January 2025 Electricity Market Review

Market Commentary

Electricity spot pricing in January 2025 dropped across all states in the National Electricity Market (NEM) compared to December 2024, with the trend extending to the wholesale futures market in all states except Victoria, which experienced a slight increase.  

Spot and wholesale futures prices dropped significantly compared to November, when hot weather, high demand, and tight supply pushed spot prices sharply higher. 

Historically, January sees a downturn in spot pricing as many people travel overseas for holidays and industrial electricity users shut down operations over the New Year period.  

When compared to January 2024, average spot pricing across the NEM is 0.68% lower in January 2025. 

However, the picture is more complex. 

A deeper look at price movements reveals that:  

• South Australia saw a 50% increase. 
• Victoria experienced a 45.8% increase. 
• New South Wales recorded a marginal 2.46% increase. 
• Queensland was the only state to register a 28.5% drop in spot pricing compared to January 2024 

Had Queensland followed the pricing trend of the other states, overall, NEM prices could have been around 50% higher than those recorded in January 2024. 

Wholesale futures prices declined slightly in January in all states except Victoria, where they saw a modest increase compared to December 2024.  

However, futures prices were significantly higher compared to January 2024. On average, wholesale prices rose 24.6% in January 2025 compared to January 2024 across New South Wales, Queensland, South Australia and Victoria.

• NSW recorded the highest increase at 30%. 
• Queensland followed at 25.6%. 
• Victoria saw a 29.6% increase. 
• South Australia registered the lowest increase at 12.5%. 

Tight reserves were observed particularly in QLD and NSW due to extreme weather conditions. 

The Kogan Creek power station trip  in Queensland led to significant spot market spikes early in the month, with two $17,500/MWh market cap events and 22 pricing instances over $10,000/MWh. 

Wind and solar dominated electricity generation in Victoria and South Australia, while Queensland and New South Wales relied more heavily on gas and hydro to meet peak demand. 

It is also worth noting that now might be the time to check your energy contract end date as you enter the new year to avoid being forced into expensive last-minute deals. 

Supply shocks and demand surges create market instability 

The month began with the Australian Energy Market Operator (AEMO) issuing a Level of Reserve 2 (LOR2) warning on January 5, signalling tight supply conditions amid high demand and reduced generation availability.  

This set the stage for further market instability. 

Bayswater Unit 3 (660 MW) in NSW went offline for maintenance on January 3, tightening reserves and putting upward pressure on prices. In Victoria, Loy Yang A Unit 2 (500 MW) unexpectedly went offline on January 7, increasing reliance on gas peakers and contributing to rising costs. 

Transmission constraints also played a role in market dynamics. On January 29, reduced imports from Victoria into NSW led to localised price spikes, as interconnector congestion prevented surplus energy from flowing efficiently across the network.  

Renewables shift market pricing, driving spot and futures volatility    

Renewable energy significantly influenced demand dynamics throughout January. On January 20, solar output peaked at record levels, reducing operational demand and driving spot prices lower, a trend that was reflected in falling futures prices for later in the month.  

South Australia saw negative spot prices on January 14, as high solar penetration oversupplied the grid during midday trading. 

However, the variability of renewables also caused volatility. On January 24, wind output dropped significantly in South Australia, forcing the grid to rely more heavily on gas generation and interconnectors, which pushed prices higher.  

Conversely, on January 21, wind generation in Victoria exceeded 50% of the total supply for several hours, keeping spot prices low and reducing gas dispatch. 

Heat waves drive demand, pushing prices higher 

Extreme heat led to demand surges across multiple states. On January 25, a heatwave drove peak demand, prompting the Swanbank E gas plant to ramp up generation to stabilise the grid.  

Similarly, January 8, 2025, saw high electricity spot prices in NSW as constrained interconnectors and elevated cooling demand stressed supply. 

Looking ahead, AEMO forecasted tight supply conditions on January 27, warning of potential price spikes in February as another heatwave looms. With Santos announcing an 8% increase in gas production for 2025, the market will be watching closely to see if additional supply can help stabilise prices in the months ahead. 

More renewable energy records set  

This year’s renewable energy record season has extended from spring into summer, breaking numerous records for large-scale wind, solar, rooftop PV, and overall renewable generation in Australia’s National Electricity Market (NEM). New capacity and excellent generation conditions led to a peak instantaneous output of 23,619.5 MW for variable renewables (VRE) and a total renewable output of 24,213.8 MW. 

On Monday, 2 December, there was also a significant drop in Victoria’s coal and gas power share to 21.9%. The growth in renewable energy highlights a shift away from fossil fuels and reflects Australia’s targets of 82% renewables by 2030 and 95% in Victoria by 2035. 

More work stops on Snowy 2.0 as union warns of lengthy delays to $12 billion project 

Construction on Snowy 2.0, Australia’s largest pumped hydro project, has hit another roadblock, with work on three major tunnelling operations grinding to a halt over safety concerns.  

The latest disruption stems from fears that workers are not adequately prepared to use emergency “refuge chambers”—safety enclosures designed to provide last-resort protection in the event of a tunnel collapse or other catastrophic incident. 

