Wind, Solar and Batteries Push Fossil Fuels to Record Lows, but Costly Coal and Hydro Keep Prices High

Australia’s electricity market saw a mix of progress and persistent challenges in the first quarter of 2025. While renewable energy soared to new heights, electricity prices remained stubbornly high due to expensive coal and hydro generation.

Rooftop solar and battery storage played a leading role in reshaping grid dynamics. According to AEMO’s Quarterly Energy Dynamics report, rooftop solar output surged by 16% to an average of 3,782 MW, significantly reducing daytime grid demand—even as underlying demand hit new records in states like Victoria and South Australia.

New minimum demand records were set in New South Wales (2,718 MW) and Victoria (1,504 MW), highlighting the increasing dominance of solar during daylight hours. This reinforces the view that traditional baseload coal power is becoming obsolete.

Large-scale solar grew 10% year-on-year to 2,386 MW, wind power jumped 18% to 3,517 MW, and battery output nearly doubled with an 86% increase to 98 MW. Overall, renewables reached a 43% share in the National Electricity Market (NEM), up from 39% the previous year.

Emissions intensity fell by 4.4%, dropping to 0.59 tonnes of CO₂ equivalent per tonne. However, wholesale electricity prices only dipped slightly—from $78/MWh to $76/MWh—due to high-priced coal and hydro bids, particularly in Tasmania, Queensland, and NSW.

Coal and hydro were key drivers of price spikes. Coal’s average price-setting bid rose from $71/MWh to $84/MWh, while hydro’s jumped significantly from $85/MWh to $123/MWh. These increases counterbalanced the downward pressure from growing renewable supply and fewer extreme price events.

Negative pricing intervals became more common, especially in regions dominated by grid-scale solar and wind. Wind set prices 7% of the time at an average of –$27/MWh, and grid-scale solar set prices 8% of the time at –$26/MWh. Battery storage also reduced its average bid price, helping moderate the overall price landscape.

As Australia leans further into clean energy, EServices4U is here to help businesses and households adapt. Our services include energy bill audits, renewable project consultation, solar and wind installation support, and energy efficiency guidance. We’re committed to accelerating the shift to a sustainable, affordable energy future. Learn more at www.eservices4u.com.au