Australian Energy & Environmental Market Update - June 2025

Australian electricity market

Monthly market trends

• The NEM-wide volume weighted average spot price surged by 131% month-on-month to $232.57 /MWh due to a combination of low wind and solar generation, and 7% seasonal rise in demand compared to May. This marks the first time monthly average prices have exceeded $200 /MWh since June 2022, when they reached $372 /MWh.
• All states experienced a significant increase in average spot prices due to two extreme pricing events on the 12th and 26th, with VIC and SA’s average price more than tripling compared to last month, while QLD, NSW, and TAS observed a 77-112% increase in monthly spot prices relative to May.

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Daily market trends

• In line with seasonal patterns, June saw increased volatility compared to May with several high trading intervals recorded in all NEM regions on the 12th and 26th of June. The number of trading intervals with spot prices exceeding $300 /MWh was more than seven times higher than the previous month, however this frequency was 30% less than levels observed in June 2024. Only one market cap event was recorded across the NEM this month, which occurred in VIC, while negative pricing intervals increased year-on-year but remained below May levels for all regions.
• On the 11th, overcast conditions led to reduced solar generation while wind generation remained subdued. Cold temperatures drove up heating demand, causing a tight supply-demand balance. Peak evening demand caused the NEM-wide IRPM2 (Instantaneous Reserve Plant Margin - a measure of surplus generation capacity relative to demand) to drop from 21.80% to 14.54%, which led to coincident high price intervals across all regions from 5:35pm, with prices soaring above $8,718 /MWh over 4 trading intervals before softening later in the evening.
• Cool temperatures and extreme prices continued to the 12th, with all regions almost hitting market cap over 6 trading intervals from 7:25pm. At 7:55pm, prices across all NEM regions simultaneously exceeded $16,000 /MWh in a historic first. Notably, VIC reached the market cap of $17,500 /MWh during this period.
• On the 26th, a combination of low wind generation and low temperatures across the southern regions drove market demand above 31,000 MW during evening peak, resulting in a tight supply-demand balance. This condition is further exacerbated with the NSW-QLD interconnector constrained at 1,142 MW capacity, contributing to the price escalation. To meet surging demand, NEM-wide gas-fired generation more than tripled compared to the previous day. Meanwhile, supply tightened due to multiple coal outages - most notably the 443MW trip of Loy Yang A2 on the 25th, which kept the unit offline until June 27. Peak evening demand led to prices recorded in NSW, VIC, and SA to hover above $15,000 /MWh at 8:45pm across 2 trading intervals.

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Futures market

• Strong performance in June boosted overall Q2 FY25 futures prices, with VIC and SA CY25 futures seeing the largest gains - rising 34% and 24% month-on-month, respectively.
• ASX swaps and caps trading volumes fell 6% month-on-month, reflecting the typical seasonal slowdown from May to June, but were up 107% compared to June last year. Meanwhile, cap prices jumped 30% across 2 days, driven by the surge in spot prices.

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Renewables markets

NEM-wide Variable Renewable Energy (VRE) penetration decreased by 2.44 percentile points from last month, primarily driven by reductions in rooftop and utility solar across all regions. VRE output declined in most regions, except VIC, where the 4.26 percentage point increase in wind generation led VRE output to increase by 0.59 percentile points compared to last month.

Monthly rotating focus: Solar asset performance

Each month we feature a different asset type - rotating between coverage of solar, wind and BESS projects.

This month's focus is solar asset performance.

• Solar merchant revenue per MW slightly decreased by 8% from last reported in March despite a 107% jump in Dispatch Weighted Average Price (DWAP). This was mainly due to a NEM-wide drop in solar generation and lower average capacity factor due to seasonal patterns.
• Total merchant revenue (including LGCs) averaged $8,113 /MW in June -19% higher than the same month in 2024. Despite a 9% drop in DWAP, average capacity factor and dispatch generation rose by 11% and 16% year-on-year, respectively.
• NEM-wide monthly average solar DWAP increased by 38% from May but is 13% lower than June 2024 levels. All regions except QLD observed an increase in solar DWAP relative to last month, with VIC and SA driving up the trend by increases of 190% and 118% respectively due to seasonal impacts, as the regional disparity in DWAPs are also observed in June 2024.
• Capacity factors decreased in all states with SA and VIC recording the largest reductions, dropping by 24–25% due to shorter daylight hours and increased cloud cover typically observed in the southern regions.

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Environmental markets

Large-scale Generation Certificates (LGCs)

• June saw a slightly subdued period of spot activity for the LGC market, with ~1.1TWh trading in spot, down from ~1.4TWh in May. Across the last 12 months this put June near the rolling average of 1.116 TWh/month.
• On the market front, the first week of the month saw calls for Cal26, 27, 28 traded respectively with strikes and prices of $23 at $2.10, $26 at $1.00 and $24 at $0.75. Demonstrating some interest in hedging against the continual downward trend emanating from excess LGCs generated outside of PPA with lower-than-expected voluntary buying. No further options traded from the 6th onward.
• The spot price along with the Cal25s and 26s fell sharply on 11th of June following a wave of selling aligned with an Australian Financial Markets Association (AFMA) meeting that suggested regulatory sensitivity.
• Further declines on 23rd shifted focus to voluntary demand, as the curve remained flat and rangebound longer-dated forwards. A technical rebound in the shorter-dated forwards followed this, with modest recovery in the late month despite generally light liquidity and limited news from the broader renewable market.