Union officials have raised alarms about whether staff have been sufficiently trained to rely on these life-saving chambers, leading to an indefinite pause in operations until the concerns are fully addressed.  

This adds to the growing list of setbacks plaguing the $12 billion project, which has already faced extensive delays and cost blowouts. 

While Snowy Hydro has expressed confidence that work will resume “shortly,” unions warn that the stoppage could be prolonged.  

The timeline for addressing these safety issues remains unclear, further jeopardizing the project’s already fragile schedule.  

Given the project’s significance in boosting Australia’s renewable energy capacity, prolonged delays could have ripple effects on the country’s clean energy transition. 

For now, the fate of Snowy 2.0 remains in limbo as safety concerns take precedence over progress. 

South Australia: Emergency diesel generators approved as backup  

The Australian Energy Markets Commission (AEMC) has approved the use of two French-owned diesel generators—Port Lincoln and Snuggery—as emergency backups for South Australia’s renewable-heavy energy grid. 

This decision comes amid concerns over supply security, particularly as delays persist in the 900 km EnergyConnect transmission project, a critical link designed to integrate over 2GW of renewable energy into the grid. 

While South Australia leads the nation in renewable energy adoption, its heavy reliance on wind and solar generation presents challenges in periods of low renewable output or extreme weather events.  

The diesel generators will be used only during severe emergencies, ensuring continuity of supply when other generation sources are insufficient. 

EnergyConnect, once completed, will strengthen interconnection between South Australia, New South Wales, and Victoria, reducing the need for backup generation.  

However, with ongoing project delays, authorities are prioritising short-term reliability measures to prevent blackouts and price volatility.  

The approval of these generators highlights the challenges of transitioning to a renewable-dominated grid while maintaining stability in an evolving energy market.  

Santos projects increase production amid expansion  

South Australian oil and gas giant Santos has forecast an 8% increase in production for 2025, aiming for 90-97 million barrels of oil equivalent (MMBoe), up from 84-90 MMBoe in 2024.  

This growth is largely driven by two major projects: the $5.4 billion Barossa gas development, expected to deliver its first gas in Q3 2025, and the Pikka oil project in Alaska, which is now nearly 75% complete. 

With these large-scale developments nearing production, Santos plans to scale back capital expenditure to boost shareholder returns. 

From 2026 onward, the company intends to return at least 60% of its free cash flow to investors, reflecting a strategic shift towards value creation following a period of heavy investment.  

The expansion underscores Santos’ commitment to long-term energy security and export growth, positioning it as a key player in both the Australian and global energy markets. 

New South Wales

Wholesale Electricity Base Load Futures:

*The ASX has ceased to report on electricity futures prices for the year 2024. As a result, reporting now covers the years 2025, 2026, 2027

Average Movement Summary:

New South Wales electricity futures prices for 2025 began the month at $135/MWh, climbing sharply to $139/MWh, before correcting and closing the month at $126/MWh. 

Prices for 2026/27 followed the same trend but at a cheaper price. Prices have dropped significantly since the crisis in October 2022 but are still $23/MWh costlier than the same period last year.  

Start comparing current market offers and make your procurement process a breeze. Take the first step and get started here!  

Commentary:

• New South Wales average spot prices dropped substantially from $134/MWh in December to $83/MWh by the end of January.  
• Electricity spot prices in January 2025 are $2/MWh costlier than they were in the same period in 2024. 
• New South Wales began the year when it left the last one with volatile pricing. There were three market cap events at $17,500 and another three events where pricing was over $10,000/MWh.  
• The bulk of trading took place at around the $70/MWh mark. Incidents of negative pricing numbered around 1,500, with three maximum lows of -$999/MWh.  
• Renewables shares in January 2025 dropped slightly to 41.9%. Reliance on gas dropped from 1.8% to 1.3%. Coal contribution remained climbed to 56.8%. 
• There was a small 0.2% contribution to the energy mix by large-scale batteries in January, costing an average of $134/MWh. Gas generation costs dropped from $293/MWh to $134/MWh. Renewables dropped from $99/MWh in December to $71/MWh. Coal dropped from $137/MWh to $97/MWh. 

Start comparing current market offers and make your procurement process a breeze. Take the first step and get started here!  

Victoria

Wholesale Electricity Base Load Futures:

*The ASX has ceased to report on electricity futures prices for the year 2024. As a result, reporting now covers the years 2025, 2026, 2027

Average Movement Summary:

Victoria futures prices opened the month at $83/MWh. In a different trend to NSW, futures prices dropped sharply to $79/MWh, before closing the month at $85/MWh.  

Prices for 2026 and 2027 followed the same pattern but at a cheaper cost.  

Electricity prices have fallen significantly since the crisis in October 2022, but they are still $22/MWh higher compared to the same period last year. 

Start comparing current market offers and make your procurement process a breeze. Take the first step and get started here!   

