Emerging ESS markets—Australia: how could expanded residential storage subsidies reshape demand?

Introduction

Following the Australian government’s launch of the Cheaper Home Batteries Program in July 2025, the country’s residential energy storage market entered a phase of explosive growth. Just five months later, in December 2025, the government announced an additional AUD 4.9 billion in subsidies for residential storage, bringing the total to AUD 7.2 billion.

InfoLink had previously projected that, once the initial AUD 2.3 billion allocation was exhausted ahead of schedule, the government would introduce another round of large-scale incentives to maintain market momentum. The earlier-than-expected rollout of the follow-up subsidy expansion underscores that end-market demand has significantly exceeded earlier forecasts.

This article provides a further analysis of Australia’s residential storage market by examining installation trends following the first subsidy round, comparing the two rounds of incentives, and assessing the future market outlook.
 

2025 market review: surge in Australia’s residential storage capacity additions

According to InfoLink’s research, Australia’s residential storage capacity additions reached 4.2 GWh in 2025 and are projected to rise to 7 GWh in 2026. Following the launch of subsidies in July 2025, capacity additions surged in 3Q25 and 4Q25. Notably, additions in 4Q25 alone were roughly three times the full-year total in 2024.

Data from the Clean Energy Regulator show that the average installed capacity reached 19.5 kWh in 3Q25 and further rose to 26.8 kWh in 4Q25. This suggests a significant increase in average system capacity amid continued subsidy support since July 2025.


Source: InfoLink’s Emerging Market Energy Storage Demand Database
 

Comparison of the first and second rounds of subsidies

In December 2025, the Australian government announced an additional AUD 4.9 billion in funding on top of the initial AUD 2.3 billion residential storage subsidy, bringing the total budget to AUD 7.2 billion. Despite the substantial increase in funding, the second round introduced notable adjustments to both the subsidy design and the phase-out mechanism. Starting May 2026, the subsidy will adopt a tiered structure. Meanwhile, the small-scale technology certificate (STC) factor will be reduced on a semi-annual basis, with a faster phase-down rate compared to the previous scheme.




Source: Based on official information from the Australian Federal Government and consolidated by InfoLink’s Emerging Market Energy Storage Demand Database.
 

Example of subsidy calculation under the new policy:

Assuming a fixed STC clearing price of AUD 40 (excl. tax) as disclosed by the Australian government,

For a 40-kWh residential storage system, the total subsidy would be approximately AUD 6,583:

• 14 kWh × 6.8 × 100% × AUD 40 = AUD 3,808
• 14 kWh × 6.8 × 60% × AUD 40 ≈ AUD 2,285
• 12 kWh × 6.8 × 15% × AUD 40 ≈ AUD 490

STC factor: calculated at 8.4 for the first-round subsidy (current level) and 6.8 for the second-round subsidy.

Under the new policy, the marginal subsidy benefit declines more clearly with increasing system capacity. This reflects the Australian government’s policy intent: the tiered subsidy structure guides end-users toward rational system sizing and discourages oversizing for incentive maximization, while calibrated STC factors mitigate the risk of rapid subsidy depletion from short-term installation surges.
 

Outlook: Strong growth momentum for residential storage in Australia

Under the new policy framework, InfoLink expects the second-round subsidy to be exhausted by mid-2029. In the near term, a pre-May installation rush will drive a sharp increase in installed capacity. Installers are likely to face significant delivery pressure, with nationwide scheduling bottlenecks and potential short-term shortages of key components such as mounting structures and inverters.

After May, installation volumes may see a brief correction. Over the longer term, however, sustained subsidy support is expected to drive strong growth in Australia’s residential storage market.