Australian energy storage revenues collapse. Arbitrage profits fall by 84%

The rapid growth in the number of utility-scale battery energy storage systems in Australia has begun to trigger a phenomenon known as revenue cannibalisation. According to a recently published BNEF report, price arbitrage profits fell by as much as 84% year on year in the second quarter of 2026, even though batteries have officially displaced gas as the main source of grid stability.

Victims of their own success

According to the “BNEF Australia Power Market Quarterly” report, average wholesale electricity prices in the Australian market fell by 40–65% year on year. This was driven by record wind and solar generation, which accounted for 35% of the energy mix, as well as the large-scale discharge of stored energy during the evening peak.

Key findings from BNEF data for the second quarter of 2026:

• Taking over the role of gas – battery energy storage systems met 8.4% of electricity demand at 6:00 p.m., up from 3.1% a year earlier. Over the same period, the share supplied by gas-fired power plants fell from 12.6% to 6.8%.
• Price setting – batteries set wholesale electricity prices in as many as 39% of trading intervals, compared with 19% a year earlier.
• Decline in arbitrage profits – growing competition between storage facilities narrowed price spreads. Average arbitrage earnings fell to AUD 60/MWh, down 84% year on year, while total market revenue from arbitrage contracted by 57% to AUD 53 million.

Saturation of the ancillary services market

A similar trend affected the frequency control ancillary services market. Storage revenues from these services fell by 51% year on year, to AUD 4.8 million, due to the market’s rapid saturation with new capacity. One exception was the hybrid Tailem Bend 2 storage facility operated by Vena Energy, which generated the highest average FCAS value, at AUD 27/MWh/day.

Analysts emphasise that the era of easy, high returns in Australia’s BESS market has come to an end. Experts say investors must begin shifting towards long-duration energy storage and more advanced energy portfolio management strategies.