Australia’s wholesale electricity market experienced a significant easing of price pressure in 2025, driven primarily by the rapid expansion of renewable energy generation and grid-scale battery storage. A comprehensive report released by the Australian Energy Regulator (AER) on August 20, 2026, details how these shifts led to substantial declines in wholesale electricity prices and revenue across the National Electricity Market (NEM) throughout the year, with implications for future retail electricity bills across the country.
The AER’s ‘Wholesale Electricity Market Performance Report 2026’ found that wholesale electricity prices and revenue were lower in 2025 compared to 2024 across all periods of the day. This positive trend was most pronounced in Queensland and New South Wales, offering a glimpse into how increased renewable penetration and flexible storage are reshaping Australia’s energy landscape. While wholesale prices do not immediately translate to lower consumer bills due to long-term retail contracts, sustained reductions are expected to gradually flow through to households and businesses.
Significant Price Drops Recorded in Major States
The report highlights considerable wholesale price reductions in key NEM regions. Queensland experienced the most significant decrease, with wholesale prices falling by $32.73 per Megawatt-hour (MWh), from an average of $127.73/MWh in 2024 to $95.00/MWh in 2025. New South Wales also saw substantial relief, with prices dropping by $31.66/MWh, from $150.43/MWh in 2024 to $118.77/MWh in 2025.
“A near tripling of installed battery capacity and the increasingly diverse ownership of new renewable energy generation capacity is both pushing down prices in Australia’s wholesale electricity market and boosting competition.”
These figures underscore a fundamental shift in market dynamics, where a more diverse energy mix is reducing reliance on higher-cost traditional generation. However, the report also noted that prices during the evening peak and overnight periods, when the grid relies more heavily on dispatchable generation, remained significantly above pre-2021 levels.
The Ascendancy of Battery Storage
One of the most impactful findings of the AER report is the burgeoning role of grid-scale battery storage. Australia’s installed battery capacity saw a near-tripling, soaring from 2.2 Gigawatts (GW) in 2024 to an impressive 6.1 GW by the end of 2025. This rapid deployment has had a material impact on wholesale market outcomes.
Batteries, through both generation and charging load, increasingly set the wholesale price in the NEM. In 2025, batteries influenced price formation 16.3% of the time, a substantial increase from approximately 1% in 2021. This growing influence has actively displaced more expensive gas and hydro generators as price setters, particularly during crucial evening peak demand periods when solar generation declines.
For homeowners considering energy storage, this trend further validates the economic benefits. Integrating a home battery system can allow households to store excess solar generation and discharge it during peak times, potentially reducing reliance on grid electricity when prices are highest. For more on optimising these systems, read about Unlock $1,000+ Annually: Best Home Battery VPP Programs in Australia 2026 Ranked.
Renewables Drive Daytime Price Declines
The continued growth of wind and solar generation also played a pivotal role in easing wholesale market pressure. During daytime hours, prices declined further, primarily driven by low-priced offers from newly added wind and solar generation. The increasing volume of renewable energy supplying the grid during these periods has reduced the need for more expensive fossil fuel-based generation.
While black coal remained the dominant price setter in Queensland and New South Wales, influencing prices more than 40% of the time in 2025, this figure represents a significant reduction compared to 2021. The report indicates that the increase in solar generation setting the price was a key driver of this reduction.
This shift underscores the importance of rooftop solar for Australian households, which can directly reduce individual electricity bills and contribute to lower overall grid demand during the day. Information on selecting efficient systems can be found in Best Solar Panels in Australia 2026: Performance, Warranties & Value for $5,500+.
What This Means for Your Future Energy Bill
The AER report provides a forward-looking indicator for consumer electricity prices. While the benefits of lower wholesale prices take time to filter down to retail customers, a sustained trend of reduced wholesale costs creates an environment for more competitive retail offers in the long term.
Consumers are encouraged to actively engage with the market to ensure they are on the most suitable energy plan. Reviewing current contracts and comparing offers from different retailers can help households and businesses capitalise on a potentially more favourable pricing environment. Furthermore, investing in energy efficiency upgrades and distributed energy resources like rooftop solar and batteries remains a powerful strategy for managing energy costs. Consider exploring Australia’s Top Energy-Efficient Home Upgrades 2026: Maximise ROI as Electricity Bills Soar This Winter.
The AER’s findings confirm that Australia’s transition to a cleaner energy mix, particularly with the rapid deployment of battery storage, is already delivering tangible benefits in the form of lower wholesale electricity prices. As more renewable generation and storage capacity comes online, these downward pressures are expected to continue shaping the future of Australian energy costs.