The new capacity takes Australia's total storage capacity to 2.7GWh this year.
WoodMac said for the first time, front-of-the-metre (FTM) capacity at 672MWh will overtake the 581MWh back-of-the metre (BTM)this year, thanks to funding programmes from the federal government and the states as well as the Australian Renewable Energy Agency.
It noted BTM installations have traditionally led capacity growth as state governments have been issuing subsidies for rooftop solar and residential storage, as well as funding for distributed energy resources.
Residential, commercial and industrial customers are also incentivised to install BTMs to manage rising electricity bills and power outages.
However WoodMac said FTM market's leading position is likely to be short-lived because the COVID-19 lockdown and ensuing recession could cause delays or cancellations to the 4.6GWh of announced projects in the development pipeline over the next five years.
"South Australia, in particular, is at risk as the majority of the planned deployments are located there," Wood Mackenzie senior analyst Le Xu said.
"Developers with strong balance sheets are in a position to push ahead with their project developments, but still face grid connection challenges in the future."
WoodMac said with ARENA funding now slowly phasing out, storage developers are turning to the market to cover 10-50% of initial project investments.
It said the FTM market is most affected by the downturn, as well as risks associated with grid constraints, and is most likely to contract in 2022.
However Xu noted the costs of energy storage systems will decline 27% over the next five years.
"By 2025, the levelised cost of electricity of both solar-plus-storage and solar-and-wind-plus-storage are expected to be cheaper than gas plants," she said.
"In general, we can expect renewables-plus-storage costs to be about 20%-29% lower in 2025 compared to today."
As Australia gradually phases out its 31 GW coal fleet, Xu said it will need to look for alternatives.
"Project developers, both domestic and international, are clearly unfazed by the challenges. The number of Australian developers has doubled to 40 this year," she said.
"By 2025, we estimate Australia's cumulative energy storage investment to hit US$6 billion. This translates to 12.9 GWh of cumulative storage deployments."
