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Australian Energy & Environmental Market Update - March 2025

Australian Energy & Environmental Market Update - March 2025

The latest edition of our monthly Australian Energy & Environmental Market Update is now available. Keep reading for energy and carbon pricing movements, policy updates and other news.

Updated
April 14, 2025
Published
April 14, 2025
Australian Energy & Environmental Market Update - March 2025

Australian Energy & Environmental Market Update March 2025

This month we cover energy and environmental market movements, AEMC’s updated NEM’s market price cap for 2025-2026, Rio Tinto’s major solar and battery deal and more.

Highlights for March 2025

Australian electricity market

  • NEM-wide average spot price remained relatively stable, decreasing $3.48/MWh from February to March, despite market demand increasing 6%.  
  • QLD and NSW both recorded an increase of 7% in market demand due to intense heatwaves in March. Variable renewable energy (VRE) penetration decreased by 2.3 and 3.0 percentile points for QLD and NSW, respectively.
  • Volatility reduced from February to March with a reduction in prices above $300/MWh and below $0/MWh across the NEM.
  • On March 15th, NSW spot price almost hit the market cap, with the price set at $17,480/MWh for 4 trading intervals as demand rose off the back of high temperatures.
  • The futures market observed a slight increase in pricing this month across most states and vintages, recovering from February’s price drops. Some vintages in SA and VIC continued to experience a softening of prices, continuing the trend from last month.
  • CY25 and CY26 futures experienced a spike on the 24th before pricing eased towards the end of the month across all regions. This was most evident in CY25 vintages, with a change of $7.43/MWh in QLD, $6.78/MWh in NSW and $5.45/MWh in VIC that day.
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Rotating coverage: Renewables & BESS markets

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

This month's focus is solar.

  • The NEM-wide monthly average solar Dispatch-Weighted Average Price (DWAP) fell by 19% from February, continuing the downward trend since the peak reached in November last year.
  • QLD was the only mainland NEM region that observed an increase in solar DWAP. The 15% increase in solar DWAP from February was primarily driven by an increase in daytime pricing from last month. Despite this increase, QLD’s solar DWAP is still 27% below March 2024.
  • This month solar assets earned on average $8.8k per MW in merchant revenue, which is 28% below the average earned in February.
  • There was a NEM-wide drop in solar generation with some regions experiencing a reduction in spot market late afternoon volatility. Overall, 71% of assets saw a decrease in spot revenue, with an average decline in spot revenue of $1,900/MW, while LGC revenue also fell by an average of $600/MW.
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Environmental markets

  • LGCs prices fell across all vintages in March, with the largest falls being $3 per certificate in the spot and CY25 markets.
  • STC submissions have remained steady throughout CY25 and remain materially below the figures seen in the previous year. Pricing remained flat, with news coming of a clearing house surplus mid-month.
  • ESC creation saw its strongest volumes for CY25 in March, at ~180k/week, well up on the previous average of ~50k/week through Jan-Feb. Pricing was impacted by rule changes, the spot up $0.50/MWh.
  • VEEC creation continued to trend upward on a weekly basis with an average of ~150k/week across March. Generally, liquidity was low, spot reaching $110.00/tCO2-e early before settling at $109.00/tCO2-e late month.
  • The PRC market continued to see upward pricing movement across all tenors through March, creation volumes were on par with calendar year to date levels, at an average of ~300k/week.

Log in to the CORE Markets platform for more data, insights and commentary. Don’t have an account? Learn more

Looking for ACCU coverage? Read our comprehensive ACCU Monthly Market Report here

In other news

  • The Australian Energy Market Commission (AEMC) updated the NEM’s market price cap and cumulative price threshold based on CPI.
  • The 2025 Federal Budget allocated $3.2b to support investment in the green metals industry and an additional $1.8b 6-month-extension of the Energy Bill Relief Fund.
  • Rio Tinto executed long term offtakes with Edify Energy for 540 MW of solar power and a 600 MW/, 2400 MWh battery.
  • The Australian government released a National Renewable Energy Priority List identifying 56 priority renewable energy projects, consisting of 24 transmission projects and 32 generation and storage projects, which will receive co-ordinated support for regulatory planning and environmental approval processes.

