May 2025 – Review of Market Events
By Aaron Bool
May began with steady conditions across the National Electricity Market (NEM), however, volatility returned by mid-month. NSW and QLD experienced sharp afternoon price spikes, with one event pushing NSW spot prices close to $10,000/MWh. These fluctuations were largely driven by a combination of interconnector constraints, the evening decline in solar output, and low wind generation. The volatility later extended through to southern states, with elevated prices in VIC, TAS, and SA. Loy Yang had a short period during which it was temporarily offline.
The latter half of May brought a shift in renewable performance. A new NEM-wide record for wind generation was set, reaching approximately 9,300 MW during the night period. Despite this, solar output remained sporadic, hindered by heavy cloud cover and rain, with generation only recovering during brief sunny periods. Spot prices spiked again near the end of the month, particularly in NSW, where prices nearly hit the market cap of $17,500/MWh. The offline status of Mount Piper 1 and Vales Point 6 added pressure to NSW’s supply mix. The Australian Energy Market Operator (AEMO) reported elevated average spot prices in NSW and moderate increases across VIC, TAS, and QLD.
In the CAL26 futures market, contract prices for NSW, QLD, and VIC experienced some initial up-and-down movement before trending downward overall. South Australia, meanwhile, recorded a consistent decline throughout the month. A similar pattern emerged in CAL27, though the movements were less pronounced. CAL28, on the other hand, followed a steady downward trend throughout. By the end of May, CAL26 prices compared to the beginning had dropped by $2.62 in NSW, $2.81 in QLD, $1.38 in VIC, and $2.18 in SA.
Looking ahead, the market appears to be in a stronger position compared to this time last year, when forward prices surged heading into the winter months. For instance, CAL26 NSW was trading around $23 higher – roughly a 20% increase – at the same point last year. While the current softness in the futures market is encouraging, it may not persist if persistent colder weather leads to heightened demand and tighter supply conditions. Volatility during peak periods remains a key risk as winter progresses.
Political Shift: ALP’s Victory and Energy Policy Direction
Labor’s strong showing in the federal election marks a turning point for Australia’s energy policy. With the Coalition stepping back from its nuclear energy stance, Labor is now positioned to accelerate its renewable agenda. The government has pledged to reach 82% – currently 35% – renewable generation by 2030, supported by battery storage and gas for firming.
Key initiatives include up to $4,000 in rebates for home battery systems, extended bill relief of $150 per household, and $100 million for energy upgrades to community facilities. An additional $500 million has been committed to improving energy performance in social housing. Emissions from transport are also being targeted, with new vehicle standards set to begin in 2025. Further investment includes $1.2 billion for a National Critical Minerals Reserve and a $2 billion expansion of the Clean Energy Finance Corporation.
These commitments reinforce Australia’s legislated emissions reduction target of 43% below 2005 levels by 2030 and reaffirm its position in the global energy transition. With greater policy clarity and funding support, the sector may now benefit from improved investor confidence and long-term direction, potentially redefining the trajectory of Australia’s energy landscape.
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