During the National Electricity Market’s life, a forecast of 40 °C in Melbourne heralds high or record demand, a reduction in turbine efficiency, reserve squeeze and high interconnector dependency causing NSW price separation with extreme Victorian spot prices. However, has the market changed?
Since the commencement of the National Electricity Market in December 1998, some 28 summers ago, there have 11 summer heatwaves where the Melbourne temperature gauge burst through 40 °C. In these scenarios:
- air-conditioning load pushes demand to high or record demand levels
- generator efficiency drops due to the high ambient temperatures
- transmission lines swing in the typical gusty northerly winds
- the risk of bushfires escalate
- smoke from bushfires can cut transmission line capacity
- the main interconnector from New South Wales is usually at full capacity causing price separation between New South Wales and Victoria
- customers can lose power due to local distribution faults
- in some cases, forced load shedding is invoked
- extraordinary financial windfalls are created for those with surplus generation or those holding long trading positions
- and on the other side of the coin, those with insufficient generation or those holding short trading positions are inflicted with what can be punishing losses
However, over the last two summers, the script is being rewritten.
Melbourne has experienced six days above 40 °C since the start of 2024-25 summer on 1 December 2024, including an all-time operational-demand record on 27 January 2026, yet the feared combination of vast imports, interconnector constraints and above $10,000/MWh spot prices have failed to materialise.