Market news

AEMC updates market price cap for 2025-2026

In 2023, the AEMC announced that the base rates for the market price cap (MPC) and cumulative price threshold (CPT) will progressively increase from July 1st 2025, through to July 1st 2027. On February 27th, the AEMC updated the NEM's MPC and CPT to align with the consumer price index (CPI) for the 2025-26 period.

The MPC represents the maximum price that can be reached in the spot market during any trading interval, while the CPT is the accumulated limit of prices over a 7-day period.

The values for 2024-25, the new base values, and the CPI-adjusted amounts for 2025-26 are as follows:

Source: https://www.aemc.gov.au/

Rio Tinto signs major solar and battery deal

Rio Tinto has partnered with Edify Energy in a major renewable energy deal. This includes 540 MW of solar power and a 600 MW / 2,400 MWh BESS, the largest DC-coupled battery in Australia. Rio Tinto will purchase 90% of the power and battery storage from the Smoky Creek & Guthrie’s Gap Solar Power Stations for 20 years.

Rio Tinto Chief Executive, Australia, Kellie Parker referred to integrating battery storage as crucial to “our efforts to make the Boyne aluminium smelter globally cost-competitive, as traditional energy sources become more expensive”.

When combined with the 2.2 GW of renewable wind and solar PPAs Rio Tinto announced for its Gladstone operations in 2024, the four contracted projects are expected to supply 80% of Boyne smelter’s annual average electricity demand, reducing the smelter’s scope 1 and 2 emissions by 70%, or 5.6Mt of carbon dioxide equivalent per year.

Federal budget increase investment in green metals industry  

The 2025 Federal Budget has allocated $3.2b over 19 years to expand Australia’s green metals industry and support sustainable mining, particularly in steel and aluminium.

The funding also supports domestic green hydrogen projects, which will be crucial in lowering emissions in heavy industries.

Additionally, the government announced a $1.8b in funding to extend the life of the Energy Bill Relief Fund by 6 months. This means that eligible Australian households and small businesses can expect $75 off their electricity bills per quarter until December 2025.

Federal and state governments identified 56 priority renewable energy projects

The Australian federal and state governments have identified 56 priority renewable energy projects. These include wind, solar, battery, pumped hydro, hybrid, and transmission projects, aimed at meeting renewable energy targets. The list features 24 transmission projects and 32 generation and storage projects, totalling 16 GW of wind and solar capacity and 6 GW of storage capacity.

Priority projects will receive coordinated support for regulatory, planning, and environmental approvals to expedite the process. Notable projects include the Liverpool Range and Spicers Creek wind projects, as well as the Valley of the Winds and Solar River solar and BESS projects.

These initiatives are expected to enhance the stability and resilience of the energy grid, reduce reliance on coal, and make energy more affordable, addressing the grid's exposure to international price spikes and reliance on expensive coal.

What this month’s developments mean for market participants

Australian energy market

This month, the energy market experienced subdued spot pricing across most NEM regions. However, NSW still saw some periods of volatility, with trading intervals just below the market cap. Subdued prices, and lower solar DWAPs means entities interested in using solar to reduce their scope 2 emissions continue to have significant buying power.

To appropriately hedge against market price risks and volatility, strategic planning remains key for both demand and supply side market participants.

The CORE Markets team works 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 prices declined this month, as ongoing oversupply from strong certificate creation continues to force sellers to compete in a crowded market. STC submission volumes remained strong, while VEEC and ESC creation continued their upward trend.

The continued decline in LGC prices presents an opportunity for Australian businesses looking to create and/or deliver on sustainability objectives to do so for a lower cost than ever before. The CORE Markets team works with demand and supply side market participants to help navigate environmental market complexities.  Get in touch to see how we can help with your strategic and transactional needs.

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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Australian Energy & Environmental Market Update - March 2025

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April 14, 2025

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