Frontier Energy (ASX:FHE) has claimed a technical change from the Western Australian Economic Regulatory Authority (WAERA) is good news for future revenues.
For those out of the loop – Frontier intends to build out a solar plant and connect to WA’s SWIS grid, on-selling generated power. In WA, electricity producing facilities receive capacity credits (in other words, payment from the government).
The WAERA has freshly issued a draft determination of the Benchmark Reserve Capacity Price (BRCP) for the 2027/28 ‘capacity year’ of $354,000 per megawatt – a 54% jump on the 2026/7 price at $230K/MW.
“Benchmark Reserve Capacity Prices are set for each Capacity Year based on the expected cost of a new entrant building and connecting a battery to the South West Interconnected System and other costs required to make the facility capable of supplying electricity,” the regulator writes on its website.
A large part of the reverse capacity price is it is intended to reward electricity suppliers who can immediately discharge power into the grid when demand unexpectedly peaks – in this way, the reserve capacity price is really more of an incentive.
Frontier expects to be able to respond to dynamic demand due to its inclusion of a ‘big battery’ energy storage system on-site its Waroona solar play.
“Reserve capacity is a unique revenue stream only available to generators in Western Australia. We believe this payment is a key reason why the economics of our project are stronger in comparison to similar projects on the east coast of Australia,” Frontier CEO Adam Kiley said.
“The current changes are a great start, most notably the new floor price (50% of the BRCP), which further strengthens the long-term economics of our project.”
The changes to the BCRP come as the wholesale electricity market is subject to more national harmonisation across all of its technical instruments.
With all of this now on board, and Frontier’s future revenues looking strengthened, a new DFS will be released in the coming weeks and months.
FHE last traded at 12cps.
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