Australia’s energy markets are in the midst of a major transition driven by decarbonisation, the decentralisation of energy services and new technology, according to the Australian Energy Regulator’s (AER) flagship State of the energy market report 2025.
The AER’s 18th State of the energy market report provides a comprehensive view of Australia’s electricity and gas markets including key trends and developments.
The Australian Energy Regulator (AER) has released its flagship State of the energy market report 2025 which provides a comprehensive view of Australia’s electricity and gas markets including key trends and developments.
AER Chair, Clare Savage, said the profile of energy generation in Australia had changed significantly over the past decade, with 2024 being a notable year.
“In 2024, more than 5GW of new solar, wind, battery and gas capacity entered the National Electricity Market (NEM) – the largest annual new entry of capacity since the NEM began in 1998,” she said.
“By the end of the year, renewable technologies including rooftop solar, solar farms, wind, hydro and batteries made up 60% of the National Electricity Market’s generation capacity and contributed 39 per cent of generation output, representing a significant increase over the past decade.”
During 2024, new records were also set for rooftop solar output (which increased by 13 per cent to 23GW) and the number of home batteries installed (a 62 per cent increase compared with 2023).
The report shows that in this evolving system, the complex relationships between weather conditions, shifting energy demand, coal generator and network outages and the diverse mix of generation types are increasingly driving the wholesale market, resulting in increased price volatility.
Wholesale market conditions from July to September 2024 illustrate this volatility. Compared to the same quarter in 2023, periods of higher wind generation drove a record number of negative prices (when the 30-minute wholesale price of electricity falls below $0/MWh) in the National Electricity Market, while separate periods of low generation and network outages contributed to high price events (when the 30-minute wholesale price of electricity exceeds $5000/MWh).
While the wholesale market has been changing, energy customers have also changed their behaviour – consuming less electricity from the grid across the middle of the day, being more energy efficient, and generating their own power through rooftop solar systems and installing batteries for storage.
Technological developments and consumer preferences continue to lead us away from a supply-side orientated system to one that needs to support two-way flows of electricity, and away from centralised generation to distributed generation.
“As the system continues to evolve consumer energy resources must be effectively integrated and coordinated to help achieve a least-cost transition, with networks evolving to support these new energy services and ensuring they are utilising their full capacity,” Ms Savage said.
Costs to operate and maintain networks are passed on to consumers. In the 12-months to 30 June 2024, electricity network service providers received $270 million (2.1 per cent) less for delivering core regulated services than in the previous year. This resulted in a decrease on average of $36 for each electricity customer compared to 2023.
Alongside events in electricity markets, the gas market is undergoing its own transition. Domestic gas use has been declining for many years. In 2024, households and small commercial customers accounted for 36 per cent of domestic gas demand.
Price outcomes in gas spot markets in 2024 were similar on average to 2023.
In the first half of the year, spot prices were generally lower than the same time in 2023. This pattern reversed in the second half of the year and spot prices were generally higher than 2023 equivalents.
Movements in retail electricity prices were mixed. As of 31 March 2025, median electricity market offers for residential customers in default market offer regions ranged from a five per cent decrease in South Australia to a four per cent increase in Queensland compared to the same period last year.
At the same time, median gas market offers for residential customers ranged from an 18 per cent decrease in Queensland to a three per cent increase in Victoria compared to 31 March 2024.
Ensuring that consumers don’t get left behind and vulnerable customers are provided with the support they need now and in the future is important.
In the 12-month period to 31 March 2025, the total number of residential customers and the proportion of customers with energy debt increased. The average debt was also higher. Disconnection rates remained low, however, with only around 0.06 per cent of small electricity and/or gas customers being disconnected for non-payment.
The AER, along with other market bodies and policy makers, are taking action to improve payment difficulty protections, in particular through the AER’s review of payment difficulty protections in the National Energy Customer Framework and the Energy and Climate Change Ministerial Council’s Better Energy Customer Experiences reform program.
