Why Wholesale Electricity Prices Are Increasing Across Australia: Key Factors Explained
Published October 15, 2026
Following several months of relatively stable and favourable electricity prices, Australia’s energy market is currently witnessing a drastic change, as wholesale prices have increased by around 20% within recent weeks. This dramatic rise comes after a long period of favourable conditions, demonstrating how fast electricity prices could change due to unforeseen circumstances.
Given that generation issues, changes in retailer pricing policies and possible extremes during the hot Australian summer season could affect the market, businesses now face uncertainty within the National Electricity Market (NEM) of Australia once again.
Why do electricity prices keep rising lately?
There are several reasons behind increasing market volatility, and generation issues certainly play a significant part. The recent shutdowns of the Eraring Power Station in New South Wales, the largest coal-fired power station in Australia, demonstrate problems of aging generation capacity.
In case when the major generators are shut down, the issues related to future electricity supply could lead to increased wholesale futures prices. The temporary issues could affect the market perception and increase volatility of prices.
The following is an example that shows the issues within Australia’s electricity market, which involves generation of electricity from old coal-fired power stations alongside generation and storage of renewable electricity.
| Key factor | How it can affect wholesale electricity prices |
|---|---|
| Power station outages | Reduced generation availability can increase price volatility. |
| Retailer hedging strategies | Changes in wholesale market risk can influence contract pricing. |
| Summer heatwaves | Higher electricity demand can put pressure on supply. |
| Renewable energy availability | Changes in wind and solar generation can affect the supply-demand balance. |
| Business contract renewals | Current market conditions may influence available contract offers. |
Effects of Price Strategies on Retailers and Cost of Electricity
Unforeseen movements in the wholesale cost of electricity not only affect the generation market but also the way in which retailers price their contracts. Retailers use strategies for hedging as well as financial contracts in an attempt to cushion themselves from the risks of fluctuating electricity costs.
When market conditions become extremely volatile, the retailers will evaluate their purchasing plans, costs and risks. This will lead to the retailer adopting a cautious approach when pricing their electricity by changing their contracts due to uncertainties regarding future electricity prices.
Changes such as the above will mean that businesses whose contracts are up for renewal will experience effects on the price options in the market regardless of changes in electricity consumption.
Can summer increase electricity price volatility?
With the onset of the summer season in Australia, the factor of weather will play an important role in the electricity market.
Because of the likelihood of hot summer and the high demands for electricity, the summer season can increase electricity price volatility.
It can also lead to price volatility in the coming months because of the sudden power outage in generation and changes in the wholesale market.
Although the future electricity prices are unpredictable, it should be kept in mind that the aforementioned trends will need to be closely watched.
What does it mean for businesses in Australia?
Although it is true that the wholesale futures prices have risen sharply, it does not necessarily mean that the electricity cost of the businesses will rise immediately or in proportion to the changes in prices.
Whether this will be relevant or not will depend on some particular factors like terms of contract, contract expiry dates and the rate of energy usage by the electricity retailers.
Why is it important to get expert advice regarding energy in a dynamic business environment?
The Australian electricity market has become extremely challenging to operate in especially in the light of frequent changes in the wholesale energy prices and constant changes in the retail energy market.
FAQs
Wholesale electricity prices can rise because of power station outages, changes in generation availability, increased electricity demand and volatility in the energy market. Retailer hedging strategies and expectations about future supply can also influence contract pricing.
No. The impact depends on the business's electricity contract, pricing structure, renewal date and retailer. Businesses on fixed-rate contracts may not experience an immediate change, while other pricing arrangements may respond differently to market movements.
Businesses can review their existing electricity contracts, compare available offers, check contract renewal dates and seek expert advice before committing to a new agreement. Comparing contract terms as well as rates can help businesses make more informed energy purchasing decisions.
At Choice Energy, we constantly keep track of all changes in the wholesale energy market and analyse pricing of our retailers in order to help businesses handle these changes.
We help businesses examine their existing energy contracts and explore other possibilities of getting more favourable energy contracts.
If you have your energy contract that expires soon or you want to think about the future, it would be best for you to get professional advice now.
