Electricity Demand Continues to Evolve

• Underlying NEM electricity demand remained stable, increasing by 0.2% year-on-year to an average of 24,220 MW.
• Continued growth in distributed solar generation (+6.9%) reduced operational demand by 0.5% despite steady underlying consumption.
• Demand profiles continued to shift, with stronger daytime consumption driven by battery charging, industrial activity and expanding data centre loads.
• Reduced evening demand reflected increased household battery discharge and milder winter conditions lowering heating requirements.
• Consumer energy resources continue to reshape load profiles, reducing traditional evening peaks.
• Underlying demand is the total electricity consumed by all users, while operational demand is the portion of that total met by the main power grid. Operational demand subtracts out local rooftop solar and small embedded generators because those systems reduce how much power needs to come from the main grid.

Renewable Generation Reached New Q2 Highs

• Renewable energy supplied a record 42.1% of NEM generation, up from 37.1% in Q2 2025.
• Wind generation reached a new Q2 record, increasing 20% year-on-year, supported by new capacity and improved wind conditions.
• Queensland recorded the strongest growth, with wind output rising 80% to a new all-time high.
• Grid-scale solar generation increased 12%, with new projects offsetting lower solar irradiance across southern regions.
• Coal-fired generation declined to its lowest Q2 level on record, while gas-fired generation fell to its lowest Q2 average since 2003.
• The cleaner generation mix reduced total NEM emissions by 6.4% and emissions intensity by 6.0%.

Battery Storage Continues to Transform Market Operations

• Grid-scale battery capacity continued to expand, significantly increasing energy shifting between daytime solar generation and evening demand.
• Daytime battery charging increased 211%, while evening discharge increased 228% compared with Q2 2025.
• Batteries increasingly influenced wholesale market outcomes, setting prices in 36% of dispatch intervals, up from 17% a year earlier.
• The greatest increase in battery price-setting influence occurred in New South Wales and Queensland.
• Battery storage is increasingly reducing peak pricing pressure while supporting greater renewable integration.

Wholesale Electricity Prices Declined Across the NEM

• Average NEM wholesale electricity prices fell to $74/MWh, down 47% year-on-year and the lowest Q2 average since 2020.
• Increased renewable generation, higher battery discharge and reduced evening peak demand collectively lowered wholesale prices.
• Victoria recorded the lowest regional average price at $56/MWh, followed by Queensland ($67/MWh), New South Wales ($75/MWh) and Tasmania ($86/MWh).
• South Australia remained the only region to experience material price volatility, driven by low wind conditions, higher demand and transmission constraints during late June.
• Overall, wholesale price volatility was substantially lower than the previous year.

East Coast Gas Market Softened Despite Global Supply Risks

• East coast wholesale gas prices averaged $9.08/GJ, the lowest quarterly average since Q2 2021.
• Domestic gas demand declined 3%, driven by reduced gas-fired generation and lower commercial, industrial and residential consumption.
• Above-average temperatures further reduced winter heating demand, particularly across Victoria.
• Queensland LNG exports reached a new Q2 record despite softer domestic demand.
• International LNG prices remained materially higher than domestic prices due to ongoing geopolitical supply risks in the Middle East.
• Iona Underground Gas Storage remained near full capacity for most of the quarter, highlighting comfortable domestic supply conditions.

Western Australia Experienced Tighter Electricity Market Conditions

• Underlying demand in the Wholesale Electricity Market (WEM) increased as cooler weather lifted heating requirements.
• Lower wind generation and reduced coal availability increased reliance on gas-fired generation.
• Renewable generation’s share of the WEM declined from 33.6% to 32.0%.
• Average WEM energy prices increased 30% year-on-year to a record $117.87/MWh.
• Higher energy costs were primarily driven by reduced renewable and coal generation combined with increased gas generation.
• Despite higher energy prices, battery participation significantly reduced Essential System Services (ESS) costs through increased competition.

Western Australian Gas Market Remained Well Supplied Despite Lower Activity

• Domestic gas consumption and production both declined 8.5% year-on-year.
• Lower industrial demand contributed to softer overall gas consumption.
• Storage withdrawals remained relatively modest compared with the previous year.
• Pipeline maintenance and cyclone recovery works created intermittent operational constraints across the Dampier to Bunbury Natural Gas Pipeline.
• Despite these operational challenges, domestic gas supply remained adequate throughout the quarter.

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This partnership strengthens our ability to provide deeper expertise, expanded capabilities and a stronger national presence, while continuing to deliver the personalised service and trusted relationships our customers value.

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Underlying electricity demand reached a new quarterly high, supported by electrification, population growth, and data centre expansion, though this was largely offset by record rooftop solar output. At the same time, batteries are increasingly influencing price outcomes, softening evening peaks while lifting daytime pricing, and fundamentally changing how the market behaves.

Gas prices have also declined despite global volatility, reflecting lower domestic demand and reduced reliance on gas-fired generation. However, this dynamic may not persist, particularly as the market approaches winter and global conditions continue to evolve.

