VIC MARKET UPDATE
Victoria has entered March with continued strength in its electricity supply, supported by high renewable output and relatively balanced demand conditions. The state’s strong renewables performance continues to help keep wholesale prices lower than many other regions of the National Electricity Market.
Wholesale Market Conditions
Victoria’s daytime prices remain broadly competitive, with strong solar and wind generation suppressing spot pricing during daylight hours. This aligns with broader national trends where renewable energy and storage are playing an increasingly major role, recent data shows renewables and storage supplied more than half of total energy needs across the NEM late last year, helping put downward pressure on wholesale prices.
The growing renewable mix has also contributed to the draft decision by the state’s regulator on the 2026–27 Default Victorian Offer (VDO), which proposes lower standing electricity prices for households and small businesses from 1 July 2026. The draft would reduce typical bills by around $43–$48 per year for households and around $165–$179 for small businesses.
Evening and Peak Considerations
Evening price behaviour in Victoria continues to reflect broader grid dynamics: as solar output drops in the late afternoon, the system relies more on dispatchable generation (coal and gas). While the state’s coal fleet is generally reliable, ageing coal plants remain a source of occasional supply risk, and downturns in wind or tight network conditions can lead to short‑term price spikes, behaviour seen across the eastern NEM.
Battery storage and distributed resources (like rooftop solar) are mitigating some volatility by absorbing excess daytime generation and making it available later in the day.
Futures Market Outlook
Forward pricing in Victoria has been relatively stable through early 2026. March is traditionally a transition month as the market shifts from summer conditions toward the cooler season. As solar output gradually tapers and scheduled maintenance increases, autumn and winter reliability concerns can begin to push forward price expectations higher.
This makes March a key period for businesses considering contract renewals. Engaging the market now, before seasonal influences strengthen, can help secure more competitive positions.
What This Means for Your Business
In Victoria, March continues to reflect strong renewable contributions, relatively competitive pricing, and emerging policy support for lower bills. However, structural grid dynamics and seasonal shifts still play a role in peak pricing risk. For businesses, aligning procurement strategies with these patterns, and considering contract engagement before winter, remains strategically important.
If your business does not yet have a strategy in place, we can help. Contact us for a free bill check or to discuss a tailored energy procurement plan.
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Victorian Draft VDO Signals Lower Prices
In March, the Essential Services Commission released its draft Victorian Default Offer (VDO) for 2026–27, indicating a reduction in benchmark electricity prices from 1 July 2026. While the VDO applies to residential and small business customers, it reflects lower wholesale electricity costs, driven by:
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Increased renewable generation
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Lower contract prices
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Improved market conditions
Alongside updates to network and retail cost components, these factors have contributed to a softer pricing outlook.
Although large commercial and industrial energy users are not covered by the VDO, the draft serves as a reliable indicator of underlying market conditions. The methodology used to set the VDO incorporates forward wholesale contract pricing, meaning that when these costs decline, the regulated benchmark follows. The March draft therefore confirms that wholesale pricing in Victoria has softened compared to previous periods, particularly during daytime hours where renewable generation is having the greatest impact.
what this means for businesses
This is a positive market signal rather than a direct price reduction. It suggests that retailers are likely to be procuring energy at lower forward costs, creating a more competitive environment for contract negotiations. However, capturing these benefits is not automatic, with outcomes still dependent on timing, contract structure, and procurement strategy in an increasingly dynamic pricing environment.
Victoria’s Renewable Milestone and Ongoing Energy Transition
In late February–early March, the Victorian Government approved two large-scale battery projects totalling 700 MW through its Development Facilitation Program (DFP). The projects include:
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A 300‑MW / 1,140 MWh battery storage system at Heywood near AusNet’s Heywood Terminal Station.
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Additional battery capacity under the same program to support grid flexibility.
These approvals are aimed at speeding up grid‑scale storage deployment, which plays a growing role in system stability as Victoria’s renewable share increases. Storage assets help absorb excess daytime renewable generation and release it during evening peaks, reducing volatility and helping manage pricing risk.
what this means for businesses
These developments are particularly important for large energy users, as the increased firming capacity provided by new battery storage projects supports more predictable pricing and enhances system reliability. Additional storage also helps reduce peak price volatility, which can benefit hedging strategies and contract structuring. Moreover, the approvals signal strong state support for storage, positioning Victoria to continue its renewable growth while providing a more stable and flexible energy market for commercial and industrial consumers.
Energy Price Outlook: Broader East‑Coast Trend Mirrors Victoria
In March 2026, broader reporting across the east‑coast electricity market highlighted an expected fall in power prices of up to 10% from July 2026, reinforcing trends already observed in Victoria. This easing is being driven by a combination of factors, including increased renewable generation, lower forward contract prices, and ongoing improvements in network and retail cost components. As more wind and solar capacity comes online, particularly during daytime hours, wholesale supply is increasing, which puts downward pressure on spot prices and reduces peak‑period volatility.
For large commercial and industrial energy users, this provides important signals for procurement and risk management:
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Softer wholesale pricing suggests retailers may negotiate forward contracts at lower cost.
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Growing renewable penetration stabilises supply and reduces the frequency of extreme price events.
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Improved network and retail cost components contribute to a generally more favorable pricing environment.
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Market trends across multiple states can inform hedging strategies, demand management, and risk mitigation planning.
Required upgrade element
While Victoria’s market is directly reflected in the state’s draft VDO, the broader east‑coast trend confirms that these pricing signals are part of a national pattern. Businesses operating across multiple states, or sourcing energy from national retailers, can use these signals to make more informed procurement decisions and optimise contracts for the 2026–27 financial year.
