Summary

November 2025 delivered a clear demonstration of the evolving dynamics and risks in the east coast energy markets, with the National Electricity Market (NEM) experiencing pronounced volatility, record renewable output, and significant weather-driven disruptions. Spot electricity prices swung dramatically, particularly in New South Wales (NSW), where intervals at the Market Price Cap ($20,300/MWh) alternated with negative prices within the same hour. Batteries and hydro assets were called upon intensively, while forward market premiums compressed sharply as traders reassessed summer risk. Gas markets remained tight but stable, with supply bolstered by new developments and subdued demand from delayed coal retirements. The carbon and renewables certificate markets saw robust activity, underpinned by strong Australian Carbon Credit Unit (ACCU) issuance and record renewable capacity additions. Policy and regulatory developments continued apace, with the launch of the Guarantee of Origin scheme and ongoing reviews of market settings to support reliability and investment.

Key themes for November included:

• Extreme spot price volatility in NSW, driven by coincident renewable output drops and heatwaves.
• Record renewable generation and storage build-out, with nearly 7 GW of new capacity on track for 2025.
• Battery storage activity surging, though arbitrage margins narrowed due to flatter price peaks.
• Forward market premiums compressed, reflecting a market view of receding structural tightness.
• Robust carbon market activity, with ACCU supply and trading volumes at multi-year highs.
• Major policy and regulatory reforms advancing, including the Guarantee of Origin scheme and market settings reviews.

This report offers a detailed analysis of developments by commodity, region, and market segment, concluding with commentary.

Electricity Spot Market Movements

Overview of Spot Price Dynamics

November 2025 was marked by some of the most turbulent spot market conditions in recent years, especially in NSW. The final week of the month saw spot prices oscillate between the Market Price Cap ($20,300/MWh) and the market floor (–$1,000/MWh) within the space of an hour, underscoring the NEM’s growing sensitivity to rapid shifts in renewable output and weather. Despite these spikes, the monthly average spot price in NSW was relatively subdued at around $78/MWh, below the equivalent period in 2024.

The volatility was not confined to NSW. Queensland (QLD), Victoria (VIC), and South Australia (SA) also experienced sharp price movements, though the magnitude and frequency of spikes were less pronounced. The volatility was primarily driven by:

• Sudden collapses in wind and solar output due to storm fronts and cloud cover.
• Heatwave conditions that elevated operational demand and stressed system reserves.
• Transmission constraints that limited inter-regional flows and exacerbated local imbalances.

Regional Spot Price Summary

Analysis of Volatility Drivers

The most significant price events occurred in NSW on 25–26 November, when a combination of searing heat, violent storms, and a rapid collapse in wind and solar output forced the market operator to call on all available fast-ramping resources. Hydro generation surged by nearly 1,400 MW, and batteries swung from net charging to discharging at up to 260 MW. Despite these responses, the system briefly lost balance, resulting in three consecutive intervals at the Market Price Cap, followed by a plunge to –$1,000/MWh as the system overshot on recovery.

These events highlight the NEM’s increasing exposure to “coincident renewable swings”—where simultaneous drops in wind and solar output, often weather-driven, can create sudden and severe supply gaps. While average daily wind production was higher than the preceding week, the brief but severe 1,500 MW wind collapse, coinciding with a 2,200 MW solar drop, was enough to trigger extreme price outcomes.

Electricity Forward Markets and Hedging

Forward Price Movements and Hedging Activity

Despite the spot market fireworks, forward prices for Q4 2025 and Q1 2026 contracts softened markedly in the final week of November. The NSW Q4-25 base swap, for example, fell from $87.35/MWh on 21 November to $80.50/MWh by 28 November, as the forward premium relative to the quarter-to-date spot average collapsed from over $15/MWh to just $2.3/MWh. Similar patterns were observed in VIC and QLD, with forward prices retreating by $4–9/MWh over the week.

The sharp compression in forward premiums reflects a market consensus that structural tightness is receding, with traders discounting the likelihood of further extreme spot price upside in the remaining weeks of the quarter. Options market activity surged, with put options representing 61% of turnover, indicating a greater concern for downward price movements. Q1-26 contracts, representing the critical summer risk period, also saw heavy trading and a 7–11% decline in prices across the mainland states.

Renewable Generation and Output

Record Renewable Capacity Additions

Australia is on track to add nearly 7 GW of new renewable generation capacity in 2025, with large-scale projects contributing up to 4 GW and small-scale (primarily rooftop solar) adding just under 3 GW. This follows a record year in 2024, when 4.3 GW of large-scale capacity was added. The Clean Energy Regulator (CER) reports that average renewable penetration in the NEM reached a new high of 42.7% in Q3 2025, up from 39.3% a year earlier.