As the market becomes more complex, with lower average prices but ongoing volatility and structural change, it remains important to stay close to both electricity and gas developments. Read on for all the key points from AEMO’s latest QED report.

Demand Growth Offset by Rooftop Solar

• Underlying electricity demand reached a new quarterly record (+1.2% YoY), driven by heat events, electrification, population growth, and data centres.
• However, record rooftop solar output (+8.1%) offset this growth, keeping grid demand broadly flat.

Renewables Rising, Thermal Generation Falling

• Renewables reached 46.5% of total generation (new Q1 record).
• Coal generation declined (-4.4%), while gas generation fell to its lowest level since 1999.

Batteries Are Now Influencing Prices

• Battery capacity has more than doubled year-on-year, significantly reshaping supply patterns.
• Batteries are now setting prices in ~32% of intervals, overtaking hydro.
• Evening peak prices softened, while daytime prices lifted due to charging behaviour.

Electricity Prices Lower Overall, But Volatility Remains

• Average wholesale prices fell to $73/MWh (-12% YoY).
• However, prices remain elevated vs last quarter (+47%) and volatile during extreme events (e.g. South Australia January spike). 

Gas Prices Fall Despite Global Tension

• East coast gas prices averaged $10.61/GJ (down from $13.26/GJ YoY).
• This occurred despite higher global LNG prices and geopolitical disruption.
• Lower demand (especially from gas generation) was a key driver.

WA Prices Stable, Gas Market Tightening, and Renewables Driving Transition

• WA wholesale energy prices remained relatively flat (~$88/MWh) with lower volatility due to battery activity.
• Domestic gas consumption and production both declined (~4-5%), with storage and pipeline constraints flagged late in the quarter.
• Underlying demand declined (-2.3% YoY) due to milder weather, while rooftop solar output increased (+6.5%), further reducing daytime grid demand.
• Renewable share increased to 46.1%, while battery discharge surged (+305%) following significant new capacity additions.

Market Outlook & Bottom Line

• Demand pressures are building, particularly from electrification and data centres
• Renewables and batteries are reshaping price dynamics, not eliminating volatility
• Gas remains a key swing factor, with downside risk to prices if global conditions flow through
• Price outcomes will increasingly depend on timing, load profile, and flexibility

With Iona gas storage on track for full capacity ahead of winter and battery capacity continuing to grow, conditions entering Q2 appear more balanced than a year ago. However, winter demand uplift, continued gas export competition from LNG markets, and ongoing South Australian grid constraints remain key risks to watch. The accelerating shift of price-setting to batteries will continue to structurally alter intraday price profiles, relevant for customers with flexible load or on time-of-use contracts. For large energy users, this reinforces the need for active procurement strategies and ongoing market engagement rather than passive contract management.

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Here are some of the key insights from the Australian Energy Market Operator’s (AEMO) most recent Quarterly Energy Dynamics (QED) report.

Demand and Generation Mix

• Operational demand in the NEM rose 2.3% year-on-year, underpinned by record underlying consumption and growing battery load.
• Distributed solar PV continued to offset daytime grid demand, setting new low demand records in several states. Despite this, higher evening peaks and electrification trends kept total system demand elevated.
• Renewable generation continued its rapid expansion, with wind and large-scale solar output up 16% year-on-year, and batteries discharging 150% more energy to support evening peaks.
• Renewables supplied a record 42.7% of total generation, driving emissions intensity to a new low of 0.57 tCO₂-e/MWh.
• Coal output edged slightly lower overall, while gas generation declined 11% amid lower evening peaking needs.

Wholesale Electricity Prices

• Wholesale electricity prices fell across all NEM regions, averaging $87/MWh. The key drivers were:
  • A stronger renewable generation share displacing high-cost peaking plant.
  • Subdued volatility, with high-price events (> $300/MWh) down 82% year-on-year.
  • Lower fuel input costs and improved inter-regional transmission flows.
• Queensland recorded the lowest average price at $72/MWh, while South Australia remained the highest at $104/MWh, reflecting greater exposure to intermittency and lower firming reserves. Negative or zero-price intervals surged, especially in Queensland, highlighting ongoing pressure on midday market pricing.

East Coast Gas Market

• East coast gas largely stable on the year.
• Demand softened marginally due to reduced gas-fired generation and LNG export volumes. Domestic supply, however, declined more sharply as Queensland export projects and the Moomba plant curtailed output, increasing reliance on the Iona underground storage facility, now at its lowest Q3 inventory since 2021.
• Tight supply margins and limited new field development continue to underpin medium-term gas price risk.

Western Australia

• In the WEM, operational demand rose 11% and renewable output hit a new Q3 record at 36.4%.
• Average wholesale electricity prices increased 27% to $101.76/MWh, driven by higher load and fewer mid-day low-price periods.
• Domestic gas production reached its highest level since 2020, offsetting a modest fall in consumption.

