Power benchmark hike on the cards

The average price of a battery energy storage project in Western Australia could rise a further 36 per cent, according to draft figures from the Economic Regulatory Authority.

ERA has proposed a reference reserve capacity of $491,700 per megawatt-hour of energy production in 2028-29 for both peak and flexible reserve capacity.

That figure is 36 percent higher than the $360,700/MWh the ERA set as its benchmark for the 2027-28 capacity year, a potential boon for renewable energy advocates.

The benchmark is being used to guide the Australian Energy Market Operator (AEMO) when determining the price to be paid to energy providers for the South West Connected System in the coming years.

Modeled based on cost estimates to build and connect a hypothetical 200MW/1,200MWh battery energy storage system to SWIS and operate it for 15 years.

When extrapolated, this figure assumes the price tag for an average battery storage project of this size is $623.7 million; this figure was $474.4 million a year ago.

If adopted, the current price would represent another significant increase in the state’s benchmark reserve capacity.

The figure was up 57 percent from the previous year when the 2027-28 standard was set last year, due to a shift away from gas-fired power generation as the state’s decarbonization drive intensifies.

ERA said the additional jump proposed this year was largely due to an increase in the amount of battery storage used in its modelling, from 800 MWh to 1,200 MWh.

Allowance for contingency costs was removed from the model on an annual basis, contributing $58.8 million to the 2025 overall determination figure.

If it is included in this year’s forecast, the price difference will be even larger.

“We anticipate that unexpected costs will arise if an adverse event occurs,” ERA wrote.

“In ordinary circumstances, contingency costs would not be incurred and ERA is concerned about whether this potentially provides excessive compensation to capacity credit holders.”

ERA said rising freight costs, material and labor and an increase in transmission connection costs following the WA government’s move to a fixed cost model were also contributing factors.

ERA’s forecasts are informed by input from Landgate, Western Power and consultant GHD Advisory.

The draft number will be welcome news for renewable energy advocates who rely on comparative reserve pricing signals to provide investment certainty.

Opposition energy spokesman Steve Thomas said the modeling “should ring alarm bells” for energy users.

“When the state government changed the cost basis to determine the price of a large-scale battery from a gas-powered generator in 2023, it began to inflate costs to suit its own ideological message,” he said.

“Now all West Australians will pay the price.

“This is another signal of an energy transition that will take its breath away and, as a result, increase energy prices.”

The ERA’s draft decision is now open for consultation and the final number will be determined in March.