Electricity prices in Australia have almost doubled between 2021 and 2025, driven by global disruptions, domestic energy policy shifts, and market volatility. If your business is approaching an electricity contract renewal, it’s crucial to be aware of these changes and plan accordingly. The war in Ukraine, the closure of key coal-fired power stations, flooding in NSW, and soaring coal and gas prices have all contributed to the rising cost of electricity. Understanding these factors will help businesses make informed decisions and prepare for potential cost increases.
Why Have Electricity Prices Increased?
1. Impact of the War in Ukraine
The war in Ukraine has had a significant impact on global energy markets. With Europe cutting its reliance on Russian gas, demand for alternative energy sources increased worldwide. This drove up gas prices, leading to higher electricity generation costs in Australia. As a result, businesses that depend on gas-fired electricity generation saw significant cost increases. The Reserve Bank of Australia reported that domestic wholesale gas prices in early 2022 were almost double those of early 2021.
2. Closure of Liddell Power Station
In April 2023, AGL Energy shut down the Liddell Power Station in New South Wales, removing 2,000 MW of baseload power from the grid. While this move was part of Australia’s transition to renewable energy, it led to reduced supply and increased prices in the short term. Businesses in NSW, in particular, saw electricity costs surge due to the reduced availability of coal-fired power.
3. Flooding in NSW and Its Impact on Coal Supply
Extreme weather events, including major floods in NSW, have further strained the energy market. In late 2022, heavy rainfall and flooding disrupted coal mining operations, reducing supply and pushing coal prices higher. Given that coal accounts for approximately 72% of power generation in NSW and QLD, any disruption to coal supply has a direct impact on electricity prices.
Whitehaven Coal, one of Australia’s major coal producers, was forced to lower its annual production forecast due to flood damage at its NSW mines. This reduction in coal availability led to increased scarcity and higher prices, costs that were ultimately passed on to energy consumers.
With climate change increasing the frequency and severity of extreme weather events, coal supply disruptions could become a recurring issue. Ironically, coal-driven climate change is now making coal mining operations more vulnerable, further destabilising electricity prices.
4. The Surge in Coal Prices
As gas became more expensive, many energy producers switched to coal, causing a dramatic spike in coal prices. Between 2022 and 2023, thermal coal spot prices saw an 800% increase, driving up electricity costs for businesses relying on coal-powered energy generation.
5. Regional Electricity Price Variations
Electricity prices vary across Australia, but every state has felt the impact of these increases. In Q3 2024, prices ranged from $114/MWh in Queensland to $201/MWh in South Australia. Milder weather later in the year helped stabilise demand, but businesses should still expect elevated prices when their contracts come up for renewal.
What This Means for Your Business
If your electricity contract is expiring soon, you should expect higher rates than before. Many businesses that are locked in contracts before 2022 will see a significant jump in their next agreement due to increased wholesale costs.
How to prepare
Review Your Contract Early – Start reviewing your electricity contract at least six months before expiry to explore options.
Consider Locking in Rates – If market conditions allow, securing a longer-term contract at a competitive rate could help manage cost increases.
Explore Energy Efficiency Measures – Reducing consumption through energy-efficient equipment or solar solutions can help offset rising costs.
Compare Providers – Don’t accept a renewal offer without checking other retailers or seeking expert advice.
Future Outlook for Business Electricity Prices
The Australian Energy Regulator (AER) has indicated that forward electricity prices for 2025 are expected to remain high, with projected increases across all regions. While the transition to renewable energy may stabilise prices in the long run, businesses must prepare for elevated costs in the near future.
Electricity prices have surged due to a combination of global conflicts, supply constraints, and increased reliance on alternative energy sources. Businesses renewing electricity contracts in and 2025 should anticipate higher rates and take proactive steps to minimise the impact. By planning ahead, reviewing contract terms, and exploring cost-saving options, businesses can better manage their electricity expenses in a volatile market.
Working with an energy broker like Choice Energy can help businesses navigate these challenges. With access to competitive rates, expert market insights, and tailored energy solutions, Choice Energy ensures businesses secure the best possible deal on their electricity contracts. To stay informed on market trends and pricing, check out the latest Energy Market Update.
