The AGL Energy Ltd (ASX: AGL) share price has been rocked over the past week amid global volatility from the US tariff announcements. But, you may have missed an important energy announcement by the Australian Federal Government involving batteries for households.

As reported by the ABC, the 'Cheaper Home Batteries' subsidy aims to reduce the cost of a household battery's upfront price by 30%. This program will reportedly cost $2.3 billion.

The ABC reported that about 320,000 Australian homes already have a battery, according to solar energy consultancy SunWiz. Around one-in-three homes that installed a solar system in 2024 opted to get a battery at the same time.

How does this affect AGL shares? Experts from Macquarie Group Ltd (ASX: MQG) have given useful commentary.

Expert view on the battery household subsidy

Macquarie said the election promise is "ambitious", noting the uncapped household battery subsidy is approximately $372 per kWh installed. The program aims to install around 1 million batteries over the next five years, targeting 8% to 10% of Australia's connections.

The investment bank suggested the proposed spending implies around 6.18GWh of storage, which is the equivalent of around 1.8TWh of annualised energy, equating to around 1% of the national electricity market. Macquarie also said that it is around 2GW of capacity. It was also suggested that, together with NSW government subsidies, this accelerated capacity could enable the planned closure of Eraring in FY27.

While a significant boost in the number of batteries may reduce grid energy consumption, organic growth like electric vehicles and electrification are a "material offset". Macquarie said that retailers saving on feed-in tariffs and reshaping the hedging can save on costs offsetting volumes. Macquarie estimated that an expansion of the virtual power plant (VPP) would add around $70 million to $90 million of operating profit (EBITDA) per 100,000 batteries.

Why would this be helpful for AGL? Macquarie explained:

Government policy favours AGL as it creates demand in the middle of the day, and reduces peak pricing. AGL as a base load generator in NSW and Vic is more leveraged to this improvement.

Macquarie views on the AGL share price

The investment bank currently has an outperform rating on AGL shares, with a price target of $12.29 on the business. That implies a possible rise of 13% from where it is today over the next 12 months, if Macquarie is right.

Macquarie's profit forecast puts the current AGL share price at 11x FY25's estimated earnings.