February 2025 – Review of Market Events

By Aaron Bool

February saw strong market activity across the National Energy Market (NEM), with spot price volatility being driven by high demand periods, and supply constraints shaping trading dynamics. Early in the month, South Australia experienced extreme price volatility, with spot prices nearing $17,500/MWh in some evening periods. Victoria also saw heightened demand in the afternoon periods, while Queensland faced severe weather conditions, leading to widespread flooding, power outages, and notably, a substation failure. Market demand remained elevated across all NEM states, peaking at 32,925 MW during an evening period, with South Australia and Victoria standing out for particularly high levels.

A scheduled stoppage related to industrial action at Gladstone prompted the Australian Energy Market Operator (AEMO) to revise constraint equations to account for skewed output, coinciding with a forecast for Lack of Reserve (LOR) conditions across Queensland, Victoria, and South Australia. Around the same period, New South Wales experienced spot price volatility, while Victoria saw the temporary outage of Berrybank 1 and 2 wind farms due to structural collapse, with both facilities returning to service a few days later.

Midway through the month, South Australia endured a severe heatwave, driving market demand higher, with temperatures reaching 44°C, the hottest levels seen within the last 5 years. This resulted in a tight supply-demand balance and further price volatility. Later in the month, New South Wales set a new record for the lowest market demand, driven by strong small-scale solar generation, which in turn led to significant solar curtailment of around 72%. Toward the end of the month, New South Wales saw spot price spikes reaching $17,500/MWh attributed to constraint equations imposed by transmission line outages.

Throughout February, solar generation remained strong, while wind output was relatively consistent. In terms of trading, the ASX CAL26 NSW market began the month at $131.13, seeing a drop of $6.97, with the market settling at $124.16. QLD started the month at $134.00 and dropped by $8.50 to round the month off at $125.50. SA saw a small drop of $1.05, going from $99.79 to $98.74, and lastly, VIC went from $75.40 to $73.50, seeing a $1.90 drop.

Looking ahead, while Quarter 1 is typically driven by a well-balanced supply and demand mix due to mild temperatures and strong renewable energy generation, and while the market is currently tracking favourably, near-term uncertainties could introduce unwelcome volatility. In particular, the upcoming Federal election may bring potential policy changes and shifts within the energy transition that could influence the sentiment of wholesale prices. Additionally, seasonal changes in demand and the potential for increased rainfall could impact renewable generation and grid stability.

Recent Highlights

• Callide Power Trading Penalty: The Australian Energy Regulator (AER) issued a record $9 million penalty for failing to meet performance standards related to the 2021 explosion incident. AER
• EnergyConnect Cost Overruns: The SA-NSW interconnector project saw cost blowouts of approximately $1.5 billion, potentially leading to higher power bills. AFR
• Market Price Cap Increase: The Australian Energy Market Commission (AEMC) announced an increase to the market price cap (MPC) for 2025-2026, raising it from $17,500/MWh to $20,300/MWh, effective 1 July 2025. AEMC

Market Reports