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Small-scale Technology Certificates (STCs)

• STCs remained largely inactive through June, despite a persistent Clearing House deficit, which narrowed from ~2.4 million to around ~1.1 million certificates across June.
• Market focus centred on potential policy clarifications for home BESS, particularly regarding dual eligibility with Peak Reduction Certificates (PRCs).  However, the absence of formal announcements from the NSW Government kept trading subdued ahead of the compliance period.
• The forwards remained stable once with only minor softening across the Q3 tenors, spot trading sideways at $39.90/MWh.

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Victorian Energy Efficiency Certificates (VEECs)

• Throughout June trading in the VEEC market was predominantly shaped by the rollout of the new Victorian Energy Upgrades (VEU) registry. The initial update lacked critical supply-side data which greatly hampering market transparency and in turn liquidity.
• Compliance warnings from the VEU and tighter oversight signalled regulatory tightening once again drove prices higher and widened the spot–forward spread, particularly for 2025 compliance, with the spot rising from ~$90/tCO2-e to $94.00/tCO2-e.

Energy Saving Certificates (ESCs)

• The ESC market surged in June on the back of tightening sentiment and regulatory action, including an August door-knocking ban and IPART’s cancellation of >600k invalid certificates, making up a  substantial contribution to the market's ~22.3 mil active certificates.
• Spot pricing peaked above $21.00 /MWh, with CY26 forwards trading as high as $25.00 /MWh, before easing slightly as creation volumes lifted into month-end.

Peak Reduction Certificates (PRCs)

• The unexpected NSW policy suspending BESS1-PRC creation from 1 July halted expectations of potential certificate stacking with the forthcoming federal battery rebate.
• Prices surged over 50% as supply expectations collapsed, triggering record volumes and structural repricing. While consultation is pending, tightness concerns persist, with spot stabilising near $3.10–$3.20 /certificate into month's end.

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Market news

Guarantee of Origin scheme released exposure drafts

• Australia’s Guarantee of Origin (GO) scheme has reached a milestone with the release of its exposure drafts - a long-anticipated step toward internationally credible granular clean energy tracking.
• The GO scheme is a voluntary digital certification scheme designed to track and verify emissions associated with renewable electricity, green hydrogen, green metals and sustainable fuels. The scheme includes two certifications: Renewable Electricity Guarantee of Origin (REGO) and Product Guarantee of Origin (PGO).
• REGO is the next-generation form of LGCs that will address some of its existing limitations and it will be a fundamental tool in creating PGOs.
• This development marks a shift from broad capacity-based incentives to a targeted, traceable proof-of-origin system. The GO scheme lays the groundwork for more credible emissions accounting and supports Australia’s ambitions in clean energy exports.
• Finalisation of the scheme is expected to accelerate decarbonisation efforts for emissions-intensive trade-exposed (EITE) sectors and position Australia as a global leader in 24/7 100% carbon-free energy.
• The government is currently accepting feedback on the scheme, with submissions closing on 18 July 2025.

New Peak Futures Contract listed on the ASX

• On 30 June, ASX listed new peak futures contracts for morning and evening periods in NSW, with rollout to other NEM mainland states expected in the coming weeks.
• The contracts are designed to help hedge and manage price volatility during morning and evening peak periods, when solar generation is low and demand is high.
• The ASX-listed product is available quarterly, up to four years ahead, covering morning peaks from 6:00am–9:00am and evening peaks from 4:00pm–9:00pm.
• These new ASX-listed peak futures contracts support the energy market by enabling more targeted hedging during the most volatile demand periods, enhancing market efficiency and improving risk management for both retailers and generators.

Frequency Performance Payments

• The Frequency Performance Payments (FPP) reform officially commenced on 8 June 2025, introducing a system of positive and negative FPPs to provide market participants with insights into their frequency performance and its dollar value/ cost.
• The calculations for FPP are based on each generation unit’s performance and its five-minute Contribution Factor (CF), which will be used to allocate the recovery of Regulation Frequency Control Ancillary Services (FCAS) costs.
• The rule is designed to incentivise plant behaviour that helps lower the overall cost of frequency regulation in the NEM.

What this month’s developments mean for market participants

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Australian energy market

This month the energy market saw reduced renewable energy penetration, increased demand, and higher average spot and futures prices across the NEM.

The extreme pricing events on the 11th, 12th, and 26th underscore the importance of strong market knowledge and effective hedging strategies to manage the impact of seasonal variations.

The CORE Markets team partners with renewable energy developers and corporate buyers to manage market risks.  Get in touch to explore how we can support your energy market approach.

Australian environmental markets

 LGC market activity declined in June with spot and forwards falling sharply mid-month amid regulatory concerns, while ESC and VEEC markets showed price movements based upon policy and compliance dynamics, staying ahead of these regulatory changes can help guide procurement strategies to take advantage and keep costs low.

The CORE Markets team supports demand and supply side market participants in navigating these markets – across strategy, procurement and trading execution. Get in touch to learn how we can support your goals.

Do you need help navigating energy and environmental markets?

The events outlined in this month's update highlight the evolving nature of energy and environemental markets and the complexity of the net zero transition.

To discuss your unique requirements, get in touch with our team today to see how we can help.

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