February 2025 Electricity Market Review

Market Commentary

The average price of wholesale electricity futures covering the National Electricity Market (NEM) has dropped by 6.8 percent since the start of the calendar year.

In fact, prices have not dropped to this level since May 2024.  

A deeper look at the wholesale price movements reveals that: 

• Queensland registered the highest drop of 9.4 percent 
• New South Wales experienced an 8.7 percent drop 
• South Australia registered a 6.8 percent drop  
• Victoria registered a marginal 1.3 percent drop 

The drop in wholesale futures prices has largely been attributed to approvals and new submissions of renewable energy projects that will fill the gap in generation once the country’s ageing coal-powered fleet is retired. 

The number of projects in the pipeline has sent calming signals through the market, reassuring customers that there will be no gaps in supply.  

Purchasing wholesale electricity can help insulate your business from bill shock as you know exactly how much you are paying for electricity for a set timeframe, allowing your business to budget accordingly.

It is worth noting that you can enter into a commercial & industrial (C&I) retail electricity and natural gas contract for the future, even if your current contract is still in effect.

Remember: Start your contract procurement process early—waiting until the last few weeks before your existing contract expires will limit your options and expose you to costly last-minute rates if the market shifts. The earlier you begin, the better your chances of securing a competitive deal.

The spot market trended differently, and there was an average price increase of 9 percent from the end of January to the end of February. However, compared to the same period last year, spot prices are 16 percent cheaper.

Pricing can get distorted when there are large fluctuations in different states.

A deeper look at the spot price movements reveals that:

• Victoria registered the highest increase at 213 percent
• South Australia registered a 184 percent increase
• New South Wales registered an 11 percent increase
• Queensland registered a 53 percent drop

New pumped hydro and two big battery projects for New South Wales

The latest NSW long-duration storage tender marks a major step in the state’s energy transition, securing an 800 MW, 15-hour pumped hydro project alongside two large battery storage projects.

These developments will help lower electricity prices by improving grid stability, reducing renewable energy curtailment, and increasing competition.

The Phoenix pumped hydro project, developed by Acen Renewables, will be built near Lake Burrendong in the Central West Renewable Energy Zone.

With 11,900 MWh of storage capacity, it will provide a crucial buffer against energy fluctuations. This is the first time a pumped hydro project has won an NSW government tender, overcoming past funding challenges.

Alongside Phoenix, the 125 MW, 1,000 MWh Stoney Creek battery near Narrabri and the 100 MW, 800 MWh Griffith battery by Eku Energy will also be developed.

Together, the three projects will deliver over 1 GW and 14,000 MWh of storage, attracting $3.5 billion in investment.

Australian Energy Regulator set to reject regulation of Basslink cable

The Australian Energy Regulator (AER) is set to reject APA Group’s request to regulate Basslink, the undersea electricity cable linking Tasmania and Victoria. This decision could hurt Hydro Tasmania’s profits and increase both states’ electricity prices.

Currently, Hydro Tasmania pays APA a fixed fee to use Basslink, allowing it to sell power to Victoria when prices are high and buy when prices are low. If the AER refuses regulation, the APA plans to take control and trade electricity itself, prioritizing its profits. This could mean higher charges for cable usage  and less predictable electricity costs..

The debate comes as the Marinus Link, another undersea cable, is set for construction and will be regulated, meaning consumers will cover its costs. Some experts question why Marinus was approved while Basslink was denied regulation.

Victoria’s Looming Gas Shortage

Victoria is facing a gas shortage as Bass Strait gas fields decline and most Australian gas—about 80%—is exported.

The Australian Competition and Consumer Commission(ACCC) has warned that supply gaps could emerge by 2027, pushing up prices for households and industries.

LNG producers prioritise selling uncontracted gas on the global market, tightening domestic supply and driving up prices. This has worsened inflation, forced business closures, and led to job losses, particularly in manufacturing.

Solutions exist beyond new production. Redirecting some exported gas to local markets would ease shortages and stabilise prices. Accelerating electrification for homes and industries could also reduce reliance on gas.

If the issue remains unaddressed, energy costs will continue to rise, affecting residents and businesses.

New records set in New South Wales and Victoria

Australia’s main electricity grid closed the summer season with record-breaking solar output.

On February 27, the NEM hit a new maximum instantaneous solar output of 7,643.3 MW, surpassing the previous record of 7,595.3 MW set just days earlier.

This marks a 14.6% increase from the 6,668 MW peak recorded a year ago.

Victoria’s energy system set several new records on Sunday, February 9, highlighting the growing dominance of renewables and the shifting role of brown coal, which saw its lowest-ever daily average output of 1,969MW, dropping below 2GW for the first time.

Maximum renewable share hit 95.2% at 13:30, surpassing the previous 94.6% record.

Maximum Wind & Solar Output reached 4,130MW, exceeding the previous peak of 3,878MW in January.

Maximum Wind Output set a new record at 3,832MW.

Battery charge peak reached 584.9MW.

Market Price Cap Set to Increase by 16% for 2025-26

The Australian Energy Market Commission (AEMC) has announced a 16% increase in the Market Price Cap (MPC), raising it by $2,800/MWh to $20,300/MWh from July 1, 2025. The Cumulative Price Threshold will also increase to $1,823,600/MWh.

