re putting in a battery but still with an option for a gas peaker down the road.
“The emergence of batteries has meant that plans to build some of this stuff have been pushed back or removed entirely.”
A US executive succinctly laid out the reasons why batteries are competing away gas generation this week: cost and speed.
“Battery storage is now one of the most competitive solutions for meeting capacity needs and is superior to gas turbine,” said Julian Nebreda, CEO of US battery company Fluence, in an earnings call this week.
“It’s not just about cost, it’s also about speed and scalability. Generally, battery projects can be permitted, sited, and deployed far more quickly than new fossil generation… We have already seen this shift in real world operations.
“In June, batteries supplied 26 per cent of Kaizen’s evening peak demand, surpassing gas for the first time. That’s a landmark moment for our industry.”
Change of tack
In Australia, rhetoric around the need for gas peaking plants has surged, but permitting and construction data shows that not only are approved projects not getting up, but they are being replaced or displaced by batteries.
The most famous is AGL’s 500 megawatt (MW), 2,000 megawatt-hour (MWh) Tomago battery energy storage system (BESS) in New South Wales (NSW).
AGL had plans approved at both state and federal levels for the 250 megawatt (MW) Newcastle power station on the same site. But it dumped the project in July 2022 only a year after securing all permits, according to the Australian Energy Market Operator (AEMO) National Energy Market (NEM) generation report for that month.
It is still on the AGL website.
Instead, this July AGL committed to building the Tomago BESS, which also happens to be a gas alternative for Australia’s last remaining aluminium smelter, Tomago Aluminium.
In South Australia, Alinta Energy’s 300 MW Reeves Plains gas peaking plant, fully approved seven years ago, has been sidelined by an eponymous 250 MW, 1000 MWh BESS now under construction and to be followed by a second stage of the same size.
Northwards, on Queensland’s Western Downs, plans for two more gas generating units have hit a standstill as nearby battery and solar proposals swoop in.
Alinta and Origin Energy both own gas generation units on the east and west sides of the big Braemar substation, and both were planning additions.
Alinta has since abandoned plans for a 450 MW Braemar stage 3 addition, and vague plans for a stage 4, the former approved 16 years ago by state and federal bureaucrats.
Origin’s proposed 500 MW Darling Downs stage 2 gas unit on the western side is still listed as in development on RenewMap, but the company has had 14 years to start work since it won the final approval.
What is being pushed through the federal EPBC process right now is an Origin-owned 500 MW, 2000 MWh BESS that will sit in between the operating gas plant and the site of the paused, abandoned or simply forgotten peaking plant.
Putting even more pressure on the last remaining gas proposal are two other big batteries proposed by APA Group and Mirabou in the north and south, and to the west is the operating 110 MW Darling Downs solar farm.
In other places such as Torrens Island in South Australia and Mortlake in Victoria, batteries have been built next to working gas plants.
It’s a situation that the COO of Torren’s Island owner AGL, Markus Brokhof, freely admits is cannibalistic, as the battery eats the gas generator’s business.
And it’s tricky to see how a gas generator like the 200 MW Winton reserve near Ballan in central Victoria is to be built when it is surrounded by 370 MW of operating solar farms, 310 MW of proposed solar, and 820 MW, 1680 MWh of battery storage.
Building batteries is just faster and the Kurri Kurri gas peaker is the only recent experience building new gas generation “and that’s been a bit of a disaster”, says McConnell.
Expensive and slow
Fluence’s Nebreda was speaking about the US situation when he said it is cheaper and easier to build batteries over gas, but the same rings true for Australia – perhaps even more so given the much higher price of gas here.
Anyone looking to build gas plants is running up against similar supply chain constraints as offshore wind, with lead times for key equipment running into the years.
“Batteries are faster to permit, quicker to build, they’re modular and lower cost,” says Nexa Advisory principal Stephanie Bashir.
“In terms of supply chains, gas turbines are currently subject to lead times of four years or more.”
