Renewable energy backed by battery storage continues to offer Australia the lowest-cost pathway to achieving net zero emissions, according to the GenCost 2025–26 Final Report jointly released by the Commonwealth Scientific and Industrial Research Organisation (CSIRO) and the Australian Energy Market Operator (AEMO).
Now in its eighth year, the annual GenCost report is regarded as Australia’s most comprehensive assessment of the costs of new-build electricity generation, storage and hydrogen technologies.
The report finds electricity generation costs are expected to continue falling in the near term as battery storage becomes cheaper and more widely deployed, while the cost of fossil fuel technologies is rising amid growing global demand for gas turbines, particularly from artificial intelligence-driven data centres in the United States.
Among its key findings, the report concludes that renewable energy supported by storage remains the most affordable investment option for Australia’s future electricity system, with solar photovoltaic (PV) and onshore wind expected to provide 93 per cent of Australia’s electricity by 2050 under a net zero scenario. Hydroelectricity, battery storage, transmission infrastructure and flexible generation such as gas and hydrogen would complement the renewable mix.
Battery storage is already reshaping Australia’s electricity market.
The report notes that lower battery costs and rapidly expanding storage capacity are increasingly competing with traditional gas peaking plants, helping reduce evening peak electricity prices.
Average wholesale generation costs across the National Electricity Market fell to around $104 per megawatt-hour in 2025, down significantly from the $189/MWh peak recorded in 2022 during the global energy crisis. Based on electricity futures markets, generation costs are expected to ease further to between $80 and $90/MWh by 2030.
CSIRO Chief Energy Economist and GenCost Project Leader Paul Graham said the report reflected rapidly changing global technology markets.
“As battery costs continue to fall and gas technology costs rise, batteries are increasingly becoming the preferred flexible generation technology in the near term.”
While batteries are expected to dominate new flexible generation investment, Graham said gas would still have an important supporting role.
“GenCost modelling finds gas technologies will still play a limited but important role in helping firm the electricity system, contributing around three to seven per cent of generation by 2050.”
One of the emerging factors influencing electricity generation costs is the surge in demand for gas turbines from hyperscale data centres powering artificial intelligence applications.
According to the report, the International Energy Agency has identified US data centres as one of the world’s largest sources of demand for gas turbines, pushing up prices globally and increasing the cost of gas-fired electricity generation.
Although the report found that some conventional technologies, including new black coal generation, could in some circumstances appear cost-competitive with renewables, it concluded that using such technologies would require more expensive emissions reductions elsewhere in the economy if Australia is to meet its net zero commitments.
Graham said geopolitical events continued to create uncertainty for future energy markets.
“Each year GenCost, with the help of stakeholders, seeks to understand how electricity technology markets are changing. The impacts of the Iran war and data centre demand for gas turbines are currently the strongest drivers of uncertainty.”
He added that this year’s report incorporated extensive stakeholder consultation, greater use of market data and new open-source modelling tools to improve transparency and industry engagement.
AEMO Executive General Manager of System Design Nicola Falcon said the collaboration between CSIRO and AEMO continued to provide trusted, independent evidence for Australia’s electricity planning.
“GenCost continues to be a respected example of collaboration between CSIRO and AEMO, providing trusted, independent insights that support planning for Australia’s future electricity system.”
CSIRO Director of Energy Dr Dietmar Tourbier said broad consultation remained central to the report’s credibility.
“Consultation remains central to GenCost, ensuring the report reflects diverse perspectives and the best available evidence to support transparent decision-making across the energy sector.”
Looking beyond 2050, the report projects that all new electricity generation technologies will cost more than $100/MWh, reflecting the significant investment required to replace Australia’s ageing electricity infrastructure rather than the cost of any single technology.
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