Energy Market Trends – January 2026
Electricity Market
Overview
January 2026 opened the summer period with generally manageable wholesale outcomes across the National Electricity Market (NEM), supported by strong renewable generation and materially higher battery participation compared with the prior year. However, the month also reaffirmed that summer risk remains highly event-driven: short heatwaves can rapidly tighten supply-demand balances and trigger sharp price spikes in specific regions.
Market Dynamics
AEMO’s most recent reporting (covering Q4 2025) confirmed the market’s structural shift: renewables (including storage) supplied more than 50% of NEM energy for the first time, while battery discharges surged and gas-fired generation fell to very low levels. These trends continued to influence January operating conditions—lowering reliance on gas peakers during many evening peaks, but increasing the importance of transmission capacity and flexibility during extreme demand intervals.
From a risk perspective, the key operational themes remained consistent:
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Evening peak management increasingly depends on storage dispatch and interconnector capability.
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Congestion and curtailment in renewable-rich zones continue to shape regional volatility and basis risk.
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Ageing thermal reliability remains a critical sensitivity during heat events, when availability margins tighten quickly.
Spot Price Trends
While average outcomes were broadly contained, January’s volatility was concentrated around extreme weather and peak-demand intervals. A notable example occurred in Victoria on 27 January 2026, when market demand set a new all-time high and the spot price spiked (reported at $1,703/MWh at one interval), illustrating how quickly conditions can change during hot evenings.
Regional Highlights
Victoria: Demand sensitivity was clearly demonstrated late in the month, reinforcing the importance of summer readiness, demand response, and firming arrangements.
South Australia: Continued to see high renewable penetration, with the system increasingly reliant on storage and fast-response supply during peak events (noting that heatwave conditions can still stress reserves).
New South Wales & Queensland: Summer conditions increased demand variability; outcomes remained highly sensitive to heat, generator availability, and interconnector flows.
Natural Gas Market
Overview
Gas market conditions remained structurally tight entering 2026. AEMO’s latest commentary on late-2025 conditions highlighted the market’s sensitivity to supply disruptions and the ongoing role of storage in supporting security of supply—factors that continue to matter for summer system firming and large-user contract exposure.
Market Drivers
Key drivers affecting gas risk and pricing expectations included:
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Reduced supply flexibility during outages/maintenance at major facilities (which can quickly shift short-term availability).
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Ongoing policy focus on future supply adequacy, including discussion of potential intervention measures as southern supply tightens in coming years.
Policy, Infrastructure & Regulatory Trends
January attention remained on summer reliability and the practical requirements of operating a grid with rising renewable penetration: transmission build, firming investment, and settings that reward flexibility. AEMO’s latest Quarterly Energy Dynamics reinforced that higher wind output and increased battery discharge—particularly around evening peaks—has reduced the incidence and impact of high-priced intervals on average outcomes.
Outlook & Risks
The remainder of summer 2025–26 is expected to remain event-driven. Key risks include:
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Heatwave demand spikes (particularly late afternoon/evening), which can tighten margins rapidly.
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Unplanned outages at ageing thermal assets during extreme temperatures.
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Transmission congestion and curtailment, which can increase volatility and complicate hedging outcomes and regional basis exposure.
For large C&I customers, this environment reinforces the value of proactive procurement planning, clear risk settings (shape, caps, firmness), and periodic validation of bill pass-throughs (network, metering and scheme charges) to ensure costs remain correctly applied as market conditions evolve.
Austech Power & Gas continues to monitor these developments closely and supports clients with tendering, contract structuring, invoice validation, and portfolio optimisation across electricity and natural gas.