AEMO Flags Winter Supply Shortfalls in Victoria and South Australia as NEM Prices Hit Five-Year Low
MT PASA modelling published August 4 shows potential reliability gaps in VIC and SA even as record renewables drove NEM wholesale prices down 47% year-on-year in Q2 2026.
Australia's electricity grid planning tool flagged potential supply shortfalls in Victoria and South Australia in its latest weekly update, published Tuesday (2026-08-04), a signal that complicates the narrative of a market awash in cheap renewable power. The Medium Term PASA run, published by AEMO, showed shortfall forecasts in both states, though WattClarity noted that the details beneath the headline numbers require careful reading before drawing firm reliability conclusions.5
The context makes those flags harder to dismiss. AEMO's Quarterly Energy Dynamics report for the June quarter, released July 30, showed NEM wholesale prices averaging $74 per megawatt hour — down 47% year-on-year and the lowest June quarter level since 2020. Record renewable penetration drove the decline. Falling average prices and tightening supply adequacy in specific states can coexist: the former reflects an oversupply of solar and wind in midday windows; the latter reflects what happens when that output is absent.4
Renewables supplied a record 42.1% of NEM generation in the June quarter, AEMO data showed, up from 37.1% a year earlier. Wind output rose 20%, grid-scale solar grew 12%, and rooftop solar added 6.9%. Coal fell 5% and gas-fired generation dropped 30% to its lowest second-quarter level since 2003.4
The price falls were steepest in Victoria, down 60% year-on-year, followed by New South Wales at 53%, Queensland at 44%, Tasmania at 39%, and South Australia at 38%. That South Australia and Victoria, where MT PASA now flags shortfall risk, are among the states with the largest price declines points to how a rapid renewable build can suppress average prices while leaving specific evenings and calm-weather periods exposed.4,5
Battery storage is doing significant work on the price side. Grid-scale battery capacity more than doubled over the past year to exceed 9 gigawatts across the NEM, AEMO said, while household battery capacity rose 41% to 3,283 megawatt hours. WattClarity reported that prices had been "largely subdued" through summer 2025-26, with battery expansion cited as a contributing factor. There were cracks: the site documented a break in what it called the "volatility drought" in Tasmania and South Australia across late June (2026-06-21 and 2026-06-22), when prices spiked despite the broader seasonal calm.4,2
Demand-side risks are accumulating. AEMO reported that 17 proposed data centre projects with a combined maximum connection capacity of 9 gigawatts were progressing through the transmission connection process by the end of June. That total roughly matches the entire grid-scale battery fleet capacity added over the past year. If a meaningful share connects on schedule, the supply surplus holding prices at five-year lows could erode faster than the market currently assumes.4
The formal 2026 Electricity Statement of Opportunities, expected from AEMO sometime in August 2026, will provide the medium-term reliability assessment that the weekly MT PASA run only partially previews. WattClarity flagged the ESOO's forthcoming publication as of its August 4 (2026-08-04) article, noting that the MT PASA shortfall forecasts were in part a preview of what the formal document may contain.5
System costs could fall further if coordination improves. AEMO's Draft 2026 Integrated System Plan estimated the total cost of the energy system could be reduced by $7.2 billion if consumer energy resources respond to market signals, a figure pointing to how much value remains locked in distributed assets not yet integrated into dispatch.1
Transmission constraints remain the binding problem for the longer run. Renewables supplied more than half of NEM electricity for a full quarter for the first time in late 2025, driven by rooftop solar, wind, and batteries. John Rae, Pacific Renewable Energy Leader at Willis Natural Resources, noted that grid constraints, supply chains, and planning processes remain limits on further penetration, with Australia's 82% renewable electricity target by 2030 requiring those limits to ease materially.3
The ESOO's reliability assessment for Victoria and South Australia, when it publishes in August 2026, is the next concrete data point. If the shortfall forecasts in the MT PASA run are confirmed in the formal document, traders with summer peak exposure in those two states face a reassessment of whether the 47% price collapse has genuinely reduced scarcity risk or simply relocated it from average prices into specific dispatch intervals.5,4