Gas-fired electricity generation in Australia has dropped to near-record lows, raising concerns about the future availability of dispatchable power as coal-fired plants are phased out. In August, gas generation during the evening peak fell by 67 percent compared to the same month last year, reaching just 1,162 megawatts (MW). This marks the second-lowest monthly level since January 2020 and the lowest ever recorded during winter months.
The decline in gas output has been largely attributed to the rapid growth of battery storage systems, which have increasingly displaced gas turbines during critical evening hours following sunset. Battery output during the evening peak in August averaged 2,758 MW—almost triple the amount generated in August 2025—and surpassed the entire gas fleet’s energy supply at those times by more than double. Battery storage’s share of firming energy during the evening peak has risen sharply from 0.4 percent in 2020 to nearly 49 percent this year, while gas’s contribution has dropped from 66.9 percent to just 20.6 percent over the same period.
This shift presents a significant challenge for developers contemplating new gas peaking plants, traditionally used to provide backup power when electricity demand spikes or renewable generation falls short. Gas turbines rely on sporadic high-price periods to deliver economic returns, but warmer-than-average winters this year in Tasmania, Victoria, and New South Wales have suppressed demand during peak times. The expansion of battery storage further reduces opportunities for gas plants to operate profitably during those intervals.
The implications are significant for Australia’s energy transition, led by the Labor government, which aims to replace retiring coal capacity with a mix of renewables, storage, and firm dispatchable sources. However, several states have shown resistance to closing coal plants without guaranteed firm replacement options, and the declining role of gas generation intensifies concerns about maintaining reliable supply.
To address supply security, the federal government has introduced a domestic gas reservation scheme requiring liquefied natural gas exporters to reserve up to 20 percent of production for the domestic market. The Australian Energy Regulator will determine the precise level of obligation under this flexible framework. The scheme is designed to ensure domestic gas availability and help stabilize prices for households, manufacturers, and electricity generators.
Despite this intervention, the economic challenge remains. While the reservation policy may improve gas availability and affordability, it does not fully address the difficulty of attracting investment in gas peaking plants that may only operate during limited hours each year. The government’s attempt to balance the role of gas as a transitional fuel with the growth of battery storage underscores the complex dynamics shaping Australia’s evolving energy landscape.
The issue also carries political weight. Discussions within the government have explored mechanisms to regulate coal plant closures, including increased economic pressure through the safeguard mechanism, highlighting the broader contest over control of the energy transition’s pace. Sustaining dispatchable capacity without driving up electricity prices remains a critical hurdle as Australia moves toward a lower-emission power system.