​Over the twelve months to August 2026, prices above $300/MWh were 23 times more likely when available wind fell below 20% of its normal for that time of day and month. Overall, wind penetration brings electricity prices down. But during wind droughts, prices become more volatile. As wind supplies more electricity, these shortfalls also increase, and raise the value of firming.

High wind penetration makes South Australia and Victoria the most exposed states in the NEM to wind-driven volatility. Strong winds drive prices to zero, but low wind leaves both markets more exposed to price spikes. Recent examples of this include events on 21, 22 June and 8 July.

Batteries, hydro and gas can capture these shortfalls. The opportunity for these firming assets depends on the depth and duration of wind droughts, and the underlying market that can meet it.

Executive summary

• Wind lowers electricity prices, but high penetration increases volatility when wind resource is low. South Australian median evening prices fall to zero when wind covers 115% of demand, but rise to $184/MWh when it covers less than 5%.
• Wind output grows fastest in Queensland and New South Wales over the forecast. Queensland's wind share of annual demand rises from 13% in 2026 to 36% in 2040, New South Wales from 11% to 24%.
• Modo Energy forecasts 83% of wind drought energy in events lasting at least four hours across NEM states in 2026–35. Longer-duration firming is needed to fill wind gaps.
• Batteries progressively meet more of wind shortfalls. Battery discharge in New South Wales meets 4% of wind energy shortfalls in 2027, rising to over 30% in the early 2030’s.
• Victoria has the strongest wind-drought firming opportunity. High wind penetration, long droughts and limited firm supply overlap.

Wind keeps prices low, but wind droughts create volatility

South Australia is the state most exposed to wind-driven price swings. Its installed wind capacity is 1.6 times average evening demand, against 0.85 times in Victoria and 0.3 times in New South Wales and Queensland.

That exposure shows up directly in the evening price. Between 5-9 pm, South Australian median prices sit at $184/MWh when available wind covers less than 5% of demand. They fall to $92/MWh at wind's average share of 56%, and reach zero at 115% of demand, when the surplus is exported to Victoria.

On the flip side, wind droughts bring price volatility. South Australia’s 95th-percentile evening price when wind is at 5% of operational demand is $592/MWh.

New South Wales and Queensland’s 95th percentile price when wind is at 5% of demand is less than half that, at $249/MWh and $240/MWh, respectively. In both states, wind penetration is lower, and there is more thermal generation available to cover shortfalls.

Despite this volatility, wind still has a net impact of lowering prices relative to thermal alternatives.