The ERA has proposed a reference reserve capacity of $491,700 per megawatt hour of energy generation in 2028-2029 for both peak and flexible reserve capacity.
This number is 36 percent higher than the $360,700/MWh that the ERA has set as a benchmark for the 2027-2028 capacity year, and is a potential boon for renewable energy proponents.
The benchmark will be used as guidance for the Australian Energy Market Operator (AEMO) in determining the price paid to energy suppliers in the South West Interconnected System in coming years.
It is modeled based on the cost estimates to build and connect a hypothetical 200 MW/1,200 MWh battery energy storage system to the SWIS and operate it for 15 years.
When the figure is extrapolated, it assumes a price tag of $623.7 million for an average battery storage project of that size – up from $474.4 million a year ago.
If the current price is adopted, it would represent another major increase in the state’s benchmark reserve capacity.
When the 2027-2028 benchmark was set last year, the figure rose 57 percent year-on-year, reflecting a shift away from gas-fired power generation as the state’s decarbonization drive intensifies.
The ERA said this year’s further proposed jump was largely due to an increase in the amount of battery storage used in the modeling – from 800 MWh to 1,200 MWh.
Monitoring the benchmark price for reserve capacity and the price of reserve capacity per MW.
Last updated: February 2, 2026A contingency fee has been eliminated from the model year after year, contributing $58.8 million to the total 2025 determination figure.
If this were included in this year’s estimate, the price difference would be even greater.
“We believe that unforeseen costs are incurred in the event that an adverse event occurs,” the ERA wrote.
“Under normal circumstances, no unforeseen costs are incurred, and ERA is concerned as to whether this may overcompensate holders of capacity credits.”
The ERA said rising freight costs, materials and labor and an increase in transmission link costs due to the WA government’s move to a fixed-cost model were also contributing factors.
The ERA estimates are based on submissions from Landgate, Western Power and consultant GHD Advisory.
The draft issue will be welcome news for renewable energy proponents, who rely on signals from benchmark reserve prices to provide investment certainty.
Opposition energy spokesman Steve Thomas said the models should “set off alarm bells” among energy users.
“When the state government changed the cost base to set the price from a gas-fired generator to a large-scale battery in 2023, it started inflating costs to suit its ideological message,” he said.
“Now all Western Australians will pay the costs.
“This is yet another signal of an energy transition that is running out and will, as a result, drive up energy prices.”
The draft ERA decision is now open for consultation, and the final number will be determined in March.
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