Drawn out order wait times are not the only issue. The Tomago, Darling Downs and Reeves Plains examples were all replacing gas plans that had already been approved. Projects that aren’t approved face greater regulatory and environmental scrutiny, says BloombergNEF senior associate Sahaj Sood.
“New gas plants are likely to be much harder to build in Australia because of long wait times for new turbine orders and greater regulatory and environmental scrutiny,” he told Renew Economy.
“Running a gas plant in Australia is also more expensive than in the US, and with the market operator forecasting a gas supply shortfall in the south-eastern states by 2028, gas prices could climb further, making batteries even more attractive as a potential alternative source of fast-responding dispatchable capacity.”
Add in tight gas markets, and new gas developments are likely to be stymied by a lack of easily accessed fuel and the market operator’s forecast of a looming fuel supply shortfall, he says.
Big batteries as cash cows
Furthermore, big batteries are reshaping the NEM in their own image, and not necessarily in a good way.
In the second quarter, big batteries set the highest battery discharge prices with an average of $478/MW, almost double the $245/MWh average in the same period last year.
That is nearly three times the average price set by gas generators, and 3.5 times that of hydro.
As Renew Economy reported, owners of gas generation are simply buying control of the batteries, or building their own, and using them in the same way to distort market pricing.
For this reason, AGL said in its annual results this week it expects big batteries to be its new cash cow as coal and gas disappear from the grid.
It’s a view shared by almost everyone because while wind and solar investment has completely disappeared, new battery installations are setting new records.
Sood says battery uptake in 2025 so far is already at a record high for a single year. His team is forecasting cumulative installed capacity could more than quadruple to 14.3 gigawatts (GW) by 2030.
Gas is the new government asset
However, as Bashir says, gas still has a role to play, and a bigger one than would be needed if transmission construction continues to be delayed.
Although overall gas generation is falling, winter peaks in the years to 2024 have surged, according to a presentation given by McConnell earlier this year.
Gas generation is actually falling over time, but winter peaks are becoming more pronounced — or at least they were before the influx of battery storage this year. Image: Dylan McConnell
But while AEMO’s Integrated System Plan does say, based on current modelling, that gas will be needed on the NEM in a decade, it also means more new gas isn’t needed today.
And that creates a tricky puzzle: if it’s not needed, who is going to pay to build it now? And are we sure it will be the right answer in a decade?
Sood and McConnell both suggest gas will be edged out of private hands and be funded by governments.
Sood notes that Queensland, NSW and South Australia are considering their own build-outs of new gas capacity, using revenue underwriting contracts to ensure supply security as coal plants retire and help balance variable renewable energy output.
McConnell points to the Nelson Review of the NEM, which in recommendation 8D suggested creating a strategic reserve of assets funded through the newly proposed long-term contracts function.
“Gas generators are the sort of asset that you might expect in a strategic reserve that can provide that one-in-10-year backup. There is public value in this but it is not well suited to be delivered by the private sector,” he says.
McConnell also wonders whether at the end of the next 10 years, gas will be the solution at all.
Maintaining gas networks to deliver fuel to generators for once-in-five or 10 year events is an expensive way to protect against week-long wind and solar droughts.
He suggests that fossil fuel-fired generators run on diesel, then later on green fuels might be a better – and perhaps even a more sustainable – option.
“There are different technologies for this role that gas will have in the future. It doesn’t have to be fossil gas and it’s probably better that it not be,” he says.
He points out that the three new, giant 30 megalitre tanks at the Viva refinery in Geelong contain about the equivalent energy to Snowy 2.0 at a cost of $75 million.
Whether big batteries rise to fill the void in the coming decade, or liquid fuels, it’s one more reason why the surge in enthusiasm for new gas generation is unlikely to turn into a raging commercial success.
And as more bean counters at gas developers fail to make the numbers add up, batteries are looking to be increasingly the way of the future
reneweconomy.com.au |
