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Australia Thermal Power Market Report Overview
The Australia thermal power market attained a volume of 5.60 PJ in 2025 and is projected to expand at a CAGR of 3.60% through 2035. The market is further expected to achievea volume of 7.98 PJ by 2035. The increasing demand for data centers, mining, manufacturing, and electricity makes the value of flexible thermal generation capacity, especially the gas one which can be activated in case of declining renewables and restricted storage.
Key Market Trends and Insights
- Gas-fired generation is gaining strategic importance as flexible backup capacity supports renewables, particularly while coal plants retire across Australia.
- Battery storage is increasingly competing with gas peaking plants, reshaping thermal generation economics and reducing evening electricity price volatility.
- Rising data-center electricity demand is creating opportunities for flexible thermal generation, particularly gas plants supporting reliability during renewable intermittency.
Market Size & Forecast
- Market Size in 2025: 5.60 PJ
- Projected Market Size in 2035: 7.98 PJ
- CAGR from 2026 to 2035: 3.60%
- Fastest-Growing Regional Market: New South Wales
There are two main reasons for the rising demand in the Australia thermal power market. First, coal plant retirements are increasing the need for dependable generation capacity when renewable output is insufficient. Second, gas turbines are gaining strategic importance for fast-start balancing, although fuel availability and pipeline constraints remain key investment considerations.
The Australia thermal power market players are moving away from traditional coal-based baseload power towards a more flexible fleet, which might enable them to maintain reliability amid variations in renewable generation. The AEMO 2026 Integrated System Plan affirms that renewables, transmission, and storage coupled with gas form the most cost-effective route forward until 2050 as coal-fired power plants are retired. On the other hand, in August 2026, Australia launched a 1.8GW WEM call for renewable generation, targeting new projects to support Western Australia’s energy transition. Such developments are making it imperative for thermal operators to become less concerned about generating continuously and more focused on flexibility, fast start capability, and system security services.
According to AEMO 2025 Thermal Audit, the NEM thermal fleet supplied 127 TWh, constituting 67% of the total NEM generation in 2024-25, with coal-fired plants generating over 95% of the thermal generation. However, the Australia thermal power market observes an aging coal fleet, as the AEMO audit notes the average age to be 38 years. Operators are therefore focusing on maintenance, outage management, efficiency gains, and life-extension to ensure reliability until the replacement capacity comes up.
Compound Annual Growth Rate
3.6%
Value in PJ
2026-2035
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Key Trends and Recent Developments
A wind and solar tender worth 1.8GW was offered by Queensland to promote development of renewable energy capacities and help replace coal-powered plants with generation plants. Companies have the option to diversify into hybrid renewable power plants, grid services, and flexible generation plants, boosting growth in the Australia thermal power market.
Origin Energy began operating its 300MW/650MWh Mortlake BESS, which uses grid forming technology together with existing thermal power plants. Existing thermal power plants can redevelop their existing power station site into a battery storage plant at reduced transmission cost.
The European Energy company started building a 40 MW/80 MWh battery adjacent to the existing grid connection of their 58 MW Mokoan Solar Farm. Thermal power firms may build storage and renewable facilities together for increased flexibility and utilization of an existing grid connection.
ABB signed a deal to update the automation of Pelican Point with enhanced cybersecurity, real-time management, efficiency, reliability, and overall longevity of assets. Firms in the Australia thermal power market may upgrade existing plants through digital automation and control systems.
Gas-Fired Generation Gains Importance as Renewable Penetration Rises
Gas-based generation is increasingly becoming essential in managing the evolving nature of the Australian electricity sector, especially when there is less production from renewable energy sources. According to the Australia thermal power market analysis, gas technology represents the key reliability and firming solution with 3.5 GW of combined cycle and open cycle gas turbines running in Queensland in 2025. This is anticipated to grow to 4.1 GW by 2030 and 6.1-8.3 GW by 2035. Examples of projects such as the 400 MW Brigalow Gas Peaker Project by CS Energy and 114 MW Lockyer Energy Project by Stanwell Corporation show how generators are now focusing on fast response capability, not baseload generation. Moreover, in May 2026, EnergyAustralia announced plans for Australia’s largest gas plant, targeting rising data-center demand and replacing retiring coal generation with flexible capacity.
Extending the Life of Coal Plants through Maintenance and Flexibility
The old coal-based plants are encouraging operators to invest in maintenance and operational flexibility instead of retiring generators, accelerating the Australia thermal power market value. AEMO's 2025 Thermal Audit revealed that the coal generators are seeking ways of improving the ability of plants to run at lower minimum power, which would help to manage the times of excess rooftop solar generation. The audit also indicates that the rising costs of maintaining coal assets are increasing and that the operators are putting together detailed maintenance and asset management plans. For example, in February 2026, Stanwell commenced commercial operations of its 300MW Tarong Battery, providing rapid firming capacity alongside Queensland’s coal plant.