This rise exceeds previous recommendations in the 2022 Reliability Standard and Settings Review, reflecting ongoing volatility and structural changes in Australia’s electricity market. The adjustment is part of a broader trend, with the MPC increasing steadily over the past five years:

• 2020-21: $15,000/MWh
• 2021-22: $15,100/MWh
• 2022-23: $15,500/MWh
• 2023-24: $16,600/MWh
• 2024-25: $17,500/MWh

Annual increases in the MPC should be expected as Australia navigates its transition to a more renewable-dominated grid.

Origin Energy’s Renewable Expansion and Storage Investments

Australia’s largest utility, Origin Energy, is accelerating its investment in renewables and battery storage while also considering new gas generators as coal exits the grid. The company is investing $1.7 billion into battery projects, including the 700MW/2,800MWh Eraring battery in NSW and the 300MW/650MWh Mortlake battery in Victoria. It has also signed agreements for the 500MW/1,500MWh Supernode battery in Queensland and the 240MW/960MWh Summerfield battery in South Australia.

Origin aims to build or contract 4-5GW of wind, solar, and storage by 2030, with its 1.5GW Yanco Delta wind project expected to be a key asset.

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 February 2025 began at $129/MWh, dropping consistently and substantially to close the month at $110/MWh.

Prices for 2026/27 followed the same trend but at a costlier price. Prices have dropped significantly since January but are still $9/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 increased from $83/MWh at the end of January to $90/MWh.
• Electricity spot prices in February 2025 are $22/MWh (24 percent) cheaper than in the same period in 2024.
• New South Wales continued the trend from January with three market cap events at $17,500, with the rest of high-end pricing mostly falling around the $400/MWh mark.
• The bulk of trading took place at around the $70/MWh mark. Incidents of negative pricing numbered around 1,000, with a maximum low of -$523/MWh.
• Renewables shares in January 2025 dropped slightly to 41.1%. Reliance on gas remained at 1.3%. Coal contribution remained climbed slightly to 57.3%.
• There was a small 0.2% contribution to the energy mix by large-scale batteries in January, costing an average of $189/MWh. Gas generation costs climbed from $134/MWh. Renewables dropped from $99/MWh in December to $71/MWh. Coal dropped from $137/MWh to $163/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, dropping sharply and consistently to closing at $76/MWh.

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

Electricity prices have fallen significantly since the crisis in October 2022, but they are still $15/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 climbed substantially from $48/MWh at the end of January to $68 at the end of September.
• Electricity spot prices are 22 percent cheaper than what they were in 2024 for the same period ($83/MWh).
• Victoria’s spot pricing is usually stable, but experienced uncharacteristic volatility in February 2025 with the highest price registered at $11,346/MWh and another instanced of $11,144/MWh.
• The bulk of the trading occurred around the $55/MWh mark.
• Incidents of negative pricing dropped from 2,500 to around 2,000, with a low of -$355/MWh.
• The share of renewables in generation dropped slightly from 45.2% to 47.5%. Coal contribution dropped from 53.4% to 50.4%. Gas increased from 0.9% to 1.5. 
• Batteries contributed 0.5% to the Victorian energy mix, costing an average of $195/MWh. The average cost of renewables went from $34/MWh to $49/MWh. Coal increased from $62/MWh to $79/MWWh, and gas increased substantially from $171/MWh to 251/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 in February at $113/MWh, dropping sharply to close the month at $96/MWh. Prices for 2026 and 2027 followed the same trend but at a lower cost.

Electricity prices have come down since the crisis in October 2022 but are $7/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 $114/MWh in January to $75/MWh at the end of February (34 percent).
• Queensland spot prices are 36 percent cheaper than they were in February 2024, when the average price was $119/MWh.
• Queensland’s spot market is usually quite volatile, but February was very calm and stable, with the maximum price hitting $634/MWh on two occasions.
• There were around 1,300 instances of negative pricing with lows of -$43/MWh. The bulk of trading occurred at the $70/MWh mark.
• Renewables in Queensland performed poorly in 2024 but picked up in the second half of the calendar year. February’s contribution remained at 31%. Coal generation also remained static at 62%. Gas increased slightly from 5.7% to 6.5%.
• Batteries supplied 0.3% of total generation and the average cost dropped drastically $493/MWh to $163/MWh. Gas prices dropped from $301/MWh in January, to $112/MWh. Coal dropped from $139/MWh to $86/MWh and renewables dropped from $57/MWh to $43/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 Januarydisplayed 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 $99/MWh, dropping consistently to close the month at $89/MWh. Prices for 2026 and 2027 also saw a drop in price, but at a substantially flatter level.

Prices have come down substantially since the crisis in October 2022 and are $7/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 increased substantially from $48/MWh in January to $91/MWh in February.
•  Electricity spot prices in February 2025 are $25/MWh (38 percent) costlier than in 2024.
• After a calm start in January, South Australia experienced a wild month in the February spot market with three market cap events at $17,500/MWh. There were a further three incidences of pricing above $17,000/MWh andeight more cases of pricing above $10,000/MWh.
• Around 2,500 negative pricing incidents were recorded during January 2025 with a low of -$505/MWh.
• Renewables share of the market remained stable at 82%. Gas generation also remained stable at 16%.
• Battery contributed 1.5% and averaged a cost of $379/MWh. Gas prices tripled from $117/MWh to $379/MWh, and renewables doubled in price from $28/MWh. $56/MWh.

Take Control of Your Energy Costs 

There is 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 February 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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Contact our team for advice on reducing electricity costs and improving your business’ energy sustainability. We are here to assist you and explore your options together. 

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.

We source, analyse, compare and rank commercial, industrial and multisite energy quotes. Obligation Free.

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