Wind generation led large-scale additions, with grid-scale solar also rising by 16% year-on-year. The pipeline of committed and probable projects remains strong, with up to 5.9 GW of capacity in the Large-scale Renewable Energy Target (LRET) data that may be accredited in 2026 and beyond.

Curtailment and System Integration Challenges

Curtailment of utility-scale wind and solar reached record levels in 2025, surpassing 6 TWh year-to-date by late November—a 62% increase over 2024. Most curtailment occurred in VIC (1.97 TWh), followed by NSW (1.41 TWh), SA (1.37 TWh), and QLD (1.25 TWh). The main drivers were:

• Economic curtailment (negative prices, unprofitable dispatch).
• System-driven curtailment (thermal and stability limits, transmission constraints).
• Limited storage and flexible load to absorb midday surpluses.

Storage charging windows are filling earlier, and the need for more utility-scale and distributed storage, as well as flexible demand (e.g., EVs, heat pumps), is increasingly urgent to make full use of renewable output.

Capacity Investment Scheme (CIS) and Project Pipeline

The CIS Tender 4, announced in October, awarded 20 projects totalling 6.6 GW of generation and 11.4 GWh of battery storage. Hybrid solar and battery systems dominated, reflecting a shift toward dispatchable renewables. More than half of the successful projects included co-located storage, underscoring the growing role of batteries in firming solar output.

Final investment decisions (FID) for new projects have been lower in 2025 than in recent years, but are expected to strengthen in 2026 as CIS and non-CIS projects progress toward construction.

Battery and Storage Performance

Record Battery Activity and Changing Revenue Mix

Grid-scale battery energy storage systems (BESS) discharged a record 153 GWh across the NEM in November 2025, more than double the 71 GWh recorded a year earlier. Charging volumes also surged, reaching 162 GWh as batteries absorbed deeper low and negative-price intervals created by record solar output. However, the surge in physical activity did not translate into proportionate revenue gains, as average price spreads narrowed sharply in NSW and QLD, crimping energy-arbitrage returns.

The lion’s share of incremental energy came from a handful of recently commissioned “big batteries,” including Western Downs BESS (QLD), Greenbank BESS (QLD), Melbourne Renewable Energy Hub (VIC), Rangebank and Kiamal (VIC), Templers and Blyth BESS (SA).

Gas Market Developments

Supply, Demand, and Price Trends

The east coast gas market in 2025 remains in a state of transition, with legacy fields in Gippsland, Otway, and Cooper Basins continuing to decline. However, recent changes and new supply options have bought more time for the market. The start of pilot well production in the Beetaloo and exploration in the Otway Basin are positive signs for future supply.

• Domestic gas demand is falling, driven by the deferral of coal-fired power station closures (notably Eraring in NSW), which reduces gas demand for power generation.
• Gas prices continue to trend toward LNG netback levels, with variations across hubs. The Wallumbilla Gas Supply Hub (GSH) and Victorian market prices remained stable in November, though subject to seasonal and weather-driven fluctuations.

Storage and Infrastructure

• Iona underground gas storage: A 25-year agreement between Snowy Hydro and Lochard Energy will provide additional storage from January 2028, enhancing system resilience.
• Kurri Kurri Power Station: The new gas-fired generator in NSW will increase gas demand, but overall system adequacy is maintained due to subdued power sector demand and adequate storage levels.

Outlook and Risks

• Peak day gas supply adequacy for southern states in summer 2025–26 will depend on flows from Iona storage and/or QLD, especially during planned maintenance at Longford and Otway gas plants in December.
• Refilling Iona storage ahead of winter 2026 is a key operational focus, with modelling indicating adequate supply but limited inventory refill over the remainder of 2025.

Carbon Market and ACCU Developments

ACCU Supply, Demand, and Pricing

The Australian carbon market continued to support climate goals in 2025, with strong ACCU issuance and trading activity. Total ACCU supply for 2025 is expected to reach the higher end of the 19–24 million range, with 5.5 million ACCUs issued in Q3 and 15 million year-to-date.

• Spot prices for ACCUs and Safeguard Mechanism Credits (SMCs) rose modestly, reflecting strong demand from entities seeking to comply with declining emissions baselines.
• Covered emissions at Safeguard facilities reduced by 2.4% to 132.7 MtCO₂-e in 2024–25, with 59 facilities eligible for SMCs and 143 exceeding baselines.

