GenCost 2025-26: Renewable energy and energy storage become a stable anchor amid global uncertainty

GenCost 2025-26: Renewables and Storage Become a Stabilizing Anchor Amid Global Uncertainty

Australia's national science agency, CSIRO, and the Australian Energy Market Operator (AEMO) have jointly released the eighth edition of the GenCost 2025–26 final report. The report's central conclusion is that renewables backed by storage remain the lowest-cost pathway for Australia's electricity system to achieve net zero emissions, and are playing a role akin to a "stabilizer" amid global energy price volatility, geopolitical conflict, and rising energy demand from data centers.

Industry Background | A Cost Coordinate System Under Global Uncertainty

GenCost is now in its eighth year and is one of Australia's most comprehensive annual assessments of the costs of new-build generation, storage, and hydrogen technologies, completed jointly by CSIRO and AEMO. Its purpose is not to forecast the investment returns of individual projects, but to provide a comparable technology cost benchmark for power system planning, grid investment decisions, and policy discussions.

In terms of market prices, the situation in the National Electricity Market (NEM) has improved markedly from its peak. The report shows that the average NEM generation price in 2025 was about 104 $/MWh, while in 2022, driven by high global gas prices, it reached a peak of 189 $/MWh. Market expectations based on electricity futures prices suggest that generation costs could fall further to the 80–90 $/MWh range by 2030.

Behind this change are two cost forces moving in opposite directions. On the one hand, battery storage technology continues to reduce costs and installed capacity is expanding rapidly; on the other hand, the cost of gas-fired generation technology is rising due to increased global demand for gas turbines. Data from the International Energy Agency (IEA) is cited in the report as key evidence: U.S. data centers have become one of the world's largest sources of gas turbine demand, and the resulting sustained cost increases are expected to continue. In addition, the report ranks the Iran war and data center gas turbine demand as the two strongest sources of uncertainty at present.

Current Developments | The "Scissors Gap" of Falling Battery Costs and Rising Gas Prices

The report's most important techno-economic judgment is the divergence between the cost curves of battery and gas technologies.

First, battery storage continues to reduce costs and is beginning to change market structure. As low-cost battery capacity continues to grow, storage is entering direct competition with traditional gas peaking units and exerting downward pressure on evening peak electricity prices. This change has not remained at the level of cost models; it has begun to be reflected in price formation in the electricity market.

Second, cost pressure on gas-fired generation technology comes from the global supply chain. Strong demand for gas turbines from U.S. data centers has pushed up equipment prices, driving up the capital costs of gas technology. Paul Graham, CSIRO Chief Energy Economist and GenCost project lead, noted: "As battery costs continue to fall and gas technology costs rise, batteries are increasingly becoming the preferred flexible generation technology in the near term."Third, improved transparency in methodology. This year’s report incorporates broader stakeholder feedback, introduces market data into near-term forecasts for the first time, and uses open-source modeling tools to improve the verifiability and transparency of results and make it easier for industry and research institutions to engage more deeply in discussion.

Fourth, deeper coordination between policy and planning. Nicola Falcon, Executive General Manager for System Design at AEMO, said that GenCost continues the tradition of collaboration between CSIRO and AEMO, providing credible, independent insights for planning Australia’s future electricity system. Dr Dietmar Tourbier, Director of CSIRO Energy, emphasized that the consultation process is at the heart of GenCost, ensuring that the report reflects diverse perspectives and the best available evidence.

Impact on the Energy System | Supply Structure, Flexibility, and Electricity Prices

From a system perspective, this report answers several key questions.

How will the supply structure change? Under the net zero scenario, solar PV and onshore wind remain the backbone of the future low-cost electricity system and are expected to supply 93% of Australia’s electricity by 2050. The remainder is supported by hydropower, storage, transmission, and flexible generation resources such as gas and hydrogen.

How will energy security and grid stability be safeguarded? The report finds that gas technologies will still play a “limited but important” role, contributing about 3%–7% of generation by 2050, mainly to provide support to the power system. This means that in a highly renewable system, flexible capacity is not optional but a component of system reliability.

