“Landmark moment:” Prices plunge as renewables supply half of grid, batteries surge and coal hits new low

The Australian Energy Market Operator has hailed the December quarter as a “landmark moment”, with wholesale electricity prices falling sharply, renewables meeting half of all demand for the first time, battery output surging and coal generation hitting a new low.

AEMO says that average wholesale electricity prices in the country’s main grid, the National Electricity Market (NEM) nearly halved in the December 2025 quarter – compared to a year earlier – to just $50 a megawatt hour (MWh), driven by record renewable and storage output.

It noted a tripling of battery discharge, a 29 per cent lift in wind output, a record high for rooftop solar, a 4.7 per cent fall in coal output to a record quarterly low, and a 27 per cent slump in gas generation to its lowest levels for 25 years.

Emissions also fell to a new low of 23.4 million tonnes of CO₂-e, a fall of 6.2 per cent from the year ago figure, and emissions intensity fell by 7 per cent to a record low of 0.53 tCO₂-e/MWh.

In short, the quarter represented much of what the government and market bodies have been arguing for the last few years – more renewables and storage will bring down prices and emissions, and still keep the lights on.

“This is a landmark moment for the NEM,” AEMO’s head of policy and corporate affairs Violette Mouchaileh said in a statement.

“It reflects years of sustained investment and demonstrates that more wind, solar and battery capacity in the system reduces reliance on higher cost coal and gas generation, placing sustained downward pressure on wholesale electricity prices.

If only it will last. The March quarter is likely to tell a different story given the extraordinary heatwaves that swept the country in January, with sustained high pricing on January 26 in South Australia likely to distort the figures, even if surges in native demand had been met relatively easily.

The federal government has set an 82 per cent renewables target by 2030, and while federal energy minister Chris Bowen refuses to concede the target is out of reach, he is keen to celebrate the sort of wins achieved in the December quarter, which also saw the breaking of a year-long investment drought.

“Australia has the best wind and sun to power our future – and it’s working,” Bowen said in a statement. 

Record energy demand at the end of last year was met with record investment in batteries, including Cheaper Home Batteries (the household rebate program).

“This is allowing Australia to use more of our sun than ever before, protecting consumers from unreliable coal and driving down wholesale energy prices.”

It is interesting to note that, as usual, average wholesale prices were lowest in the those with the biggest share of wind and solar – such as Victoria and South Australia (both $37/MWh) – and highest in those most dependent on coal, NSW ($75/MWh) and Queensland ($58/MWh). All states enjoyed falls from year earlier.

“The drop in wholesale price is good news – and we are working to ensure as much of that flows through retail prices,” Bowen said.

The December Quarterly Energy Dynamics report clearly points to a rapidly changing grid, with traditional sources of energy such as hydro, brown coal, black coal and gas being displaced by the rising output of wind, solar, rooftop PV and battery storage (see graph earlier in the article).

But there are some other interesting dynamics, particularly in the overall share of renewables, the instantaneous share of renewables, the potential share of renewables, and the share of renewables at times of peak and minimum demand.

Let’s go through the first of these, the instantaneous peaks and the potential renewables. In the NEM, a new instantaneous peak of 78.6 per cent was reached, even though the potential was much higher – a new peak of 113.9 per cent also reached in this quarter.

The difference is AEMO’s need to keep enough synchronous generation online to guarantee grid security, and this will continue at least until the transmission companies can find enough synchronous condensers, or get the all clear to use battery grid forming inverters to deliver those “system strength” requirements.

Of course the difference is also seen in the need for curtailment of wind and solar, some of it obliged by the market operator due to network constraints and other directions, but most of it because of negative prices and the lack of sufficient storage to swallow that excess output.

There were some interesting state based record highs (graph above to the right), including South Australia which reached a peak of 98.7 per cent, all of it wind and solar. That is a share of state based generation, so is different to the share of demand, which reached a peak of 154 per cent in November, with the excess sent to other states.

NSW was next highest with a peak of 86 per cent, followed by Victoria 82.5 per cent and Queensland, the country’s most coal dependent grid, with 70.6 per cent.

Interestingly, in Western Australia, which hosts a separate grid that is the biggest isolated grid in the world, the penetration of wind and solar hit a peak of 91 per cent, as we discuss in another story today.

Finally, there is the contribution of renewables at times of peak demand, often a hotly contested topic.

This shows the average renewables share (middle line), compared to the peak renewables share and the minimum renewables share at the time of maximum demand on the grid.

It does not incude the impact of rooftop solar, which has been shown in recent days to take a significant slice off the scale of grid demand, particularly in the midst of heatwave such as those experienced in recent weeks.

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