Source: CER Carbon Markets Report Q3 2025LGC Market Outlook

LGC prices have continued to soften significantly through late 2025, falling to around A$7 after a sharp decline in recent weeks. The market is being shaped by record renewable capacity additions, with both large‑scale projects and rooftop solar driving certificate creation to historically high levels. In Q3 alone, more than 15 million LGCs were issued, adding to the surplus. At the same time, compliance demand under the Renewable Energy Target has eased, as most retailers have already met their obligations, while corporate buyers increasingly secure long‑term PPAs rather than purchasing certificates on the spot market.

The result is a market characterised by oversupply and subdued pricing. While voluntary demand from corporates remains a supportive factor, the near‑term outlook points to continued volatility and low prices unless new policy drivers or structural demand emerge to absorb the surplus.

Guarantee of Origin (GO) Scheme

• Launched on 3 November 2025, the GO Scheme includes the Product Guarantee of Origin (PGO) and Renewable Electricity Guarantee of Origin (REGO), providing robust emissions tracking for products and renewable electricity.
• Initial uptake: As of 14 November, three applications (one PGO, two REGO) had been received.

Policy and Regulatory Developments

Major Policy Announcements and Reviews

Guarantee of Origin Scheme

• GO Scheme launched: Provides voluntary certification for emissions intensity of products and renewable electricity, supporting low-emissions industry development.

NEM Wholesale Market Settings Review

• Ongoing review: The independent expert panel, supported by the Department of Climate Change, Energy, the Environment and Water (DCCEEW), is preparing final recommendations for wholesale market settings to promote investment in firmed, renewable generation and storage capacity post-2027. The draft report was released in August, with final recommendations due late 2025.

Reliability Standard and Settings Review

On 27 November, the Australian Energy Market Commission (AEMC) released its draft report outlining preliminary views on the future of reliability standards and market clearing arrangements during minimum system load events. The report highlights the growing challenge of managing reliability in a grid increasingly dominated by variable renewable generation, with particular focus on periods of very low operational demand driven by rooftop solar. The AEMC is considering adjustments to reliability settings to ensure sufficient dispatchable capacity remains available, while also exploring mechanisms to manage market clearing when minimum system load conditions occur. These proposals signal a shift toward more proactive reliability planning and operational flexibility, aimed at safeguarding system security as coal retirements accelerate and renewable penetration deepens.

Capacity Investment Scheme (CIS)

• Tender 4 awarded: 20 projects totalling 6.6 GW of generation and 11.4 GWh of storage, with a strong focus on hybrid solar and battery systems.

Default Market Offer (DMO) and Retail Market Reforms

The Federal Government is undertaking a review of how the Default Market Offer (DMO) is set, with reforms aimed at tightening retail pricing and strengthening consumer protections. Recent changes include the removal of the competition allowance and stricter caps on retailer cost pass‑throughs, designed to shield households and small businesses from wholesale volatility. While these measures deliver short‑term affordability benefits, they also raise concerns about the long‑term sustainability of retail competition and innovation. Alongside the DMO reforms, the Government has proposed a new Solar Sharer Offer, which would provide households with a defined daily window of zero‑cost electricity usage during periods of abundant solar generation. This initiative is intended to shift consumption into daytime hours, absorb excess renewable supply, and ease evening peak demand, embedding the benefits of the energy transition directly into retail pricing structures. Together, these reforms signal a more interventionist approach to retail market design, balancing affordability with system security and the integration of renewables.

Political Developments

• Coalition policy shift: The Liberal Party announced it would remove the net zero target from its policy platform, focusing on affordability and reliability, and pledging to lift the ban on nuclear energy and maintain baseload power until replacement capacity is ready.

Commentary

November 2025 was a pivotal month for the east coast energy markets, highlighting both the opportunities and challenges of the energy transition. While record renewable deployment and storage build-out are driving decarbonisation, they are also introducing new risks and complexities—most notably, increased spot price volatility, curtailment, and challenges in forward market liquidity. Weather extremes and system disruptions are likely to persist, underscoring the need for robust risk management, flexible operations, and proactive engagement with policy and regulatory change.

Wollaton Consulting clients are encouraged to remain vigilant, adaptive, and informed as the market continues to evolve. The coming summer will test system resilience, and those best prepared will be positioned to manage risk and capture value in Australia’s dynamic energy landscape.

For further data, charts, and tailored energy management advice, please contact us.

Disclaimer

This report has been prepared by Wollaton Consulting for general informational and marketing purposes only. The information contained herein is based on sources believed to be reliable at the time of publication; however, Wollaton Consulting makes no representation or warranty, express or implied, as to the accuracy, completeness, or currency of the information provided.

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