Australian Energy & Environmental Market Update - August 2025

Australian electricity spot market

Monthly electricity spot market trends

• NEM-wide volume-weighted average spot price (VWAP) continued to soften from June’s highs, decreasing by 2% month-on-month, to $93.16 /MWh. Driving this trend, SA experienced a steep decline almost halving last month’s average, decreasing by 47% from last month. Compared to the same period last year, NEM VWAP declined by 38%, with TAS being the only region to maintain a similar price level.
  
  • Notably, TAS recorded the highest average regional price this month at $125.23 /MWh. Prices were elevated throughout the month with low wind generation continuing from last month (25.08 GWh decrease year-on-year) alongside lower hydro generation (73.10 GWh decrease) compared to July, driving gas fired generation to surge by 407% relative to July.
• Monthly NEM-wide demand remained slightly elevated, although it decreased by 637 GWh from July’s 12-month high, landing just shy of 19.1 TWh. Monthly average wind generation dropped NEM-wide by 2.25 percentile points (551 GWh) compared to the previous month, contributing to a slight increase in gas-fired generation (105 GWh increase).

‍

Daily electricity spot market trends

• In August, the NEM experienced more instances of negative pricing compared to July, and a higher frequency of prices exceeding $300/MWh in all states except SA and QLD. However, there were no occurrences of prices reaching the market price cap. Lower NEM-wide wind generation created intervals of tighter supply-demand balance. One example of this occurred on the 18th where the monthly demand peak corresponded with a small wind lull (14% drop from previous day), tightening the supply-demand balance, and thus increasing reliance on gas fired generation by 69%.

‍

Electricity Futures market

• This month’s prices strengthened across most forward markets after a late July fall, excluding the CY27 futures in SA which slightly decreased by $0.42 /MWh month-on-month.
• CY28 vintages in VIC experienced significant gains, up by $3.03 /MWh from $75.24 /MWh.
• Total traded volume declined in August compared to the previous month, with futures and caps falling despite a surge in options trading.

‍

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

Renewables markets

NEM-wide variable Renewable Energy (VRE) penetration increased by 1.35 percentage points from last month now sitting at 41.28%. This increase was mainly driven by an uptick in rooftop solar generation across the NEM.

Monthly rotating focus: BESS asset performance

Each month we feature a different asset type - rotating between coverage of solar, wind and BESS projects. This month's focus is BESS asset performance.

• The last 3 months have been notable for BESS assets. June saw record-high energy arbitrage revenue across the NEM, reaching net revenue of $95.5 million, driven by pricing outcomes in the energy market despite a drop in FCAS revenue.
• July saw a softening in revenue from June’s high, leading to a 51% decrease in net revenue, despite a significant increase in FCAS revenues.
• In August, net BESS market revenue increased across the NEM, rising 35% from July to $51.6 million. This was largely driven by a surge in net revenue in the NSW and SA markets, both of which increased by over 30% compared to the previous month.
• FCAS market revenue increased by 91% across the NEM in August. QLD and SA recorded the largest movements, with revenue rising by 113% and 99% respectively compared to the previous month.
• On the 17th, the FCAS market in SA entered administered pricing for the Lower 1 Second service after reaching the cumulative price threshold of $1,823,600 /MWh.
• An administered price cap of $600/MWh was applied across all 10 FCAS services and remained in place until the 24th. This pricing event was driven by the Tailem Bend-Tungkillo 275 kV line outage, which triggered local procurement of FCAS in SA and led to the surge in prices.

‍

Looking for more in-depth renewables asset analysis?

Learn more about our Renewable Energy Offtake Market Report, an important and recurring pulse check for renewable energy buyers and seller.

Environmental markets

Large-scale Generation Certificates (LGCs)

• The LGC markets faced persistent downward spot pressure, with no major regulatory shifts remedying this trend throughout August.
• Following the lows reached in July, a more stable spot-level began to emerge ~$1/MWh above the floor. Liquidity remains sporadic as the sustained strength on the ask has weighed on the curve.
• The month saw around average levels of VRE generation, though these certificates will likely not see the market until early Q4 given the ~6 weeks delay on creation.
• Participants are expecting an increase in market activity (both spot and derivatives) which could further stabilise pricing, but this is contingent on the patience of originators. Many periods well-below negative LGC pricing were seen in NEM states across the month.

