August 2025 Market Wrap: Transition Gathers Pace Amid Grid and Policy Challenges
August 2025 marked a pivotal period in Australia’s energy transition, with new records in renewable generation, evolving forecasting methodologies, and further commitments from government and industry to reshape the national electricity landscape. Several major developments will have implications for large energy users, particularly as coal exits, demand grows, and grid capacity remains under strain.
The release of the 2025 Electricity Statement of Opportunities (ESOO) reaffirmed growing reliability risks in the coming decade, particularly in NSW and Victoria. While AEMO’s modelling shows the NEM may meet the reliability standard under a scenario where all “actionable” transmission projects and Commonwealth Capacity Investment Scheme (CIS) initiatives proceed smoothly, this is a best-case outlook. Escalating project costs—such as VNI West—and the potential for delays mean there is little margin for error. As such, many observers have expressed concern about the “all-must-go-to-plan” nature of current planning assumptions.
In parallel, AEMO announced a shift in demand forecasting methodologies, aiming to better capture the impact of electrification, artificial intelligence, data centres, and future fuels on electricity loads. This update is especially important as industrial users ramp up electrification efforts and as distributed energy technologies increasingly influence consumption patterns. Accurate, adaptive forecasting will be essential for investment planning and contract strategies.
Generation dynamics also continued to evolve. The NEM saw new monthly records for utility-scale wind and solar output, driving down spot prices and reducing coal generation to historically low levels. These trends reflect both seasonal advantages and structural change. At the same time, batteries continued to break new records for charging and discharging, underlining their growing role in supporting system flexibility.
From a policy standpoint, the Federal Government’s Rewiring the Nation program progressed with renewed momentum. This multi-billion-dollar initiative, backed by concessional finance via the Clean Energy Finance Corporation, aims to accelerate critical transmission investments identified in AEMO’s Integrated System Plan (ISP). August also saw development approvals for Victoria’s Wombelano Wind Farm, the first major wind farm approval in the state in several years. Such projects are vital to relieving capacity constraints and enabling additional renewables to connect to the grid.
Meanwhile, AGL signalled it may mothball or cycle coal generators over weekends to accommodate solar generation, highlighting the challenges of maintaining ageing thermal assets amid low daytime prices. The move also reinforces the growing financial pressures coal generators face and may foreshadow more frequent operational flexing or earlier retirements.
In the environmental markets, certificate prices remained relatively firm, but volatility persists as policy and market uncertainty influences trading dynamics.
At Edge2020, we continue to monitor these developments closely. With over 10 TWh and $1 billion in energy spend under management, our priority remains supporting our clients through tailored insights, proactive risk mitigation, and forward-looking procurement strategies. As market complexity grows, staying informed and agile will be essential.
