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By Rob Verdonck
Wholesale prices fell in 2025 from a year earlier, indicating easing pressure, but remained higher than in 2022 — when the nation suffered an unprecedented failure of its main power market, the Australian Energy Regulator said in an annual report on Thursday. A 177% jump in grid-scale battery capacity last year contributed to lower prices in the second half.
Australia has become a global bellwether for the energy transition, as the nation rushes to replace a fleet of aging coal-fired power plants, with unplanned outages at the generators causing extreme volatility. Meanwhile, its households are world leaders in installing solar panels and home batteries, while the government has an ambitious target to get 82% of electricity from renewables by 2030, almost double the level at the end of last quarter.
“Price outcomes increasingly depend on whether enough flexible capacity is available when it is needed,” the AER said. “If flexible supply, storage, transmission and demand response do not scale to provide necessary capacity in the right places and at the right times, consumers may face higher prices and greater reliability risks, because the market will be more vulnerable to supply and demand shocks.”
High revenue and falling prices in the National Electricity Market have given batteries the strongest standalone investment signal, beating out wind and solar, according to the report. Turbine shortages and increased costs have “materially worsened” the outlook for new natural gas plants, while additional black-coal generation isn’t economically viable, the AER said.
“Batteries are still a small share of total generation but are increasingly influential during the evening peak, when they are beginning to displace gas and hydro as the generators that most often determine price,” the AER said. “These changes show that new flexible capacity is improving some outcomes, but not yet enough to remove price pressure when renewable output is lower and demand is higher.”
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