JACKSON HEWETT: With coal on the nose and gas at capacity, Australians are turning to storage

Thanks to Donald J Trump, security is now the buzzword of 2025.

The Europeans have determined they must go it alone on defence.

Australia is staring at an open Pacific with little insight into whether the US will come to our aid.

Economic individualism, particularly Trump’s tariff wall, will threaten the country’s industrial base.

To this mix, we must add energy security.

Household energy prices are up 40 per cent over the past two years, causing economic pain for consumers living through a cost-of-energy crisis. Businesses are crying out for relief, citing “relentlessly rising energy costs” as a handbrake on profitability.

Last week, the energy regulator declared prices in some areas would need to rise by as much as nine per cent, driven by the cost of installing new transmission to connect renewables, and the high price of gas feeding into the peaking plants propping up intermittent renewable supply.

Our ageing coal fleet will not last much longer, sucking up government funds to keep operating. The fast-deteriorating Eraring power plant alone requires $225 million annually from the NSW Government to stay online — a lifeline likely to be extended beyond its original 2027 closure date. More than half the coal fleet was built in the 1980s and is reaching the age where their decline accelerates.

It would take a brave investor indeed to build a new coal power plant, and the Coalition’s nuclear plan is at least a decade away.

That leaves gas peaking plants as the fallback to fill the gap.

But here’s where the even worse news kicks in.

Gas turbines are sold out.

At one of the world’s largest energy conferences in Houston last week, the CEO of NextEra—a power company with nuclear, gas, solar and wind assets—dropped an energy bombshell.

Global demand for gas generation has outpaced supply, leaving power companies like his waiting up to five years for new gas turbines.

Companies such as GE are scrambling to catch up, doubling their order book for gas turbines from 48 to 80 units. But almost all of those orders are earmarked to satisfy US domestic demand, to power the hyper-scalers driving artificial intelligence processing. GE said it is sitting on a backlog stretching out to 2028.

Gas turbines aren’t getting cheaper either. According to the US Energy Information Administration, the per-kilowatt cost of a gas turbine doubled between 2021 and 2022, and has continued to rise in the high single digits since.

Gas itself is no bargain.

Where gas once loosely tracked oil’s trajectory, that is no longer the case. Oil prices are down 20 per cent over the past year to $US76 per barrel, but gas has more than doubled from $US1.70 to $US4.08 per million BTU.

The increase in the price of gas is one of the main reasons the regulator raised default prices last week and prompted commentators to lament the failure of successive governments to lock in a strategic gas reserve.

Our gas producers are exporters, meaning gas from Australian wells is priced to the international market. For those against subsidies, imagine how much it would cost to compensate gas exporters for the gap between domestic expectations and what they could achieve on the global market.

Energy demand is set to almost double by 2050, driven by the shift from gas to electric heating, rising EV uptake, and rapid data centre growth, according to the Australian Energy Market Operator. It forecasts 90 per cent of coal-fired power will close by 2035, with all shuttered by 2040. Replacing them will require six times more grid-scale solar and wind, quadruple the rooftop solar, and 15 times more battery storage. Nearly 10,000 km of transmission lines, costing $16b, will have to be built.

In the meantime, the country faces the prospect of electricity prices that, at best, remain stubbornly high — or continue to rise.

Propping up ageing coal plants will be costly, and even then, the older ones are more likely to break down during heatwaves, which are also periods of peak demand. That means grid reliability will remain precarious.

Doing all that will likely mean more energy insecurity, and the likely continuation of the $3.5b worth of $300 household rebates — a short-term fix likely to be extended by whoever forms government at the next election.

It’s no wonder so many households are voting with their wallets and exploring battery storage.

Rooftop solar is already flooding the market with excess energy during the day, resulting in negative wholesale prices for a quarter of the year in Victoria and South Australia, according to Tim Buckley, a director at Climate Energy Finance and a former director at the Institute for Energy Economics and Financial Analysis.

It’s one reason Australia is one of the fastest-growing markets for grid-scale batteries, with major investors such as Blackstone absorbing that surplus energy during the day to sell it back into the grid at night.

Australian households should get in on the action, Mr Buckley argues, and would be better served if the government redirected the bandaid of household rebates to subsidise battery uptake.

The number of homes with batteries increased to 320,000 in 2024, according to consultancy SunWiz, but that remains a fraction of the four million homes with 25GW of rooftop solar currently installed.

As it stands, those four million homes produce up to a quarter of the maximum electricity capacity of the National Energy Market, but without a battery, households aren’t benefiting. State feed-in tariffs are being slashed, or households are being charged for contributing to an already saturated grid.

Instead, Australians should be capitalising on Chinese battery production, which has pushed costs down by 90 per cent over the past decade and is forecast to fall another 20 per cent this year, according to Mr Buckley.

In his view, household battery storage is no longer a fringe technology, but the most immediate and practical solution to Australia’s looming energy security crisis. Batteries allow households to store excess solar energy during the day — when wholesale prices are often negative — and use it during the evening peak, reducing strain on the grid and lowering bills.

“What we need to do,” Mr Buckley argues, “is massively scale up household battery deployment—not by increments, but by 400 per cent this year, and sustain that growth every year for the next 15 years.”

He points to Western Australia’s $5000 subsidy for household batteries as a model—”that’s maybe on the high side,” he concedes—and calls for similar policies across the eastern states, especially targeted at regional areas hardest hit by rising prices and losing amenity due to new transmission infrastructure.

Mr Buckley also believes legislative change is needed to allow apartment dwellers and public housing tenants to install shared batteries — even if they don’t have solar panels — so they can draw on excess supply.

Reducing the upfront cost of battery installation could cut the payback period for a solar system to five to seven years, according to SunWiz, and widespread adoption could accelerate efforts to shore up the national grid.

“What we actually want to do,” Mr Buckley said, “is use batteries to optimise the existing $105 billion Australia has already invested in the grid, rather than double down and put another $20 billion of capital on the table for more grid.”