Cheaper Home Batteries Program: A Brief Analysis of Australia's Policy

Policy background

Australia’s residential energy-storage installations have risen markedly since the Cheaper Home Batteries Program came into effect on July 1, 2025. The initiative stems from the Labor Government’s long-standing commitment to clean energy transition. When it comes to energy policies, the governing Labor Party and the oppositions, including the Liberal and National parties, remain fundamentally divided, with the former prioritizing renewable energy and the latter advocating for nuclear power.

For Labor, climate action and energy transition constitute core pillars of its governing agenda. The residential storage subsidy is a practical embodiment of this policy concept, reinforcing Labor’s political identity as a pro–clean-energy party while also fulfilling a key electoral pledge made prior to its re-election. Labor also prefers to steer economic and industrial development through public investment. The AUD 2.3 billion residential storage subsidy, along with an earlier AUD 2 billion support package for the aluminium sector, underscores the party’s preference for deploying public spending instruments to advance policy objectives.
 

Policy details

The subsidy received under the program hinges on three principal factors: the usable energy capacity of the battery system, the number of STCs allocated per kWh of usable capacity, and the prevailing market price of STCs.

In operational terms, the calculation begins with verifying the system’s usable capacity. The applicable STC allocation for the installation year is then multiplied by the market trading price of STCs to derive the final subsidy amount. For illustration, an 8 kWh residential battery system costing AUD 10,000 would receive roughly AUD 2,976 in 2025, equivalent to around 30% of the installation cost. This estimate is based on the Australian government’s indicative values assuming an STC price of AUD 40 and an allocation of 9.3 STCs per kWh in 2025. It should be noted that the final subsidy will be subject to the actual STC market price at the time of installation.

Subsidy calculation formula:
Subsidy amount = Usable capacity × STC allocation (by year) × STC price
Example:
2,976 AUD=8 kWh × 9.3 × 40 AUD


 

Policy impact

Following the rollout of the subsidy, Australia’s residential storage market has grown rapidly. InfoLink’s data indicate that Q3 installations alone exceeded 1 GWh, about 1.7 times last year’s full-year total, demonstrating the policy’s strong stimulus to end-user demand. Australia’s residential installations in 2025 are expected to approach U.S. levels, making it one of the key growth engines in the global residential energy storage market.

Meanwhile, several products have been recalled over safety issues, underscoring the need to place product safety at a higher priority amid rapid market expansion.

Public data indicate that from July 1 to October 21, average registered system capacity has risen from 15-20 kWh to 20-25 kWh, with some individual systems even surpassing 30 kWh. This trend reflects how the subsidy is designed to be directly tied to battery usable capacity: larger capacity receives higher total subsidies. While overall system costs increase, the policy effectively reduces unit costs on a per-kWh basis.

Larger-capacity batteries carry greater value as a flexible resource. With mandatory VPP participation under the subsidy scheme, a mature business model of VPP would earn higher revenues from peak-to-valley arbitrage and secure additional returns from grid services such as frequency regulation, positioning as a high-value grid asset. These factors are driving end-users to favor larger-capacity battery energy storage systems (BESS).
 

Policy sustainability

As subsidies gradually decline from the government’s estimated AUD 372/kWh in 2025 to AUD 188/kWh by 2030, more end-users are expected to bring installations forward. Drawing on Australia’s publicly available federal data and key assumptions, we provide a preliminary estimate of how long the AUD 2.3 billion subsidy pool is likely to sustain.

Key assumptions: Each system is 18 kWh, with the STC factor taken as the 2025–2026 average of 8.9.

• Subsidy per system = 18 kWh × 8.9 × 40 = AUD 6,408.
• Total systems supported by the AUD 2.3 billion subsidy pool = AUD 2.3 billion ÷ AUD 6,408 ≈ 359,000 systems.
• Under an optimistic scenario, assuming 25,000 installations per month, the subsidy pool is expected to be depleted around mid-September 2026.
• Under a conservative scenario, assuming 20,000 installations per month, the subsidy pool is expected to be depleted in early January 2027.

These static-parameter estimates are for reference only. In practice, several additional factors may affect outcomes. Although installations are currently accelerating faster than expected, the scheduled decline in STC factors may curb demand in later years. If STC prices exceed AUD 40, the subsidy pool could be consumed more rapidly. Furthermore, any state-level incentives introduced could amplify demand through policy stacking.
 

At the current stage, while the subsidy may be exhausted earlier than anticipated, the Labor Party’s energy-transition agenda suggests that follow-on targeted support remains possible. The form and scale of any subsequent measures, however, will depend on future fiscal conditions and electoral dynamics.