We have seen solar and batteries at the core of government schemes over the last year, and indeed further back in time. In addition, the Commonwealth has sought to make the most of solar resources by encouraging consumption during the middle of the day with its Solar Sharer Offer. And finally with the challenges facing the roll-out of wind, gas and pumped hydro projects, we are left in a world where many of our clients have said to us that solar is the only option for investment. Against this backdrop, we ask the question how hungry is our current market for solar, and what can we learn about the returns that solar will earn from the energy only market?
As a starting point, we examine historical average prices for the mainland regions of the National Electricity Market (NEM). Figure 1 shows that 2025 prices were lower in all regions than 2024 prices but have risen from their levels in 2023. New South Wales experienced the highest average price of $103 per MWh, with Victoria the lowest at $77.9 per MWh.
Figure 1 – Average calendar year prices for mainland regions of the NEM, 2000-2025
Average prices are a good starting point to understand the returns to solar, but the marked feature of prices over the last decade has been the deepening duck curve.
Figure 2 shows the average dispatch price by time of day for Victoria in 2025. We have coloured the different times of day according to solar output during these periods, namely:
The belly of the duck (ie, the solar hours) is markedly lower than the shoulder and overnight periods, as has been seen for some time.
Figure 2 – 2025 average Victoria prices by time of day, coloured by solar definition
An immediate question is how prices for each of these time periods have changed over time with the increasing penetration of solar. Figure 3 shows the Victoria quarterly average price for each of the three categories: solar hours, solar shoulder, and overnight.
We note the following:
Figure 3 – Victoria quarterly average prices by solar category, 2010 to 2025
Average price is a very helpful indicator of the available pie for solar, but if we want to look more deeply at returns it is necessary to incorporate dispatch volumes, which vary greatly over the course of the year. With that in mind, Figure 4 shows the monthly revenue and generation by solar category for all solar farms in Victoria for 2025.
We note the following:
Figure 4 – Revenue and generation across all solar units in Victoria by solar category
We can also project forward to see how the system will evolve using one of our house scenarios, ie, Endgame’s Sunny Side Up Scenario. Figure 5 shows average Victoria revenue per MW for three financial years by month and solar category for this case. We project that the pattern of the increasing significance of winter continues – indeed, by 2039-40 our modelling shows that solar will earn virtually nothing from September to March save for the small amount of output during the solar shoulders. In addition, the relative importance of the shoulder decreases from around 30 per cent of revenue to 16.5 per cent by FY2040.
Figure 5 – Projected Victoria solar revenue per MW; FY2030, FY2035, FY2040
Solar revenues in summer have collapsed. Solar must now justify itself through contribution to the system during winter, particularly when the system is becalmed, ie, when wind output is low. Even with the large amounts of batteries that are projected to enter the system, this outcome does not change. The success of solar, and particularly rooftop solar, has led to a world where the system will be awash with energy in summer and so the marginal value of the technology is greatest when its output is relatively low.
We conclude with the following observations: