nsw MARKET UPDATE
Electricity market conditions in New South Wales remained relatively favourable through July, although winter demand has led to more frequent periods of short-term price volatility across the National Electricity Market (NEM).
While forward electricity prices continue to sit well below the highs experienced in 2022–23, the market has become increasingly sensitive to weather conditions, renewable generation levels and evening peak demand.
Strong renewable output across the NEM, combined with growing battery storage capacity, continues to support lower average wholesale prices. However, cold winter mornings and evenings are increasing reliance on dispatchable generation, particularly gas-fired generation, creating more volatility during peak trading periods.
Key Market Drivers
Current NSW electricity pricing is being influenced by several key factors:
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Strong renewable output across the NEM continues to support lower wholesale prices
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Battery storage is increasingly helping to smooth out peak price spikes
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Overall supply conditions remain stronger than in recent years
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Winter demand is lifting volatility during peak morning and evening periods
While conditions remain favourable, pricing is becoming more reactive to short-term weather and demand changes.
Futures Pricing outlook
Forward electricity prices remain relatively soft by historical standards, reflecting confidence in growing renewable supply and additional storage entering the market.
However, seasonal risks remain through the remainder of winter.
Key expectations include:
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Continued periods of elevated morning and evening demand.
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Ongoing reliance on gas generation during renewable shortfalls.
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Short-lived wholesale price spikes during low wind and solar conditions.
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Improving longer-term market stability as additional batteries and renewable projects are commissioned.
The longer-term outlook continues to support lower wholesale pricing, although short-term volatility is expected to remain a feature of the market.
Network Tariff Changes
The NSW network tariff changes introduced on 1 July are now in effect, prompting many businesses to reassess their electricity network charges.
For many commercial customers, network costs now represent a significant proportion of total electricity expenditure. Businesses with changing operating hours, electrification projects or solar and battery investments may find their existing tariff structure is no longer the most cost-effective option.
Reviewing tariff suitability has become an increasingly important opportunity to reduce overall electricity costs.
Supply Outlook – Generation & Infrastructure
NSW entered the second half of winter with adequate supply under normal operating conditions, although reserve margins continue to tighten during periods of high demand.
Key factors include:
Planned generator outages:
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Around 700MW of generation offline in NSW due to scheduled maintenance
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Additional NEM-wide outages can tighten supply during peak demand windows
Interstate reliance:
NSW remains dependent on imports from Victoria and Queensland during peak periods. When interconnector flows are constrained, local pricing can become more volatile.
Battery storage growth:
Battery capacity is gradually increasing across NSW, improving the system’s ability to manage evening peak demand and reduce short-term volatility, although its full impact is still developing.
System constraints:
Transmission limitations and reduced renewable output during winter mornings and evenings can create short periods of tighter supply conditions.
Overall, the system remains adequately supplied under normal conditions, but margins tighten noticeably during peak winter demand periods.
What it means for your business
With wholesale electricity prices remaining well below recent highs and network tariff changes now implemented, July presents a strong opportunity for NSW businesses to review their electricity arrangements.
While wholesale prices remain a key driver, network charges are increasingly important and can materially affect overall electricity costs if tariffs are not aligned with usage patterns.
A review of both contract position and network tariff structure can help identify savings opportunities and ensure arrangements remain suitable ahead of upcoming contract cycles and winter volatility.
For businesses without an active energy strategy, now is a practical time to reassess positioning before peak seasonal conditions place further pressure on the market.
nsw ELECTRICITY FUTURE PRICING CHARt
The NSW Government has granted conditional planning approval for the Hunter Transmission Project, a major piece of electricity infrastructure that will strengthen the state's transmission network and connect renewable energy generated in the Central-West Orana and New England Renewable Energy Zones to homes and businesses across the east coast.
Before approving the project, the transmission route was significantly amended to reduce impacts on private landholders and environmentally sensitive areas, including habitat for the endangered Littlejohn's tree frog. The project must still receive Commonwealth environmental approval before construction can begin, which is expected from late 2026
Key takeaways:
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The project will construct approximately 110 km of new 500 kV transmission lines between Bayswater in the Upper Hunter and Olney near Lake Macquarie.
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The transmission line is a critical component of NSW's energy transition, creating a new high-voltage backbone that will allow renewable energy from inland Renewable Energy Zones to be delivered to major demand centres.
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Construction is expected to commence in late 2026, subject to federal approvals and completion of detailed design and environmental management requirements.
What it means for businesses
The approval marks another significant milestone in NSW's transition away from ageing coal-fired generation toward a modern electricity system supported by renewable energy and storage.
By expanding transmission capacity, the Hunter Transmission Project will improve the ability to connect large-scale renewable generation to the grid, strengthen energy reliability and help reduce transmission constraints that can contribute to higher electricity prices.
While the project remains controversial due to its local environmental and landholder impacts, it is expected to play an important role in supporting long-term energy security as coal-fired power stations retire over the coming decade. Over time, additional transmission infrastructure should improve competition between generators, increase access to lower-cost renewable energy and enhance overall system resilience across the National Electricity Market.
The NSW Government has approved plans for Yancoal Australia to redevelop its retired Stratford coal mine in the Hunter region into a major renewable energy hub featuring 320 MW of solar generation and 300 MW of pumped hydro storage capable of delivering up to 12 hours of continuous energy storage.
The $1.8 billion project is the first pumped hydro development to receive final NSW planning approval in six years and will repurpose existing mine infrastructure, including reservoirs, water resources and transmission connections.
The project will combine 320 MW of solar generation with 300 MW of pumped hydro storage, providing up to 12 hours of dispatchable energy and is expected to supply electricity to 140,000 NSW homes, contributing around 13% of NSW's 2034 long-duration energy storage target,
What it means for businesses
The approval highlights the growing investment in long-duration energy storage needed to support Australia's transition to a renewable electricity system. While batteries are increasingly managing short-term fluctuations, pumped hydro provides the extended storage required to supply electricity during prolonged periods of low wind or solar generation.
While it does not immediately change market pricing, over time, projects such as Stratford are expected to improve grid reliability, reduce reliance on gas-fired generation during peak periods and help moderate wholesale electricity price volatility.