Can Gas Turbines Keep Australia's Grid Stable Through the Energy Transition?

Introduction

Australian energy policymakers face an uncomfortable truth. As coal-fired power stations retire and renewable energy penetration increases, the grid's ability to respond to sudden fluctuations in supply and demand is becoming dangerously stretched. Solar and wind are intermittent by nature—the sun does not always shine, and the wind does not always blow. When they falter, something must fill the gap instantly. The answer, according to the Australian Energy Market Operator, is flexible gas-powered generation. The Australia gas turbine market is emerging as the critical backbone of the nation's energy transition, providing the rapid-response capacity that batteries alone cannot yet deliver at scale. Valued at AUD 762.9 million in 2025, the market is projected to reach AUD 1,173.1 million by 2034, growing at a compound annual rate of 4.65 per cent from 2026 to 2034. These figures reflect an industry being redefined by its role in securing Australia's energy future.

What's Driving Growth of Australia's Gas Turbine Market?

The renewable energy transition is creating unprecedented demand for flexible backup power. As solar and wind become more prevalent, their intermittent nature creates grid stability challenges. Gas turbines are increasingly being deployed to provide rapid-response backup power, ensuring reliability during peak demand or renewable supply fluctuations. Combined-cycle gas turbines and aeroderivative turbines are gaining traction due to their high efficiency and quick start-up capabilities.

Coal plant retirements are opening the door for gas-fired generation. Aging coal-fired plants are being phased out across the National Electricity Market, further driving the need for gas-based power as a transitional energy source. As of 2022, Australia's energy mix remained heavily dependent on fossil fuels at 90 per cent of the total, where natural gas supplied 27 per cent of the supply and 34 per cent of power generation. The gap left by retiring coal must be filled, and gas turbines are the most commercially viable solution.

Government policy is actively supporting gas as a firming technology. While the federal government's decision to exclude gas from the Capacity Investment Scheme has sparked controversy, state governments are moving decisively. The Queensland Government has pledged a $479 million investment for CS Energy to develop the Brigalow Peaking Power Plant, the state's first new gas-fired power station in more than a decade. Queensland's Energy Roadmap modelling indicates the state may have up to 4.1 GW of gas-fired generation capacity by 2030, increasing to between 6.1 GW and 8.3 GW by 2035.

Investment in hydrogen-capable turbines is accelerating. Australia is investing heavily in green hydrogen production, aiming to become a global leader in this emerging sector. Gas turbine manufacturers are responding by developing and retrofitting units to run on hydrogen blends or 100 per cent hydrogen, reducing carbon emissions. Major energy companies are piloting hydrogen-compatible turbines to align with Australia's long-term sustainability goals.

Three Trends Reshaping the Industry

Gas turbines are being redefined as grid stabilisers rather than baseload generators.

The traditional role of gas turbines as continuous power producers is shifting. AEMO has declared flexible gas-powered generation the essential "ultimate backstop" for a grid transitioning to high levels of renewables. Gas assets are now valued not just for energy supply during peak demand, but for providing critical grid physics like inertia and frequency control. AEMO is encouraging investment in gas turbines fitted with clutches, enabling them to act as synchronous condensers. This shift in asset utilisation is transforming the economics of gas turbine investment, with operators earning revenue from both energy sales and grid services.

New gas-fired generation projects are finally moving forward after years of stagnation.

The Brigalow Peaking Power Plant represents a significant milestone. Located next to CS Energy's existing Kogan Creek Power Station in Queensland's Western Downs, the 400-megawatt facility will be capable of reaching full output within five minutes, delivering reliable energy to more than 150,000 Queensland homes during peak demand periods. GE Vernova has been appointed to deliver the gas turbines for the project. Once operational in 2028, the plant will provide firming capacity for peak electricity demand while complementing variable renewable energy. Beyond Brigalow, Stanwell Corporation is progressing its Lockyer Energy Project and CleanCo is investigating a new open-cycle gas turbine at Swanbank. Together, these three projects could deliver more than 700 MW of new gas-fired generation capacity by the start of the next decade.

Rising turbine costs are reshaping project economics and investment decisions.

The cost of building new open-cycle gas turbines has "increased significantly" since 2022. CSIRO has found that the bill for building gas power plants has soared by 32 per cent over 2025-26 amid soaring turbine technology costs, with gas costs not projected to return to normal levels until 2035. This cost inflation is forcing project developers to carefully evaluate investment timing and scale. At the same time, the cost of battery storage has fallen, creating competitive pressure on gas peaking plants. The Reliability Panel has proposed tweaks to reliability standards to balance the cost of building new gas generation against the value customers place on reliability.

What the Market Numbers Actually Tell Us

A market expanding from AUD 762.9 million to AUD 1,173.1 million over nine years suggests significantly greater commercial activity across turbine manufacturers, engineering procurement and construction contractors, maintenance service providers, and project developers. The 4.65 per cent compound annual growth rate signals steady, sustainable expansion rather than speculative boom. For investors and industry participants, this trajectory indicates that gas turbines are becoming a permanent fixture in Australia's energy system, with demand driven by the predictable retirement of coal plants and the intermittent nature of renewables. AEMO is currently forecasting gas-fired generation capacity to increase from 11.5 GW now to 15 GW by 2050, including replacement of 9.3 GW of current capacity that is expected to retire over that period. This visibility provides long-term confidence for capital investment decisions.

Where New Opportunities Are Emerging

The most significant opportunities lie at the intersection of hydrogen capability and grid services. Hydrogen-compatible turbines represent a strategic investment for companies seeking to align with Australia's decarbonisation goals while maintaining a revenue-generating asset base. The Australian Carbon Credit Unit scheme awards one carbon credit for every tonne of CO₂ avoided or sequestered, enabling gas turbine operators to benefit from low-emission upgrades and tradable credits. Hybrid power projects integrating renewables and gas-fired generation are gaining traction as developers seek to optimise the complementary strengths of both technologies. For companies that can secure offtake agreements with state-owned generators, navigate the evolving regulatory landscape, and invest in hydrogen-ready technology, the pathway to commercial success in Australia's gas turbine market is becoming increasingly clear.