Australian households and businesses saw significant relief in wholesale electricity prices across most states in 2025, with reductions up to $32.73 per megawatt-hour (MWh). However, a new report from the Australian Energy Regulator (AER), released this week on 20 August 2026, highlights that evening peak and overnight energy costs remain stubbornly high in many regions, preventing a full translation of wholesale savings to consumer bills.
The AER’s annual Wholesale Electricity Market Performance Report 2026, its fifth review of the National Electricity Market (NEM), found that increased wind and solar generation, bolstered by a rapid expansion of battery storage, was the primary driver for falling wholesale prices and revenue across all periods of the day in 2025 compared to 2024.
Significant Wholesale Price Reductions Across the NEM
The report detailed notable wholesale price decreases in key NEM states throughout 2025:
| State | Wholesale Price Drop (2025 vs 2024) |
|---|---|
| Queensland | -$32.73/MWh |
| New South Wales | -$31.66/MWh |
| South Australia | -$18.59/MWh |
Queensland recorded the largest reduction, with prices falling from $127.73/MWh in 2024 to $95.00/MWh in 2025. New South Wales also saw substantial improvements, with prices decreasing from $150.43/MWh to $118.77/MWh.
“Renewables growth eased pressure across Australia’s wholesale electricity market in 2025, though price relief has been uneven throughout the day and has not returned the market to pre-2022 levels.”
Battery Storage Reshaping Market Dynamics
The rapid deployment of battery storage systems has played a pivotal role in these shifts. The AER reported that battery storage generation and charging collectively set the wholesale price in the NEM for 16.3% of the time in 2025, a significant jump from approximately 1% in 2021.
This trend continued into Q2 2026, where NEM-wide battery price spreads fell by 85% in a single year to average AU$51/MWh. Battery discharge was the most frequent price-setting fuel type in every NEM region except Tasmania during this period, often setting prices below $100/MWh.
Australia’s NEM connected 9.1 GW of new generation and storage to full output in the 2026 financial year, more than double the FY25 result. Battery projects now constitute 52% of the 75.4 GW NEM connections pipeline, underscoring their growing importance.
The Persistent Evening Peak Problem
Despite overall wholesale price reductions, the AER’s report highlights a critical challenge: prices remained materially above pre-2022 levels during the evening peak and overnight periods across all states except Queensland.
This disparity means that while daytime wholesale prices are falling due to abundant solar and wind, the cost of electricity when most households consume it (typically 4 PM to 9 PM) remains elevated. The AER attributes this to the current limitations of battery storage and hydro, which are better suited to easing evening peak pressure rather than overnight conditions where wind generation is more relevant but faces its own approval and delivery challenges.
For consumers, this translates to continued pressure on their energy bills, particularly for those without smart meters or flexible energy plans that allow them to shift consumption. While the Default Market Offer (DMO) 2026-27, which took effect on 1 July 2026, saw price reductions for most residential flat-rate standing offers in NSW and Southeast Queensland, and for time-of-use customers across all DMO regions, the underlying wholesale market dynamics at peak times still pose a challenge. South Australian flat-rate DMO customers, for example, saw a modest increase of 1.4% from 1 July 2026.
Empowering Consumers and Future Outlook
The AER’s key recommendation is for policy attention to focus on reducing overnight and evening price pressure. This involves accelerating the deployment of longer-duration storage and more wind generation. For households, adopting smart energy management systems and participating in Virtual Power Plant (VPP) programs can offer tangible benefits. By optimising energy use and potentially earning revenue from their home batteries, consumers can mitigate the impact of high peak prices.
Households looking to take control of their energy costs can explore options such as Best Home Energy Monitoring Systems in Australia 2026: Unlock $1,000+ Annual Savings to understand their consumption patterns. Furthermore, joining a VPP in 2026: Earn Up To $1,500 Annually & Boost Grid Stability can provide financial incentives for contributing stored energy back to the grid during peak demand, directly addressing the market’s current imbalances.
The findings underscore the ongoing transformation of Australia’s energy market. While the transition to renewables is successfully driving down overall wholesale costs, strategic investment and consumer engagement will be crucial to ensure these savings are fully realised across all periods of the day, ultimately delivering more affordable and reliable energy for all Australians.