The Australian Energy Regulator (AER) has found that the continued growth of solar and wind generation, combined with the expansion of battery storage, helped ease pressure on Australia’s wholesale electricity market in 2025 (“Wholesale electricity market performance report 2026”, AER, 20/08/2026).
According to the report, wholesale electricity prices and revenue declined in 2025 compared with 2024 across all periods of the day. However, prices during the evening peak and overnight periods remained significantly above pre-2021 levels. As a result, average prices and total revenue were higher than in 2021 in every region except Queensland.
During daytime hours, prices declined further, driven by low-priced offers from newly added wind and solar generation. The growing electricity demand from batteries charging also increasingly influenced price formation during these periods.
“Black coal remained the dominant price setter in Queensland and New South Wales –(NSW), setting the price more than 40% of the time in 2025, although this was significantly lower than in 2021. The increase in solar setting the price was a key driver of the reduction. Battery generation and battery load (charging) have increasingly set the price, rising from around a combined 1% in 2021 to 16.3% in 2025, replacing gas and hydro”, according to the report.
At the beginning of 2021, the NEM had only five utility-scale battery storage systems, with a combined capacity of 261 MW. At the end of 2025, installed battery storage power output had reached 6.1 GW, up from 2.2 GW at the start of 2025 alone. The AER said this sharp increase had a material impact on wholesale market outcomes.
The report also noted that recent project additions have supported market outcomes, although the outlook for future capacity additions is more uncertain. Batteries currently appear to offer the strongest commercial case, but the recent narrowing of price spreads is expected to weigh on the investment outlook. Wind, solar and gas face weaker investment signals.