Fast-Start Gas Peakers Expand to Support Grid Reliability
The Australia thermal power market’s focus is shifting towards open-cycle gas turbines capable of quick startup when needed in times of increased demand, gaps in renewable production, or sudden generator failures. The 660 MW Hunter Power Project of Snowy Hydro situated in Kurri Kurri, New South Wales, involves two heavy duty open cycle gas turbines which are meant to offer dispatchable capacity and to support renewable power production. This project is set to become a firming capacity and not a baseload generator. Further, in August 2026, CPC Energy’s proposed 850MW Allawah gas plant cleared federal environmental assessment, supporting Queensland’s future firming capacity and energy hub.
Retirement of Coal Units Puts More Value on Thermal Reliability Services
The imminent retirement of coal stations is expected to affect the commercial attractiveness of thermal generators in the NEM. According to AEMO's 2025 Electricity Statement of Opportunities, 11 GW of generation, mostly based on coal, are expected to retire within the next decade and includes Eraring, Bayswater, Vales Point, Yallourn and Callide B units. With these stations leaving, the thermal generators left are even more valuable for system strength, inertia, reserves, and emergency energy supplies. Further, as shown by AEMO's 2025 Thermal Audit, players find Australia thermal power market opportunities to convert equipment of retiring coal and gas units into synchronous condensers. In May 2026, MGA Thermal began a FEED study for Australia’s largest 195MWh industrial thermal energy storage project at Tronox.
Thermal Generation Is Being Repositioned Around a Renewable-Heavy Grid
Thermal generation firms are progressively positioning themselves in relation to renewable energy sources and not in competition with wind and solar generators. As confirmed by AEMO's 2026 Integrated System Plan, renewables combined with transmission and storage and backed by gas generation constitute the least-cost approach for the National Electricity Market up to 2050. This is driving the need for flexible, rampable, and minimum generation capacity for thermal plants. This trend in the Australia thermal power market is supported by a fast-growing number of new generation and storage sources. In July 2026, South Australia opened 11,000 square kilometers for renewable projects, inviting investors to develop large-scale wind and solar facilities.
Australia Thermal Power Industry Segmentation
The Expert Market Research's report titled “Australia Thermal Power Market Report and Forecast 2026-2035” offers a detailed analysis of the market based on the following segments:
Market Breakup by Fuel Type
- Nuclear
- Coal
- Natural Gas
- Oil
Key Insight: Coal enjoys the advantages of having a well-established generation network, dispatchability, and its ongoing relevance in providing power for industry and system services. Natural gas is being positioned with regards to flexible generation, peaking, and renewable firming, propelling growth of the Australia thermal power market. In March 2026, EnergyAustralia proposed expanding Marulan’s gas plant to 1.4GW, responding to rising data-center demand and coal retirements. Oil maintains relevance in terms of backing up generation and being used by remote sites that may find alternative fuels less accessible. Nuclear energy does not currently have any commercial generation activity in Australia due to existing federal regulations.
Market Breakup by Application
- Residential
- Commercial
- Industrial
Key Insight: As per the Australia thermal power market report, industrial load is dependent on mining, minerals processing, manufacturing, and other facilities that require uninterrupted electricity. Commercial loads are evolving towards an increased dependence on data centers, logistics, hospitals, and businesses that rely on resilience as well as the provision of renewables together with the provision of electricity. Residential electricity consumption impacts thermal power plants indirectly due to evening peak loads, seasonal heating and cooling loads, and low solar generation from households. As a result, the generators supplying these loads are increasingly differentiating their assets based on flexibility, responsiveness, reliability, and coupling with storage.
Market Breakup by Region
- New South Wales
- Victoria
- Queensland
- Australian Capital Territory
- Western Australia
- Others
Key Insight: The state of Queensland continues to be highly reliant on existing coal assets, resource sectors, and increasing demands for flexible gas generation. On the other hand, the state of New South Wales increasingly relies on retiring coal capacity and needs replacement of dispatchable capacity. The Victorian thermal power sector demonstrates the impact of the transition from brown coal and the need for reliability services. The Western Australia thermal power market takes advantage of available gas, mining needs, and its isolated electricity grid. The Australian Capital Territory also exhbits demands for thermal generation because of renewables acquisition for electricity generation.
