Wholesale electricity prices in Australia were about 45 per cent lower in the second quarter of 2026 compared to the same period in 2025, according to the International Energy Agency’s mid-year update.
Australia’s increasing use of renewable energy and battery storage has slashed wholesale electricity costs at a time when the Strait of Hormuz crisis has driven up prices sharply in Japan and the European Union.
“In Australia, average wholesale prices in the National Energy Market (NEM) fell by 30 per cent year-on-year in H1 2026, to USD 49/MWh,” the report said.
“The market continued to be shaped by strong renewable output and rapidly expanding battery storage.
“Installation of new battery capacity contributed to a tripling of daytime-to-evening energy shifting in Q1 2026, which in turn helped mitigate price surges by reducing the amount of expensive gas and coal generation used during these hours.”
With HVACR the biggest energy user in a building or business, falling prices were welcomed by industry.
The Australian Institute of Refrigeration, Air Conditioning & Heating (AIRAH) CEO, Sami Zheng, said transitioning away from the use of gas is the lowest cost, fastest emissions reduction pathway for Australia’s built environment.
“One of the most important aspects of the switch for asset owners and facilities managers is the relative cost of energy for space heating and hot water. As electricity prices fall compared to gas, heat pumps as an all-electric solution become more competitive,” Zheng said.
On a global scale, the IEA report said the world will generate more of its power from renewables than from coal this year.
On the Middle East energy shock overall, the report said the continued expansion of power generation from renewables has played a key role in diversifying electricity supplies, thereby supporting energy security and helping limit the impacts of the shock.
It warns renewed supply stoppages in the Strait of Hormuz “continue to weigh on prices” so global electricity markets remain vulnerable to further disruptions and any resulting tightening of global LNG supply.
Globally, electricity generation from renewables is set to overtake coal-fired output in 2026 after reaching near-parity with coal in 2025.
The IEA forecasts global generation from renewables will grow by more than eight per cent in 2026, with its share in the electricity generation mix is set to rise from 33 per cent in 2025 to 37 per cent by 2027.
“The Strait of Hormuz crisis drove spikes in LNG prices, translating into higher costs for gas-fired electricity generation and pushing up wholesale electricity prices in several regions from March onward,” the report said.
“In the second quarter of 2026, average spot wholesale electricity prices in the European Union and Japan increased by more than 30 per cent year-over-year.
“However, the United States was much less affected by the LNG price shock, with the average wholesale electricity price in the second quarter largely unchanged from the previous year.”
Solar PV remains the main driver of growth in electricity generation on a global basis, up by 23 per cent this year, followed by a gain of 17 per cent in 2027.
The IEA said output is forecast to rise by 610 TWh in 2026, broadly matching the record expansion seen in 2025.
As a result, solar PV is expected to surpass wind power in 2026, becoming the second-largest source of renewable electricity generation after hydropower.
“China continues to account for around half of the global increase in solar PV generation. At the same time, India and other Asian economies will play a growing role, with their combined contribution rising from almost 10 per cent in 2025 to around 17 per cent in 2026.”