Australia’s power market is back in the spotlight – and not for good reasons. A new report from ABC News reveals that the National Electricity Market (NEM) allows wholesale prices to spike to the highest levels anywhere in the world. And while the cap is meant to keep the system stable, it’s leaving businesses and households footing the bill.
How high can prices go?
Right now, the market price cap sits at $18,600 per megawatt hour (about $18.60 per kilowatt hour). To put that in perspective, the average retail price Australians actually pay is just 30 to 40 cents per kilowatt hour. But when spot prices soar – even if it’s only for a few hours a year – the flow-on costs can be huge. In fact, analysis shows that fewer than 15 hours of extreme pricing between 2019 and 2024 contributed to 10 per cent of the total cost of electricity supply.
Why the cap isn’t working
The problem? The cap isn’t working as intended. It was designed to encourage investment in new generation, but consumer advocates argue that hasn’t happened. Since 2012, almost all new large-scale projects have relied on government subsidies, not price signals from the market. Meanwhile, rising caps mean higher risk and higher costs for everyday consumers and businesses.
Australia’s outlier status
Australia’s market design is also an outlier internationally. Unlike many other countries that operate capacity markets (where generators are paid to be on standby), the NEM is an “energy-only” market. That means it relies on allowing prices to skyrocket to drive investment. For businesses, this translates to volatility and uncertainty.
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The business impact
For small businesses, these spikes can feel like a sudden hit to cash flow. For larger commercial and industrial operators, the concern is long-term price security and exposure to risk. Either way, the message is clear: the current system isn’t delivering what it promised.
Expert insight
Lorcan O'Dea, energy expert at Zembl, said: “What this article highlights is just how exposed Australian businesses are to the volatility of the energy market. A handful of hours where prices spike can drive up costs across the entire year. For small businesses, that’s a sudden cash flow shock. For larger operators, it’s long-term uncertainty. Either way, it shows why having the right energy strategy in place is critical.”
How Zembl can help
That’s where support matters. At Zembl, we cut through the complexity of the energy market, so you don’t have to. Whether you’re running a café or a large-scale operation, our team helps you secure better energy deals, manage risk, and find smarter ways to save. Because while the market plays games with prices, we make sure you stay in control.
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