Australia Thermal Power Market Share
By fuel type, the coal segment registers the largest share of the market due to established generation capacity
The segment of coal continues being the largest thermal power fuel in the Australia thermal power market, owing to the large existing fleet of plants in the states of Queensland, New South Wales, and Victoria. Operators are relying on their existing coal-fired plants as these generate dispatchable power, add to system strength, and can provide reliable power when renewables do not. The focus of operators is shifting from capacity additions to maintenance, flexibility, and efficiency. In August 2026, Glencore announced plans for an Australian listing, attracting investors seeking copper exposure despite concerns surrounding its thermal coal operations.
Natural gas is turning out to be the fastest growing segment of thermal fuels owing to the increasing emphasis on flexible capacity that can adapt to changes in electricity generation. Gas turbines can offer flexible capacity to complement renewable energy generation owing to their fast start-up capabilities and ability to operate at peaks. Developers are therefore concentrating on developing open-cycle gas turbines and other flexible facilities, boosting the Australia thermal power market revenue. There are several opportunities for investments in this segment, especially around areas with grids dominated by renewables and requiring dispatchable power during extended periods of low wind and low solar conditions.
Industrial applications dominate the market due to continuous, energy-intensive operational power requirements
Industrial use is the main application segment owing to the need of reliable electricity supply for mining, mineral processing, metals processing, and manufacturing in Australia, which are energy-intensive processes. Thermal generation offers dispatchable electricity to be used in industrial plants where power disruptions result in high production and capital expenses. Mining areas might benefit from firm electricity generation and captive or long-term power purchase agreements that can complement renewables, accelerating the Australia thermal power market expansion. The process of industrial decarbonization is making generators offer more flexible thermal generation capacity able to work together with renewable sources, storage capacity, electrified production facilities, and emission reduction programs. In August 2026, Pacific Energy unveiled a hybrid solar, battery, and thermal power system for Rox Resources’ remote Western Australian gold mine.
Commercial applications are expected to develop faster since the number of data centers, logistic facilities, healthcare facilities, office buildings, and large retailers is expected to continue to grow and require more reliable electricity capacity. Increased numbers of digital facilities will lead to higher needs in electricity that can operate during limitations in renewable generation or grid availability, widening the Australia thermal power market scope. Thermal generation can offer backup generation in more diversified electricity generation and procurement strategies. Customers in the commercial sector are interested in improving emission performance, which might prompt generators to become more efficient, offer flexible gas generation, and dispatchable capacity with renewable electricity and storage capacity.
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Australia Thermal Power Market Regional Analysis
Queensland leads the market due to extensive coal generation infrastructure
The Queensland region constitutes the dominating regional thermal power market in Australia, owing to the presence of large-scale coal-fired power generation plants, significant industrial consumers of electricity, and growing need for dispatchable generation. The mining and resource industries operating in Queensland drive the demand for reliable power, while the existing thermal power plants remain one of the key sources of system strength and reliable electricity. In addition, Queensland becomes an important region for the development of flexible gas-fired generation, as the focus of developers shifts to building the peaking generation capacity in connection with the installation of renewable generation. In May 2026, Aggreko started building Australia’s largest off-grid hybrid plant, combining solar, battery storage, and thermal generation for mining.
The New South Wales region emerges to be the fastest-growing regional segment for the development of flexible thermal generation owing to the eventual retirement of baseload coal-fired plants. This becomes the reason for the growing importance of the dispatchable capacity able to support the operation of wind generation, solar energy, battery storage, and transmission networks, boosting Australia thermal power market growth. In addition, gas-fired peaking generation becomes particularly relevant due to its quick response capabilities during renewable shortfall periods and periods of high demand.
Competitive Landscape
In the competitive structure of the industry, emphasis is placed on the prolongation of the life of existing coal assets and development of flexible power generation to be able to serve the renewable-rich electricity grids. Major Australia thermal power companies such as AGL Energy, Origin Energy, EnergyAustralia, Stanwell, CS Energy and Snowy Hydro are increasingly concerned about reliability, efficiency, dispatchable nature, maintenance and firming of generation plants.
There are emerging competitive opportunities related to fast start gas turbines, life extension of existing coal plants, hybrid generation-storage systems, and reuse of retired power plants to offer grid support services. According to the 2026 Integrated System Plan published by AEMO, gas-fueled power generation forms part of the least cost approach to sustaining reliability with respect to retirement of coal plants. Competitive opportunities for Australia thermal power market players include faster ramping, minimum operating capability, fuel flexibility and digitalization of assets management and contract capacity and firm power generation for industry consumers.