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Compared to last year’s ESOO, forecast reliability has improved, helped by more than 10 gigawatts (GW) of additional projects that now meet AEMO’s committed and anticipated criteria (2.9 GW/7 gigawatt hours of utility storage, 4 GW of grid-scale solar and 3 GW of wind).

Electricity consumption is forecast to increase 28%, from 178 terawatt hours (TWh) to 229 TWh, predominantly driven by the rapid expansion of data centres, the broader inclusion of prospective industrial load and accelerating business electrification.

Supply Developments: New generation and storage commissioning must accelerate to 5.2–10.1 GW annually over the next five years (up from 4.4 GW in 2024-25). Delays to projects (common in recent years) represent a material risk to supply security.

Reliability Risks: Qld (80 MW reliability gap forecast for summer 2025-26 due to demand growth and slower project commissioning); SA (390 MW gap forecast in 2026-27 with Torrens Island B retirement and EnergyConnect delay); NSW (reliability gaps previously linked to Eraring closure no longer forecast but system security remains a challenge); Vic (gaps tied to Yallourn closure no longer forecast, though gas supply and outage management risks persist).

Major Retirements: Torrens Island B (SA, 2026), Eraring (NSW, 2027), Yallourn (VIC, 2028). Replacement capacity must be delivered ahead of these closures.

System Security Requirements: As synchronous coal plants retire, new services are critical (system strength, frequency control, ramping capability, and restart services). Consumer energy resources (rooftop PV, batteries, EVs) must be effectively coordinated under the National CER Roadmap to avoid operational challenges.

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This article outlines the key insights from the recent Q2 2025 report, including the primary factors driving electricity and gas prices in the National Electricity Market (NEM) and Western Australia.

Key Factors Affecting East Coast Electricity Prices

1. Renewable Penetration and Demand Shifts
   Underlying electricity demand hit a Q2 record of 24,118 MW (+0.7% YoY), but strong growth in rooftop PV (+15%) reduced operational demand by 0.7% to 21,760 MW. Mild and sunny conditions near the start of the quarter supported high rooftop solar output, setting new lows for minimum demand levels, while cold, wet and windy winter evenings later in the quarter pushed heating needs and operational demand, especially in Victoria, which set a new winter demand record.

2. Variable Renewable Energy (VRE) and Storage
   VRE generation surged, with wind output up 31% and grid-scale solar up 17%. Renewables supplied nearly 38% of total NEM demand (up from 32.2% in Q2 2024), cutting emissions intensity to new lows. Battery storage also played a growing role, with discharge volumes more than doubling YoY. These technologies helped dampen price pressures during periods of high supply, but couldn’t fully offset shortfalls during still, cold evenings.

3. Price Volatility in June
   While the quarterly average wholesale electricity price rose modestly to $140/MWh (+5% YoY), June alone averaged $232/MWh, up sharply from April and May (~$95/MWh). This was driven by cold, still weather and peak heating demand, which coincided with low wind generation and forced increased reliance on gas and batteries. Just three extreme June days contributed $32/MWh to the quarterly average, with 12 June recording the highest daily NEM-wide price in market history.

East Coast Gas Market Dynamics

1. Reduced Demand Eases Prices
   East coast wholesale gas prices averaged $12.36/GJ, down from $13.66/GJ in Q2 2024. Overall demand fell 3%, due to lower gas-fired electricity generation and weaker LNG export volumes. Victoria continued to lead reductions in industrial and residential gas usage.

2. Supply Adjustments and Storage Drawdown
   While Queensland LNG projects pulled back domestic supply, Victorian production rose modestly, supported by increased output from Otway and Orbost. Iona Gas Storage was heavily drawn upon in June to meet gas-fired generation needs, setting new withdrawal records, but inventories remained healthy thanks to strong pre-winter injections.

Western Australia Gas and Electricity Dynamics

1. Rising Demand Offset by Rooftop Solar and Embedded Generation
   Cooler weather and increased battery charging drove underlying demand up 8.6%, but operational demand rose only 4.4% due to strong growth in distributed PV (+31%) and embedded generation.

2. Renewables Supply Over One-Third of Demand
   Renewables met 35.1% of demand, with a record 78.8% share in a single interval. Emissions intensity fell 5.5% despite rising consumption.

3. Energy Prices Up, But System Service Costs Plummet
   Average energy prices rose to $90.46/MWh due to higher demand and market changes. However, FCESS and uplift costs fell 72% thanks to increased competition and rule reforms.
4. Gas Demand and Production Down Slightly
   Compared to Q2 2024, domestic gas consumption declined 4.6% and production dropped 1.4%, while gas storage withdrawals surged to support winter demand.

Brief Outlook

Energy prices remain highly weather-dependent. While renewable output and battery storage continue to grow, their intermittent nature, especially during winter peaks, means gas-fired generation remains critical for reliability and price stability. In the near term, expect continued volatility during extreme conditions, though increasing renewable and storage capacity may gradually smooth price spikes over time. Longer-term pricing will depend on the pace of coal retirements, renewable integration, and gas market flexibility heading into summer 2025.

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