Record-shattering wind, Q1-26 swaps and caps trading tell a story, plus fresh coal-plant hiccups impact prices and risk. At times renewables are crashing prices, but volatility is flexing and premiums are being paid while potential volatility prevails.
We are experimenting with weekly reports, and here is a our report for the week ending 18 Jan-26.
The National Electricity Market entered mid-January with a striking contrast between exceptionally cheap daytime prices driven by record-breaking renewables and the persistence of sharp, if sporadic, evening price spikes.
Forward trading on the ASX echoed this duality: base-swap prices edged higher than quarter-to-date spot averages, while cap contracts remained historically inexpensive. Meanwhile, thermal‐fleet reliability improved overall compared with a year earlier, although Queensland’s large coal units continued to cast a long shadow over the system’s comfort margin.
ASX Q1-26 base swaps
During the review week the Q1-26 base-swap contract remained the focal point of hedge activity. The comparison with realised spot outcomes so far this quarter reveals how keenly market participants are seeking insurance.
From 1 January to 18 January the average spot price settled at $76.68/MWh in New South Wales, $65.69/MWh in Queensland and just $29.39/MWh in Victoria. Against those reference points, last week’s trades look decidedly “over-spot”: New South Wales swaps changed hands at a volume-weighted (VWAP) $83.28/MWh, roughly 8 % dearer than the state’s quarter-to-date spot mean. Queensland’s 335 MW of swaps cleared at an even steeper 16 % premium, with a VWAP of $75.91/MWh. Victoria, enjoying the most benign wholesale environment thanks to surging wind, nonetheless saw 138 MW of swaps priced at $45.92/MWh—fully 56 % above its quarter-to-date average of only $29.39/MWh.
The readiness to pay these premiums signals that many market players doubt that January’s wind-driven softness will extend into February and March, when summer demand peaks and renewable output is more volatile. South Australian base-swap liquidity was once again negligible, yet with a quarter-to-date spot price of $68.82/MWh, any base trade would almost certainly have settled between Victoria’s deep discount and New South Wales’ premium.
ASX Cap contracts told a subtly different story
Even though high-price intervals above $300/MWh now account for roughly one-third of the Q1-to-date average in NSW and fully two-thirds in SA, cap premia remained remarkably low. NSW caps averaged just $19.21/MWh, while Queensland and Victoria cleared at $11.06/MWh and $10.04/MWh respectively. Such pricing implies that market participants regard the risk of extended price spikes as manageable and are content to secure volatility cover at what amount to option-like bargains.
Spot-price dynamics – lower means, fatter tails
Quarter-to-date averages confirm the depth of January’s retreat in wholesale prices. Victoria’s $29.39/MWh is 43 % below the equivalent 2025 period and its lowest start to any calendar year since 2016. Queensland and New South Wales are cheaper year on year by 17 % and 9 % respectively, while South Australia’s average has risen 17 % to $68.82/MWh, largely because of a handful of three- and four-hour spikes that vaulted past $1,000/MWh.
Interestingly, negative-price incidence has diverged: it has halved in NSW and QLD but climbed in VIC (36.9 % of 5-minute intervals) and SA (44.2 %). In tandem, the high-price tail has thickened, with the share of > $300/MWh intervals jumping to 32.5 % in NSW and 66.4 % in SA. This bi-modal distribution explains why median prices are far lower than means and why caps remain attractive despite cheaper averages.
Renewable-generation highlights – wind takes centre-stage
Behind the price story lies an impressive surge in renewable output. On 16 January Victoria produced an unprecedented 71.5 GWh of wind energy, almost double its January-to-date average and shattering its previous record. New South Wales reached its own record of 36 GWh on 12 January, flooding the NEM with cheap energy during the overnight and morning peaks. Queensland’s younger wind fleet showed its fledgling character, plunging from 30.7 GWh early in the week to 8.9 GWh by Friday, yet its month-to-date average still exceeds last January’s by more than 130 %.
Utility-scale solar generation was steadier but sensitive to weather. Consistently clear skies kept NSW and QLD solar farms operating near their respective January-to-date means of about 36 GWh and 23 GWh per day, whereas intermittent smoke and cloud pushed Victoria’s output as low as 7.9 GWh on 16 January before a weekend recovery.
South Australia’s solar farms, still modest in scale, dipped below 1 GWh mid-week but doubled that figure once conditions brightened.
Rooftop PV added further variability
NSW households produced 6.8 GWh on 13 January—some 20 % above the state’s current January norm—whereas Victoria’s PV dived to 1.3 GWh on 15 January, buckling under smoke haze and overcast skies, only to rebound past 5 GWh three days later.
Baseload coal-plant outages – reliability still fragile but improving
Thermal fleet reliability shows a mixed but generally improving picture. Any five-minute interval in which a baseload black- or brown-coal unit generated below 20 MW was counted as an outage.
Over the week ending 18 January, New South Wales experienced 3,203 such intervals, stripping an estimated 190 GWh from available supply. Queensland registered 7,944 intervals, equating to 153 GWh of lost energy, and Victoria logged 6,686 intervals, or 246 GWh. Collectively the three mainland coal states forfeited about 589 GWh of potential generation in just seven days—evidence that coal-fleet fragility can still dominate system conditions when renewable output ebbs.
Yet, on a year-to-date basis the situation looks marginally brighter. Between 1 January and 18 January the NEM shed 895 GWh of coal energy to outages, down 12 % from 1,015 GWh in the same window last year. Victoria accounts for most of the progress, slashing outage energy by 36 % as the Loy Yang and Yallourn delivered steadier performance.
New South Wales trimmed its lost energy by 4 %, but Queensland posted a 9 % uptick, reflecting repeated trips at the Callide and Stanwell units. The state therefore remains the focal point of reliability anxiety.
Integrated view – why premiums make sense
The combination of record renewable penetration, lower average prices and reduced southern-state coal outages has created a deceptively soft backdrop. Forward curves, however, betray the market’s instinct that the balance of the quarter could tighten. Buyers appear willing to pay a single-digit premium over quarter-to-date spot in NSW, a double-digit uplift in QLD and a hefty premium in VIC because the current wind-driven Nirvana may prove fleeting once February’s heat sets in.
Caps are losing value but extreme events can rapidly change the story.
Should wind and solar continue to deliver at recent record levels and coal reliability stabilise, the forward-price premia now on offer may erode, leaving today’s swap buyers nursing above-market hedges. In that sense, the week’s activity reflects a classic mid-summer conundrum: participants are paying small premiums for the comfort of certainty in a season where nothing ever stays quiet for long.