AGL Energy Limited (AGL)
AGL Energy was incorporated in 1837 and is based out of Australia. It is the biggest private electricity producer in the country and uses coal-fired power plants along with gas, hydroelectricity, batteries, and renewable energy sources. The company has a goal of having a generation portfolio that emits fewer greenhouse gases and also has thermal capacity to generate power.
Zenith Energy Pty Ltd.
Founded in 2006 and headquartered in Australia, Zenith Energy is an independent power producer serving mining industry and industrial clients in remote areas. The company combines thermal and sustainable fuels along with solar, storage, and hybrid technologies. Zenith Energy’s Build Own Operate model and custom microgrids help clients generate reliable power with reduced carbon emissions.
Hybrid Systems Australia
Founded in 2015 with its headquarters at Perth, Australia, Hybrid Systems Australia deals in renewable and hybrid power systems, both for grid connected and remote locations. The engineering and operation teams of this company are assisting customers from mines and regional areas to use thermal back-up along with renewable energy generation and storage, thereby supporting Australia thermal power market growth.
ATCO Australia Pty Ltd.
Founded in 1999 and having its headquarters in Perth, Australia, ATCO Australia provides gas-fired generation via ATCO Power Australia. The company owns and operates natural gas power plants in Karratha and Osborne and uses its knowledge of gas infrastructure in order to ensure reliable energy to its clients.
*Please note that this is only a partial list; the complete list of key players is available in the full report. Additionally, the list of key players can be customized to better suit your needs.*
Key Highlights of the Australia Thermal Power Market Report
- Evaluates how thermal generators are repositioning assets around renewable intermittency and grid reliability.
- Examines innovative hybrid configurations combining thermal generation, batteries, solar, and other distributed resources.
- Profiles companies targeting fast-start generation, remote microgrids, and lower-emission power solutions.
- Assesses opportunities emerging from coal retirements, plant life extensions, and thermal infrastructure repurposing.
- Highlights changing requirements from mining, industrial, commercial, and remote electricity users.
Why Rely on Expert Market Research?
- Connects company strategies with practical changes in Australia’s electricity-generation landscape.
- Identifies commercially relevant opportunities across flexible generation, hybrid systems, and thermal asset optimization.
- Distinguishes established thermal capacity from emerging firming and backup technologies.
- Uses company developments, regulatory direction, project activity, and industry signals to build a practical market view.
- Supports investment, expansion, competitive positioning, and technology-planning decisions with focused market intelligence.
Call to Action
Unlock the latest insights with our Australia thermal power market trends 2026 report. Discover regional growth patterns, consumer preferences, and key industry players. Stay ahead of competition with trusted data and expert analysis. Download your free sample report today and drive informed decisions in the market.
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*While we strive to always give you current and accurate information, the numbers depicted on the website are indicative and may differ from the actual numbers in the main report. At Expert Market Research, we aim to bring you the latest insights and trends in the market. Using our analyses and forecasts, stakeholders can understand the market dynamics, navigate challenges, and capitalize on opportunities to make data-driven strategic decisions.*
Key Questions Answered in the Report
In 2025, the market reached an approximate volume of 5.60 PJ.
The thermal power market is categorised according to fuel type, which includes nuclear, coal, natural gas, and oil.
The thermal power market key players are AGL Energy Limited (AGL), Zenith Energy Pty Ltd., Hybrid Systems Australia, and ATCO Australia Pty Ltd. among others.
Based on the application, the market is divided into residential, commercial, and industrial.
The market is broken down into New South Wales, Victoria, Queensland, Australian Capital Territory, Western Australia, and others.
The market is projected to grow at a CAGR of 3.60% between 2026 and 2035.
The market is expected to witness a healthy growth rate during the forecast period of 2026-2035 to reach a volume of 7.98 PJ by 2035.
Aging coal assets, rising maintenance costs, emissions regulations, fuel supply uncertainty, renewable competition, grid constraints, lengthy approvals, and capital requirements are challenging thermal generators while reliability obligations remain.
Stakeholders are upgrading aging plants, integrating storage, developing fast-start gas capacity, securing fuel contracts, improving digital monitoring, and targeting industrial customers requiring reliable flexible power.
Report Summary
Explore our key highlights of the report and gain a concise overview of key findings, trends, and actionable insights that will empower your strategic decisions.
| REPORT FEATURES | DETAILS |
| Base Year | 2025 |
| Historical Period | 2019-2025 |
| Forecast Period | 2026-2035 |
| Scope of the Report |
Historical and Forecast Trends, Industry Drivers and Constraints, Historical and Forecast Market Analysis by Segment:
|
| Breakup by Fuel Type |
|
| Breakup by Application |
|
| Breakup by Region |
|
| Market Dynamics |
|
| Competitive Landscape |
|
| Companies Covered |
|
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