The Australian Energy Market Operator’s (AEMO) Quarterly Energy Dynamics report, released on 30 January 2025, has confirmed that Victoria continues to have the lowest wholesale electricity prices across Australia.
Across Q4 2024, Victoria’s prices dropped to $45 per megawatt hour, almost half the average cost of $88/MWh across Australia, and were the lowest of any National Electricity Market (NEM) region.
The report found that compared with Q3, 2024, prices in Victoria, South Australia and Tasmania – all states with high renewable energy generation – had decreased significantly, while those in the NEM’s northern regions increased.
NSW and Queensland’s wholesale prices rose to $143 and $127/MWh, respectively, largely due to their dependence on higher-priced and increasingly unreliable coal generation.
Average wholesale electricity spot price by region – energy and cap return for selected quarters
Record growth in solar generation meets demand and lowers prices
Record levels of growth in solar generation helped to meet the record level of demand for electricity that was reported in the NEM. This growth in solar, coupled with reduced coal availability, saw renewable sources reach a record 46% share of electricity generation across the NEM over the quarter, with coal generation falling below 50% for the first time.
Renewable energy sources, such as wind and solar, have a profound impact on wholesale electricity prices during periods of high renewable generation, and can even result in prices falling to $0 and into negative pricing when electricity generation is exceeding demand, leading to a surplus that drives prices down.
This ‘merit order effect’ occurs when low-cost renewable energy sources displace more expensive fossil fuel-based generation in the electricity market, and results in lower wholesale average electricity prices. This phenomenon has been observed in various markets worldwide, including the NEM.
“The contribution of renewables helped push down prices in South Australia and Victoria, which have the highest share of wind and solar.” Renew Economy, 30 January 2025
Victoria’s pipeline of renewable energy sources is projected to continue to deliver long-term savings.
According to the Australian Energy Market Commission’s 2024 Residential Electricity Price Trends report, Victoria’s growing share of renewables in the energy mix has not only delivered some of the lowest wholesale electricity prices in the country in recent years, but will continue for the next decade.
The AEMC report states:
“Prices in Victoria are projected to fall by 9% over the outlook, with prices remaining below the national average. Victoria is also projected to have the largest increase in demand due to electrification. A higher rate of electrification should place downwards pressure on Victorian household energy costs.”
Victoria's recent and forecast wholesale electricity prices, relative to other NEM states
The Essential Services Commission also monitors retail electricity prices in Victoria. Their data shows that the Victorian Default Offer (VDO) prices, which serve as a benchmark for retail electricity prices, have benefited from the declining costs of renewable energy.
In 2024, Victoria’s Default Offer reduced 7% from 2023, saving households around $100 and businesses $260 on their electricity. The 2024-25 Victorian Default Offer for households is, on average, more than $300 lower than the Default Offer in NSW, QLD and SA.
Residential and small business VDO compared to DMO rates
For industry, low wholesale prices can provide a competitive edge by reducing operating costs, enhancing competitiveness, promoting sustainability and ensuring price stability.
The key to continued low prices and further cost declines relies on timely delivery of renewable energy projects and reforms to policy and regulatory frameworks. See how we are doing that at Victoria's electricity future.
Keep an eye out for our energy facts series.
Page last updated: 04/02/25