Renewable Surge Drives Down Energy Prices
The Australian Energy Market Operator’s (AEMO) Quarterly Energy Dynamics Report for Q3 2025 (1) paints a clear picture of an electricity market in transition. Despite higher demand driven by colder weather and electrification trends, the report found wholesale electricity prices fell sharply across the National Electricity Market (NEM). The reason? A surge in renewable generation and growing energy storage capacity.
At its core, the report tracks energy demand, generation mix, prices, and emissions trends across both the NEM and Western Australia’s Wholesale Electricity Market (WEM). It provides quarterly insights into how the grid is adapting to new technologies and climate-related shifts, This information helps investors looking to understand the forces shaping Australia’s clean energy economy.
Prices Fall as Renewables Rise
Wholesale electricity prices averaged $87/MWh across the NEM during the September quarter (2), down 27% year-on-year and 38% from the previous quarter. Price volatility also eased significantly, with high-price events adding just $6/MWh to the average — an 82% drop from a year earlier.
Queensland recorded the lowest average price at $72/MWh, followed by Victoria ($77/MWh), New South Wales ($90/MWh), Tasmania ($91/MWh) and South Australia ($104/MWh).
The report credits the decline to a combination of milder September weather, less market volatility, and record renewable output. Notably, renewable generation reached a new record of 77.2% of total NEM supply on 22 September 2025, up from 75.6% late last year.
Demand Still Rising — and Changing
AEMO reported that operational demand rose 2.3% year-on-year, averaging 22,323 MW, while underlying demand, which includes rooftop solar, climbed 3.2% to a new Q3 record of 25,154 MW.
Much of the growth was attributed to colder temperatures, more electric vehicles, greater household electrification, and the rising power needs of data centres.
Interestingly, despite this demand surge, several states recorded new minimum demand lows. New South Wales fell to 3,265 MW, Queensland to 2,790 MW, and South Australia briefly went negative (–14 MW) as rooftop solar flooded the grid during daytime hours.
The Expanding Role of Batteries
Battery storage continues to play a growing role in balancing the grid. The NEM added nearly 3 GW of new battery capacity since late 2024, lifting total discharge by 150% to an average of 215 MW. These batteries primarily supplied energy during evening peaks, reducing reliance on gas and hydro generation. Both of which saw output declines of 11% and 3.5% respectively.
Coal’s share continued its gradual retreat. Total coal-fired generation fell 0.8%, with brown coal output down 5%. Combined, renewables averaged 42.7% of total NEM generation, marking a new Q3 record and pushing emissions intensity to an all-time low.
Western Australia’s Parallel Story
On the west coast, colder conditions drove electricity demand up nearly 11%, while renewable generation hit new highs. The WEM’s renewable contribution averaged 36.4%, with peak renewables supplying 83.2% of demand at one point. This was a record for the state.
However, higher energy costs lifted the WEM’s normalised energy cost to $149/MWh, up 8% year-on-year. Gas production also rose to 109 PJ, the highest since 2020, while consumption slipped slightly to 98 PJ.
The Investment Takeaway
For investors, the Q3 2025 data underscores several key trends.
First, renewable capacity is increasingly setting prices, not fossil fuels. As more low-cost wind and solar come online, price volatility is flattening and long-term average prices are trending lower. This creates opportunities for investors in storage, demand-response technologies, and flexible generation that can capture value during low-supply periods.
Second, battery economics are improving rapidly. The rise in storage capacity demonstrates market confidence in dispatchable renewables and signals a maturing investment environment for grid-support assets.
Third, emissions intensity continues to fall, confirming that the clean energy transition is having a measurable environmental impact. With renewables now accounting for more than 40% of NEM generation and climbing, Australia’s power sector is on track to meet, and possibly exceed, its 2030 emissions targets.
Finally, the report highlights how demand profiles are shifting, with rooftop solar and electrification reshaping when and how energy is consumed. Investors should look closely at technologies that help manage daytime oversupply and evening peaks eg smart charging, virtual power plants, and flexible industrial loads.
The Bottom Line
AEMO’s Q3 2025 report offers a snapshot of a market evolving faster than many expected. Lower prices, record renewables, and growing battery integration point to a system becoming cleaner and more resilient. For investors, that complexity brings both risk and reward. The challenge will be identifying which technologies, regions, and business models stand to gain most as Australia’s electricity grid continues its transition toward a decarbonised future.
References
1. AEMO, Quarterly Energy Dynamics Q3 2025, 30 October 2025.
2. AEMO Media Release, Rising Renewable Energy Output Offsets Demand Growth, 30 October 2025.
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