Where are electricity costs heading? In the medium term, battery cost reductions and the competitive effects of capacity expansion are pushing down evening peak prices, and futures markets also point to further cost declines by 2030. In the long term, however, the cost logic will shift: as existing generation assets are gradually retired, future electricity prices will increasingly reflect the construction costs of replacement infrastructure. The report projects that by 2050, the cost of all new-build generation technologies will exceed 100 $/MWh.

How should carbon reduction pathways be weighed? The report explicitly states that although some non-renewable energy technologies (such as new-build black coal) may be cost-competitive with renewables, their use would require higher carbon abatement costs elsewhere in the economy to achieve Australia’s net zero target. This assessment elevates the discussion from a simple comparison of generation costs to the level of whole-system abatement costs.

Challenges | Costs, Geopolitics, and System Constraints

Although the lowest-cost pathway is clear, the challenges reflected in the report are equally concrete.

Cost risks for flexible resources. Gas turbine prices are continuing to rise, driven by global data center demand, weakening the economics of gas as a flexible power source and making planning that relies on gas for system support face greater uncertainty.Long-term replacement cost. By 2050, as aging assets are systematically replaced, no new-build generation technology is expected to fall below 100 $/MWh. This means the current state of low marginal costs is not the norm, and future electricity tariff structures will more closely reflect the capital expenditure on new infrastructure.

Geopolitical uncertainty. The report lists the Iran war and data center gas turbine demand as the two strongest drivers of current uncertainty, indicating that energy technology costs can no longer be decoupled from the global security situation and the digital infrastructure investment cycle.

The limits of modeling and forecasting. Even with the introduction of market data and open-source tools, technology cost forecasts still face rapid changes in supply chains, policy, and demand. The report reduces this risk through multiple rounds of stakeholder consultation, but uncertainty itself cannot be eliminated.

The hidden constraints of system-level supporting infrastructure. The report places energy storage, transmission, hydropower, and hydrogen into the same cost framework, which itself suggests that the speed at which the share of renewable energy rises ultimately depends on whether these supporting components can advance in sync, rather than on the cost curve of any single generation technology.

Future Outlook | The Energy Landscape in the Next 5 to 20 Years

From the perspective of the next 5 to 20 years, GenCost 2025–26 offers several globally relevant insights.

First, energy storage will become a structural force in the electricity market. The report shows that falling battery costs and capacity expansion have begun to reshape the market, competing with gas peaking and driving down evening peak prices. If this trend continues, energy storage will no longer be merely a complement to renewable energy, but will become an independent variable determining the shape of electricity market prices.

Second, the backbone position of solar PV and onshore wind is further confirmed under low-cost scenarios. A 93% share of electricity supply by 2050 means that the planning focus of future power systems will shift from “what type of generation to add” to “how to integrate a high share of variable power sources.”

Third, the focus of electricity costs will shift from operating costs to capital costs. As existing assets retire, electricity prices will increasingly reflect the investment needs of new generation, storage, and transmission facilities. This places new requirements on electricity market design, long-term power purchase agreements, and capacity mechanisms.

Fourth, the technological competition landscape will be more affected by global supply chains. Demand for gas turbines from U.S. data centers has already been transmitted through equipment prices into Australia’s technology cost assessments. This indicates that future energy competition will occur not only among generation technologies, but also among compute infrastructure, manufacturing capacity, and key equipment supply.

Fifth, systematic comparison of carbon abatement costs will become the core of policy. The report’s conclusion on new-build black coal suggests that comparing the levelized cost of electricity of a single technology is insufficient to support net-zero decisions; policymakers need to use whole-system carbon abatement costs as the benchmark.For the energy industry, the value of GenCost 2025–26 lies in providing an assessment framework that places renewable energy, energy storage, gas, hydrogen, and transmission in the same coordinate system. Under this framework, the combination of renewable energy plus storage is not only an emission reduction pathway but also a cost-buffering mechanism for addressing global energy shocks.

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Source: CSIRO, GenCost 2025–26: Renewables and storage a source of stability amid global uncertainty, news release dated July 15, 2026. Original link: https://www.csiro.au/en/news/All/News/2026/July/GenCost-2025-26

Keywords: renewable energy, energy transition, energy storage, battery systems, solar power, wind energy, grid modernization, energy investment, decarbonization, climate policy