‍

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

‍

Small-scale Technology Certificates (STCs)

The STC Clearing House has once again remained in surplus, aided by consistent weekly submissions above >1mil certificates.

The first government Battery Small-scale Technology Certificate (BSTC) purchase (~200 STCs) has occurred, but further action is awaited and much anticipated.

Forward trading remains active and stable across the near-dated tenors in the wake of issuances skyrocketing in recent weeks. Which came off the back of the Cheaper Home Batteries Program (CHBP) implementation.

‍

Victorian Energy Efficiency Certificates (VEECs)

• The VEEC market is currently navigating the various registry updates - including improved transfer processing and more granular activity data. These changes aim to clarify supply sources, especially around Schedule 44 and Schedule 6.
• Forward pricing remains tiered due to credit considerations, while creation in August hovered between the 120-150k/week level. Spot opened the month at $95.70/tCO2-e, closing down by 45c at $96.15/tCO2-e.

Energy Saving Certificates (ESCs)

• ESCs saw major regulatory changes with the Scheme Rule Gazettal. Key creation methodologies such as ‘Commercial Lighting’ and ‘New Appliance’ sales now have end dates, while new restrictions (e.g., the ban on door-knocking and co-payment rules) are expected to reduce future supply.
• These changes have driven recent price volatility and upward momentum across the spot and forwards, which ultimately softened somewhat ahead of the month's end.
• The implementation dates of the various measures gazetted in August are tipped to have further bearing on market prices. Spot opened the month at $23.25/MWh closing up 50c at $23.75/MWh.

Peak Reduction Certificates (PRCs)

• Having seen infrequent trading, August was highlighted by a sharp mid-month sell-off followed by a rebound.
• While issuances have materially declined, no new policy changes were announced. Current market tensions are suggesting caution around the future of supply.
• August's issuance figures were heavily reliant on large volume deliveries to individual APs (Accredited Parties) of battery PRCs. This is generally expected to dry up completely in the coming months. The spot price opened the month at $3.05/certificate trading sideways over the month, closing unchanged.

‍

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

‍

Market news

NEM Review draft report released

• The NEM Review Panel, led by Tim Nelson, has been tasked with reviewing the NEM wholesale market settings to support investment in firmed renewable generation and storage capacity following the conclusion of the Capacity Investment Scheme (CIS) in 2027.
• In its draft report, the Panel broadly deemed the short-term markets as functional and effective, with room to consider price-responsive resource participation on the demand-side. The recommendations were aimed at strengthening the medium- and long-term contract markets for better investment certainty and supply reliability.
• The most critical recommendations include the establishment of a market-making obligation (MMO) and the electricity services entry mechanism (ESEM).
• The MMO is proposed to solve medium-term market liquidity issues by allowing all market participants access and transparency in trading a small set of standardised and fungible derivative contracts, those which sit at the heart of the NEM’s functions.
• The ESEM is proposed to solve the tenor gap issue by introducing a central authority, responsible for competitively procuring electricity services such as bulk zero emissions energy, shaping, firming, and essential system services in the medium-long term. Once market demand for these electricity services eventuates, the central authority would recycle these contracts back into the market.

Australian Energy Regulator Q2 2025 Report released

• On the 29th of August, the AER published the Q2 report on high price electricity events in line with its requirements under the NER requirements.
• In Q1 2025, the wholesale 30-minute average electricity price exceeded $5,000/MWh on 11 occasions across 7 days, while in Q2, this occurred on 66 occasions across 6 days mostly in NSW, VIC and SA. The significant number of elevated price intervals through Q2 drove the volume-weighted average price for NSW up to $59 /MWh relative to the more subdued levels of QLD and TAS at $23 /MWh.
• The main drivers were a combination of factors of high demand, low wind output, baseload outages (all coal-fired generators), and network limitations.
  
  • In April–May, unexpected outages drove unanticipated price spikes, while in June forecasted constraints allowed the market to adjust, resulting in lower price outcomes despite high winter demand  
• During the quarter, prices in two consecutive 30-minutes FCAS intervals exceeded $5,000/MW on 10 occasions. By comparison, there were no such spikes in the previous quarter and 15 in the same period last year.

