Australian households and businesses are seeing the tangible impact of the accelerating energy transition, with a new report from the Australian Energy Regulator (AER) confirming that utility-scale battery storage and renewable generation significantly eased pressure on wholesale electricity prices in 2025. Released on 20 August 2026, the AER’s Wholesale electricity market performance report 2026 highlights a substantial shift in how power prices are determined, with batteries now setting the National Electricity Market (NEM) spot price 16.3% of the time.

The report, which provides a comprehensive overview of the NEM’s performance in 2025, reveals that wholesale electricity prices and revenue declined across all periods of the day compared to 2024. This trend offers a measure of relief after previous years of volatility. However, the AER noted that prices during the critical evening peak and overnight periods remained significantly above pre-2021 levels, indicating ongoing challenges in dispatchable capacity during these times.

While the overall trend was positive, average prices and total revenue in 2025 were still higher than in 2021 across every NEM region except Queensland, which experienced a more pronounced reduction.

The Rising Influence of Batteries on Price Setting

The most striking finding from the AER’s analysis is the dramatic increase in the influence of battery storage on wholesale price formation. In 2025, battery generation and battery load (charging) collectively set the spot price in the NEM for 16.3% of the time. This represents a significant leap from approximately 1% in 2021, demonstrating batteries’ growing role in displacing traditional gas and hydro generators as price setters.

“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.”

This surge in influence is directly correlated with the rapid expansion of utility-scale battery capacity across Australia. The report details that installed battery storage power output reached an impressive 6.1 GW by the end of 2025, a substantial increase from 2.2 GW at the start of that year alone. This is a monumental rise from just 261 MW across five utility-scale systems at the beginning of 2021. The AER explicitly states that this sharp increase had a material impact on wholesale market outcomes.

Solar’s Continued Impact and Coal’s Decline

Solar generation also played a crucial role in moderating daytime wholesale prices in 2025. The influx of low-priced offers from newly added wind and solar generation drove further price declines during daylight hours. The increasing electricity demand from batteries charging also influenced price formation during these periods, creating a dynamic interplay between renewable generation and storage.

Conversely, the dominance of black coal as a price setter in Queensland and New South Wales continued to diminish. While it still set the price more than 40% of the time in 2025, this was a significant reduction compared to 2021 levels. The report attributes the increase in solar setting the price as a key driver of this reduction.

The AER’s report also casts an eye towards future investment signals. It concludes that batteries currently offer the strongest commercial case for new projects. However, the recent narrowing of price spreads is expected to weigh on the investment outlook, potentially making future battery projects less attractive. Wind, solar, and gas generation projects, according to the report, face weaker investment signals.

Looking ahead, the regulator’s key recommendation is for policy attention to focus on reducing overnight and evening price pressure. While battery storage systems are well-suited to easing evening peaks, wind generation is seen as playing a more relevant role in overnight conditions, though it faces its own approval and delivery challenges.

For Australian consumers, these wholesale market dynamics ultimately influence retail electricity bills. While the AER’s findings indicate a positive trend in wholesale prices, the persistence of higher evening and overnight costs underscores the value of optimising energy consumption. Households equipped with smart meters and considering home battery storage can significantly leverage these market shifts. Participating in programs like Virtual Power Plants (VPPs) can allow homeowners to earn income by dispatching their stored energy to the grid during peak demand, further reducing their bills. Readers can explore options like Join a VPP in 2026: Earn Up To $1,500 Annually & Boost Grid Stability or investigate Unlock $1,000+ Annually: Best Home Battery VPP Programs in Australia 2026 Ranked to maximise their savings.

Ultimately, the Wholesale electricity market performance report 2026 demonstrates a NEM in active transformation, where the rapid deployment of battery storage and renewable energy is fundamentally reshaping price dynamics, offering both opportunities and ongoing challenges for energy consumers.