Bite-sized report: AER Wholesale Markets Quarterly — Q1 2025

The first quarter of 2025 delivered a dynamic energy market shaped by regional price swings, surging battery investment, and record-breaking demand extremes.

The Australian Energy Regulator’s (AER) latest quarterly report reveals how generation trends, supply chain shifts, and forward market expectations are reshaping Australia’s electricity and gas landscape.

Q1 2025 marks a turning point in Australia’s energy transition. Batteries are beginning to displace coal as fast-response providers. Gas remains constrained by geography and infrastructure, even as demand dips. And market participants are recalibrating strategies around volatility and risk. The NEM is evolving — faster in some places than others — but the pace of change is undeniable.

Regional divergence in electricity prices

Wholesale electricity prices painted a tale of two markets. While Queensland and New South Wales recorded significant drops, the southern states of Victoria, South Australia, and Tasmania saw prices rise. 

This divergence reflects both demand-driven stress and supply-side limitations. In Tasmania, for example, drier conditions led hydro generators to pull back low-priced offers, while higher demand during hot weather lifted average prices in Victoria and South Australia.

Q1 2025 average electricity prices by region:

• Queensland: $102/MWh (a 26% drop year-on-year)
• NSW: $97/MWh (down 5%)
• Victoria: $72/MWh (up 4%)
• South Australia: $98/MWh (up 17%)
• Tasmania: $112/MWh (up 64%)

Although there were only 11 high-price events this quarter — down from 26 in Q1 2024 — baseline prices remained elevated in southern regions. Meanwhile, negative price intervals hit a new record in NSW, with 699 half-hour periods below $0/MWh.

Demand peaks and troughs highlight system stress

Demand volatility continued to challenge system planners. Queensland recorded a new all-time maximum demand of 11,258 MW on 22 January 2025, while NSW, Victoria, and South Australia all hit new minimum Q1 demand records.

These extremes reflect weather-driven demand, shifts in commercial and industrial activity, and the growing impact of behind-the-meter generation in reducing visible grid load.

A turning point for generation mix

Coal continued to retreat as a dominant force in price setting. Although outages were lower — particularly in Queensland with the return of Callide units — coal offered less capacity and set prices less often across all regions except Tasmania.

Battery storage, on the other hand, surged forward. Discharge volumes rose 85.5% compared with Q1 2024, and batteries played a larger role in price formation. Wind and solar output also increased, while hydro shifted offers to higher price bands due to dry weather conditions.

Market offers rebalanced across the spectrum

Generators shifted their bidding behaviour, with fewer offers in the <$70/MWh range and more offers at very high prices.

Offer changes vs Q1 2024:

• Offers below $70/MWh: down 1,108 MW
• Offers above $5,000/MWh: up 1,308 MW
• Wind offers: up 606 MW
• Solar offers: up 322 MW

Black and brown coal, hydro, and gas all reduced their volume of low-priced offers, reflecting higher input costs and fuel availability constraints.

Gas prices climb despite record-low demand

Gas market prices rose year-on-year, even as demand remained soft. Victoria recorded its lowest-ever Q1 gas demand, yet spot prices averaged $13.17/GJ across the east coast markets — up 14% from Q1 2024.

The Brisbane STTM traded approximately $1.45/GJ above Victorian DWGM prices, continuing a familiar price gap between northern and southern hubs.

Record battery entry defines the quarter

Q1 2025 set a new benchmark for battery deployment, with 845 MW of new battery capacity added to the grid. This included:

• Eraring BESS (NSW): 460 MW
• Greenbank Battery (QLD): 200 MW
• Koorangie Energy Storage (VIC): 185 MW

Only two new solar farms, totalling 76 MW, were registered during the quarter. In contrast, battery entry volumes eclipsed all other technologies and suggest a long-term structural shift in how flexibility is delivered to the grid.

Pipeline flows and short-term trades

Gas flowed strongly north from Victoria to Queensland, driven by lower southern prices and firm demand in northern regions. Victoria exported 25% more gas than the same quarter last year, and Queensland imported 50% more than Q1 2024.

Storage at Iona filled steadily and approached capacity by mid-March, supported by stable production from Longford, which produced 43.4 PJ — well above Q1 2024 output.

Forward markets reflect softer price outlook

Electricity futures markets corrected downward after expected summer volatility failed to materialise. Base futures prices dropped sharply across most NEM regions:

• Queensland: down 42%
• NSW: down 38%
• SA and VIC also saw notable declines

Cap contracts also plunged:

• Victoria: down 94%
• Queensland: down 85%

Forward gas prices for 2025 remained below $14/GJ, but southern states are expected to pay a premium over Queensland.

Forward delivery expectations:

• Southern states (Q2 2025): ~$14.55/GJ

• Queensland: ~$12.98/GJ

• Price gap: up to $1.67/GJ

These differences reflect tighter winter supply conditions in the south and higher transport costs.