Commentary:

• Victorian average spot prices dropped from $52/MWh in December 2024 to $48/MWh by the end of January. 
• Electricity spot prices are around double what they were in 2024 for the same period.  
• Victoria’s spot pricing was relatively low, with the highest trading price registered at $479/MWh. The bulk of the trading occurred around the $50/MWh mark.  
• Incidents of negative pricing dropped 2,500 from around 3,000 the previous month with two lows of -$1000/MWh. 
• The share of renewables in generation dropped slightly from 46% to 45.2%. Coal contribution rose from 52.5% of the energy mix to 53.4%. Gas increased dropped from 1.5% to 0.9%.   
• Batteries contributed 0.5% to the Victorian energy mix, costing an average of $107/MWh. The average cost of renewables increased slightly from $31/MWh to $34/MWh. Coal dropped from $64/MWh to $62/MWh and gas increased to $171/MWh from $140/MWh.  

Queensland

Wholesale Electricity Base Load Futures:

*The ASX has ceased to report on electricity futures prices for the year 2024. As a result, reporting now covers the years 2025, 2026, 2027

Average Movement Summary:

Queensland futures electricity prices opened January 2025 at $120/MWh, climbing to $123/MWH, dropping sharply to close the month at $113/MWh. Prices for 2026 and 2027 followed the same trend but at a cheaper cost.  

Electricity prices have come down since the crisis in October 2022 but are $23/MWh costlier than the same period last year.  

Start comparing current market offers and make your procurement process a breeze. Take the first step and get started here!  

Commentary:

• Queensland electricity spot prices dropped from $134/MWh in December 2024 to $114/MWh at the end of January. 
• Queensland spot prices are significantly cheaper than they were in January 2024, when the average price was $160/MWh.  
•  Queensland experienced a volatile month on the spot market with 22 instances of pricing above $10,000/MWh and a high of $17,304/MWh. 
• There were around 1,300 instances of negative pricing with two lows of -$41/MWh. The bulk of trading occurred at the $100/MWh mark.  
• Renewables in Queensland performed poorly in 2024 but picked up in the second half of the calendar year. January saw an improvement in generation from 31% in December to 32%. Coal generation increased from 60% to 62%. Gas dropped slightly from 8.2% to 5.7%. 
• Batteries supplied 0.3% of total generation and the average cost doubled from the previous month to $493/MWh. Gas prices went up from $198/MWh in December to ($301/MWh) in January, coal increased from $131/MWh to $139/MWh and renewables dropped from $75/MWh to $57/MWh.  

South Australia

Wholesale Electricity Base Load Futures:

*The ASX has ceased to report on electricity futures prices for the year 2024. As a result, reporting now covers the years 2025, 2026, 2027

Average Movement Summary:

As usual, South Australia’s wholesale electricity futures prices for January displayed a different trend from other states, due to its different energy mix, of which the majority are renewables and the rest gas.  

2025 futures started the month at $106/MWh, dropping consistently to close the month at $99/MWh. Prices for 2026 followed a similar trend while 2027 prices remained flat. 

Prices have come down substantially since the crisis in October 2022 and are $1/MWh costlier than the same period last year.  

Start comparing current market offers and make your procurement process a breeze. Take the first step and get started here!

Commentary:

• South Australia’s average electricity spot prices dropped from $61/MWh in December 2024 to $48/MWh at the end of January 2025.  
•  Electricity spot prices in January 2025 are $15/MWh costlier than they were in 2024. 
• SA had a relatively calm start to the year. Known for volatility, SA spot pricing was tame with a high of $988/MWh. 
• Around 3,000 negative pricing incidents were recorded during January 2025 with a low of -$369/MWh. 
• Renewables share of the market remained stable at 83%. Gas generation also remained stable at 16%.  
• Battery contributed 1.3% and averaged a cost of $109/MWh. Gas cost an average of $117/MWh, and renewables prices dropped by almost half from $43/MWh to $28/MWh.  

Take Control of Your Energy Costs 

There is also a lot of activity in the wholesale futures market as the new calendar year starts. Many businesses and industrial energy users are going to the market to make forward purchases of wholesale electricity while prices are relatively soft.  

It is worth observing that businesses can go to the market to secure a new contract in advance, even if their current electricity contract is still in effect. 

Depending on your business’s risk appetite, now could be a good time to secure a new energy contract. 

Act now! Reach out to one of our experienced energy consultants today and gain valuable insight into the potential costs that may lie ahead. Don’t wait—take control of your energy expenses now! 

We hope you have found our electricity market update for January 2025 informative and helpful. We understand that these are challenging times, and we are here to support you. If you’d like to delve deeper into the energy market’s previous months, you can find our monthly energy market reviews here. 

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Explainer:  Why we focus on Wholesale Futures Prices

Wholesale Futures Price: This reflects what the market expects wholesale electricity spot rates to be in future periods. The offers that commercial and industrial (C&I) customers receive via Leading Edge Energy are closely correlated to wholesale prices on the ASX Energy futures market; this is why we focus on these prices in our commentary.

Spot Price: This represents how much the spot market is charging for electricity currently based on demand and supply. Spot prices go up when demand is high and supply is tight. You can view live Spot Prices here. 

You can learn more about the difference between wholesale electricity futures and spot prices in our blog section.

Disclaimer: The information in this communication is for general information purposes only. It is not intended as financial or investment advice and should not be interpreted or relied upon as such.

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