January 2025 – Review of Market Events

By Aaron Bool

The beginning of 2025 saw a mix of record-breaking demand lows, heat-driven volatility, and network constraints impacting the electricity market. At the beginning of the month, Victoria recorded a new minimum market demand milestone, reflecting the ongoing shift in energy consumption patterns. Shortly after, South Australia and Victoria braced for hot weather, with demand forecasts rising accordingly. Midway through the month, New South Wales faced system stress, with an actual Lack of Reserve (LOR2) event occurring as the VIC1-NSW1 interconnector was completely constrained, preventing energy transfer in either direction. Spot price volatility followed, with prices in NSW reaching $17,500/MWh. Severe widespread thunderstorms that night further strained the network, leaving over 140,000 customers without power.  

Later in the month, further volatility hit New South Wales, with prices spiking to approximately $14,000/MWh, while Queensland experienced its own LOR2 event alongside a new record-high market demand. A few days later, while demand remained elevated, it also reached the third-highest level on record. By the end of the month, New South Wales again saw elevated demand during afternoon periods, capping off a month marked by extreme weather and market fluctuations. 

Looking ahead, as coal-fired power stations complete their offline maintenance programs, the end of the first quarter of the calendar year typically brings a softening in contract prices due to improved generation availability and a return to more stable weather conditions. However, the recent network constraints and high volatility events may continue to influence market sentiment, particularly if extreme weather patterns persist or if reserve levels remain tight. 

Recent Highlights

• The Australian Energy Market Operator (AEMO) has released its Quarterly Energy Dynamics (QED) report for Q4 2024, providing insights into market dynamics, trends, and outcomes across the National Electricity Market (NEM), the Wholesale Electricity Market in Western Australia, and key gas markets. The report compares Q4 2024 with previous quarters to highlight shifts in pricing, supply, and demand. AEMO 
• The first stage of Project EnergyConnect (PEC1) has begun regular operation, linking South Australia’s high-voltage network to New South Wales via a new 330kV transmission line from Bundey to Buronga. While not appearing as a separate interconnector, PEC1 increases transfer capacity between South Australia and Victoria by approximately 150 MW in each direction. Once Stage 2 is completed in 2026, a direct South Australia–New South Wales interconnector will be formally established. WattClarity 

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