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Business Environment Profiles - Australia

Electricity wholesale price

Published: 31 October 2024

Key Metrics

Electricity wholesale price

Total (2025)

115 $AU/MWh

Annualized Growth 2020-25

12.7 %

Definition of Electricity wholesale price

This report analyses the average wholesale price of electricity across Australia's National Electricity Market (NEM) in financial years. Wholesale electricity prices are measured in dollars per megawatt hour (MWh). The data for this report is gathered from the Australian Competition and Consumer Commission (ACCC), Australian Energy Market Operator (AEMO) and the Australian Energy Regulator (AER).

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Recent Trends – Electricity wholesale price

IBISWorld expects the wholesale price of electricity to spike 43.4% in 2024-25 to $114.9 per megawatt hour. The jump is particularly notable as it highlights 2023-24's low pricepoint. The current year price is more reflective of the general trend following the longer-term stabilisation. Higher demand, slightly lower solar and wind output and some energy generation road bumps have exacerbated the price correction from last year's low. Additionally, a cold snap and a heavier reliance on gas generation kept wholesale prices high as the financial year rolled over into 2024-25. Shorter days compared with last prior year also left solar power to contribute less to the energy mix, lifting wholesale prices.

The National Electricity Market operates as a wholesale spot market for electricity in New South Wales, Victoria, Queensland, the Australian Capital Territory, South Australia, and Tasmania. The wholesale market directly involves generators and retailers, but affects all parts of the electricity supply chain. The Australian Energy Market Operator (AEMO) receives offers from generators, who bid quantities of electricity at certain price points. These prices are capped at $17,500 per megawatt hour in 2024-25. The regulator then matches offers progressively from low to high until demand is met, dispatching electricity in five-minute intervals. Each dispatch price is determined by the bid from the generator providing the final megawatt hour of electricity. In October 2021, the Australian Energy Market Commission (AEMC) introduced a five-minute settlement (5MS) period, replacing the previous 30-minute period.

In 2021-22, supply-chain constraints and the Russia-Ukraine conflict have caused surging coal and gas prices, driving higher input costs for thermal electricity generators. Additionally, the war between Israel and Hamas has raised tensions in the Middle East, continuing to lift prices in the current year. Outages in multiple coal-fired generation plants negatively affected electricity supply and contributed to skyrocketing prices. Furthermore, higher than average temperatures in some years, including 2022, have placed upwards pressure on demand for electricity. Prices inflated across all NEM states, with South Australia facing a particularly high wholesale prices following their particularly cold winter.

Wholesale prices are highly volatile, as generators sell electricity to retailers for prices determined dynamically by supply and demand. Consequently, retailers manage this risk for the consumers and businesses they on-sell to. Transmission and distribution networks then operate as the physical infrastructure for getting this electricity to businesses and households. Energy-intensive businesses, like mining or manufacturing firms, may bypass retailers and source electricity directly from networks. As wholesale prices contribute approximately one-third of retailers' costs, extended price falls or rises can affect consumers' retail bills. However, retailers often manage risk through locking in longer futures contracts, ensuring a fixed price is paid for electricity supplied at a point in the future. As a result, a retailer's exposure to the spot market can mean fluctuating wholesale prices are delayed in flowing through to retail bills. Further complicating this relationship are large 'gentailers', including AGL, which are vertically-integrated and hedge their risk through controlling both generation and retail businesses.

Wholesale electricity prices have been extremely volatile over the past five years, as Australia continues to transition away from fossil fuel electricity generation. Coal-fired generators have become less reliable and more expensive to operate over the past decade, leading to some closures. For instance, the closure of AGL's Liddell power station in 2023 has removed a source of power for New South Wales. In response, rising investment in renewable generation capacity, including solar, wind and hydro, has disrupted the Electricity Supply subdivision. Renewable sources supply electricity at a much lower price than traditional thermal generators, as they don't require high input costs. Despite this, the NEM is still reliant on coal- and gas-fired generators to provide baseload power, as renewable sources are intermittent and rely on sun, water or wind availability. An oversupply of new renewable capacity, combined with subdued demand due to the COVID-19 pandemic, drove falling wholesale prices over the two years through 2020-21. However, wholesale prices skyrocketed in 2021-22, as energy commodities spiked in response to the Russia-Ukraine conflict and associated supply shortages. Overall, IBISWorld forecasts the electricity wholesale price to rise at a compound annual rate of 12.7% over the five years through 2024-25.

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5-Year Outlook – Electricity wholesale price

IBISWorld forecasts the electricity wholesale price to decline by 7.3% in 2025-26 to $106.5 per m...

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