WA capacity pricing benchmark swaps gas for batteries, and ups returns 57%

The Western Australian Economic Regulation Authority has determined both the peak and flexible benchmark reserve 2027/28 capacity prices to be $360,700 / MW / year, and represents a jump of 57% on the previous year.

December 19, 2024 Ev Foley

Image: Reece Whitby

The Western Australia (WA) Economic Regulation Authority (ERA) has determined both the peak and flexible benchmark reserve capacity prices for 2027/28 to be $360,700 / MW / year, representing a 57% jump on 2026/27.

A change in the required reference technology has played a role in the increase, where previously the benchmark was a 160 MW open cycle gas turbine peaking generator and is now a 200 MW / 800 MWh lithium-ion battery, which is more expensive to build and install.

The Australian Energy Market Operator (AEMO) will use these benchmark reserve capacity prices (BRCPs) to determine the price paid to capacity providers for making electricity capacity available to the Wholesale Electricity Market (WEM).

Former WA network operator Western Power Excutive Manager – Growth and now Managing Director ATA Consulting Peter Kerr described these new returns for projects in a LinkedIn post as “juicy”.

“Some have been expecting benchmark capacity prices to drop given battery prices have fallen, but so far, that hasn’t resulted, albeit there is a yawning gap between energy supply and demand in out years as coal is retired,” Kerr said.

Capacity years 2021/22 to 2026/27 were based on 160 MW open cycle gas turbine, while the 2027/28 BRCP has been determined on a 200 MW / 800 MWh BESS, and explains the jump in pricing.
*Image: Australian Energy Market Operator*

The ERA estimates the total battery energy storage system (BESS) development and capital costs to be around $474 million (or an annualised cost of around $64 million). The BRCPs WEM Procedure sets out how to calculate these costs.

The ERA says the largest capital cost contributor is the cost of supplying and installing the BESS, which is around 50% of total capital costs. Construction costs and contingency are also a significant contributor at 16% and 12% of total capital costs respectively.

As required by WEM Rule 4.16.8, the 2025 BRCPs values are effective from 8am, 1 January 2025 and will apply to the 2027/28 capacity year only.

All other BRCP amounts determined prior to this determination are still in effect for their relevant capacity year.

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