Waratah BESS and SIP Enablement

• Akaysha Energy owned and developed Waratah Super Battery Project which started construction in May 2023 and finished in October 2024 is Australia's second BESS to receive a SIPS (System Integrity Protection Scheme) contract. It is also the largest asset to receive a SIPS contract to date. It will monitor 36 transmission lines in real time and is capable of instantly responding to system events if required.
  
  • On the 1st of August, the project was enabled under the SIPs for 350 MW of its capacity with the full 850 MW / 1,680 MWh of capacity expected later in the year.
  • The battery will help the grid handle additional power delivery to Sydney, Newcastle, and Wollongong, such that less energy is curtailed.
• At 850 MW capacity it is also set to be the largest single unit ever connected to the Australian grid, surpassing Queensland’s 750 MW Kogan Creek coal-fired generator.

AEMO 2025 ESOO Report

• AEMO has released its 2025 Electricity Statement of Opportunity (ESOO) Report outlining the current and future reliability of the NEM.
• Electricity consumption is forecasted to increase by 28% in 10 years, from 178 TWh in FY25 to 229 TWh in FY35. This is underpinned by accelerating electrification of the business sector, expanding development of data centres, and the inclusion of prospective industrial loads in forecasts.
• This consumption growth has been forecast despite stronger energy efficiency measures and a lowered revision in hydrogen production loads.
• The rate of commissioning for new generation and storage projects is expected to increase from 4.4 GW in FY25 to between 5.2 and 10.1 GW per year over the next 5 years.
• Reliability outlooks have improved from last year’s report with Queensland and South Australia being the only states with forecasted reliability gaps within the next five years, dependent on expected developments and investments being delivered on time and in full.  
  
  • Queensland is forecast to have a reliability gap of 80 MW for 2025-26 due to increased forecasted maximum demand, reduced availability from Townsville and Condamine steam turbines, and higher rates of black coal generator outages.
  • South Australia is forecast to have a large reliability gap of 390 MW for 2026-27 with the advised retirement of Torrens Island B gas plant (800 MW) and the delayed completion of Project Energy Connect, an inter-state connector between South Australia and New South Wales. With this delay, the South Australian government has asked AGL to extend the lifespan of the gas plant another 2 years to cover the forecasted reliability gap.
• The announced closure dates of major power plants, Yallourn Power Station (1480 MW) in Victoria in FY29 and Eraring Power Station (2880 MW) in New South Wales in FY28 previously caused forecasted reliability gaps in AEMO’s ESOO report of 2024. These reliability gaps have no longer been forecasted because of lowered forecast demand for those years and the expected commissioning of well-located batteries prior to the power plants closings.
• As more large power stations are expected to retire, more investment will be required to close forecast reliability gaps.

Engie ‘Australian first’ virtual battery deal with AGL

• Engie’s Australian division has struck a deal with AGL, purchasing a five-year derivative contract only, virtual battery agreement due to start in 2027.
• While the contract capacity has not been disclosed, this deal will allow Engie to operate a “virtual” two-hour battery without any links to specific assets. These financial swaps, or charge and discharge positions, will be defended by AGL’s portfolio of BESS assets in New South Wales.
• Deals such as this allow retailers and large corporations access to the benefits of dispatchable capacity without the significant capex associated with energy storage projects, or the additional operational and administrative complexity of a physical toll. Simultaneously, they allow developers to secure revenue certainty in advance of completion of asset construction, while retaining some merchant exposure and the potential associated upside.

What this month’s developments mean for market participants

‍

Australian energy market

This month, the energy market continued to soften from the June’s high, with spot prices easing slightly and futures stabilising following late-July declines. SA recorded the steepest drop, while TAS experienced elevated pricing due to continued low wind and hydro output. Battery asset revenue increased in August, driven by FCAS revenues surging across the NEM.

For asset owners and market participants, understanding key seasonal trends in the market highlights the importance of strong market knowledge and effective hedging strategies to manage the impact of seasonal variations and maximise revenue opportunities.

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

The LGC market showed a more stable spot-level beginning to emerge ~$1/MWh above the floor. STC creation remained strong, underpinned by the Cheaper Home Batteries Program, while forward market activity remained active and stable.

Regulatory changes in the ESC market are expected to tighten future supply, driving recent price volatility. Keeping ahead of regulatory and policy developments is key to navigating these markets and aligning procurement strategies with evolving risks and opportunities.

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.

‍

‍