Power prices fall $32.73/MWh but coal-exit volatility risk remains

For investors and market participants, the signal is in the shape of the price curve, not just the annual average. Falling daytime prices compress merchant solar economics through cannibalisation, while elevated evening peaks concentrate value in storage and peaking assets. The coal-retirement timeline is now a priced risk event: if replacement capacity slips, the overnight premiums the AER has already identified will widen first.

Australia's National Electricity Market delivered two signals at once in its latest official health check: the energy transition is now suppressing wholesale prices at scale, but the exit from coal remains a live price-risk event. The Australian Energy Regulator's Wholesale Electricity Market Performance Report 2026, released on 20 August 2026, found wholesale power prices fell across all five states covered by the NEM in 2025 compared with 2024, led by Queensland (down $32.73 per megawatt hour), New South Wales (down $31.66) and South Australia (down $18.59). The regulator attributed the decline to growing wind and solar supply and to a battery fleet that nearly tripled during the year, from 2.2 gigawatts to 6.1 gigawatts.

“

Australia's National Electricity Market delivered two signals at once in its latest official health check: the energy transition is now suppressing wholesale prices at scale, but the exit from coal remains a live price-risk event.

The report sits within a record-breaking build-out of rooftop solar and household batteries, and follows the CSIRO's GenCost analysis, which projected renewable energy projects would continue to lower power prices through 2030. It drew on data from the Australian Energy Market Operator, the CSIRO, the Australian Securities Exchange and power companies to assess the state of the National Electricity Market — the wholesale market covering Queensland, NSW, Victoria, South Australia and Tasmania. The regulator used the findings to recommend changes for both consumers and government to keep power prices down.

Beneath the headline decline, however, the report exposes a more complicated intraday picture. Evening-peak and overnight prices remained higher than 2021 levels in every state except Queensland. That is the structural signature of a solar-heavy grid: abundant near-zero-cost generation in the middle of the day, then a sharp ramp requirement as the sun sets and demand climbs. The near-tripling of storage capacity helped shave peak demand, and AER board member Jarrod Ball said batteries are "increasingly shaping wholesale prices and strengthening competition during evening peaks when demand remains high and solar output is lower." But he added the caveat that "batteries alone will not resolve every pressure in the market."

The forward-looking risk is explicit: prices could rise again if new generation and storage projects do not arrive in time to replace closing coal plants. That makes the coal-retirement schedule — and the pace at which firming capacity, dispatchable generation and transmission are delivered — the central variable for the market's next phase. For households, the report also notes the wholesale falls have not fully flowed through to bills, prompting the regulator to recommend changes for both consumers and government. That recommendation signals the regulator sees scope for policy and market-design adjustments, rather than waiting for further supply-side gains alone, to secure the consumer benefit of the wholesale decline.