Wind and Solar Dominate Australia’s Power Market, Threatening Coal Industry

In the closing months of 2025, wind and solar energy generated nearly 70% of daily power demand on Australia’s primary grid, marking a significant reduction in reliance on the fossil fuel sector that has traditionally underpinned the nation’s electricity supply.

Big batteries, along with smaller storage options, have begun to take substantial bites out of the profits of the coal and gas industries.

Renewable Energy Gaining Momentum

The recent quarterly report from BloombergNEF underscores the rapid transformation occurring within Australia’s main electricity network. This development is a precursor to what lies ahead, as the federal government aims for an ambitious target of 82% renewable energy, expected to be achieved by 2030 or shortly thereafter.

The report reveals that renewable sources accounted for 50% of the National Electricity Market’s (NEM) power demand during the last quarter of 2025, with wind and solar alone making up 45%. For the first time, renewables surpassed coal, whose share decreased to 47%.

Coal Industry Facing New Challenges

This shift signifies a deeper transformation affecting the grid and poses a significant challenge to the coal industry’s long-standing business models, which relied on consistent energy supply throughout the day and capitalised on peak evening demand.

According to BNEF’s data, midday power demand saw wind and solar providing an average of 69.7% during the quarter, with a notable peak of 76.2% recorded on October 11.

Rooftop solar systems are now dominating midday generation, compelling coal plants to reduce output during these hours while increasing production to meet peak demands in the morning and evening. Some coal operators are even experimenting with turning off their units entirely during midday, while hoping to profit from demand spikes later in the day.

Emergence of Battery Technology

The plans for evening energy generation are increasingly disrupted by new technologies, specifically utility-scale batteries, which are becoming a substantial contributor to evening demand, thereby reducing the profitability of coal and gas generation during peak hours. BNEF indicates that grid-scale batteries accounted for an average of 4.4% of power demand at 7 pm, a significant rise from only 1.5% the previous year, with a peak of 9.9% noted on December 3.

This shift is depicted in a graph representing changes over the past five years, a trend expected to accelerate with increased installations of wind, solar, and battery storage in the coming years.

South Australia Leading the Way

South Australia stands out as an exemplary case, being the nation’s and the world’s most advanced renewable energy grid, boasting an average renewable share exceeding 75% and aspiring to achieve 100% net renewables by the end of next year.

BNEF highlights that the average minimum demand in South Australia plunged to minus 138 megawatts during the last quarter, emphasising its need to either export or store surplus generation.

Notably, the last of the state’s coal plants were retired a decade ago, and the system issues limiting the early closure of coal plants in New South Wales have largely been resolved in South Australia, thanks to its combination of synchronous condensers and grid-forming batteries.

The Diminishing Role of Coal

Coal continues to generate electricity in four states: New South Wales, Queensland, and Victoria within the NEM, as well as Western Australia on the separate WEM grid. Western Australia plans to close its final coal plants by the end of the decade, while other states have uncertain timelines for their closures.

However, the economic viability of coal is under increasing pressure. BNEF notes that coal’s average utilisation rate has dropped to 51.3%, rendering it less reliable as a “base-load” source, particularly given the plants’ susceptibility during energy crises; it is now performing below that of the highest yielding wind farms. In New South Wales, the remaining coal plants are operating at just 47% capacity, while the top-performing wind farm, located in Victoria, boasts a capacity of 67%.

Challenges for Renewables

As the report highlights, coal plants must maintain profitability for a significant part of the year to cover their fixed and maintenance expenses. This is becoming increasingly challenging as solar and wind energy sources occupy midday slots in the market, with batteries progressively claiming a larger share of evening demand.

Nevertheless, limitations still persist for wind and solar operations due to grid congestion issues that must be rectified alongside increasing storage solutions. Wind energy curtailment reached 16% in the December quarter, peaking at 25.8% in Victoria, while large-scale solar installations have been adversely impacted by rooftop solar generation. In South Australia, large solar projects saw an average capacity factor of only 13%, with more than half (59%) of their potential output curtailed due to negative pricing.