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 Regulation Authority. 

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

The number is 36 per cent higher than the $360,700/MWh the ERA set as the benchmark for the 2027-28 capacity year, and a potential boon for renewable energy proponents.

The benchmark is used to guide the Australian Energy Market Operator (AEMO) as it sets the price paid to energy providers into the South West Interconnected System in the years ahead. 

It is modelled based on the cost estimates to build and connect a hypothetical 200MW/1,200MWh battery energy storage system to the SWIS and run it for 15 years. 

When extrapolated, the figure assumes price tag of $623.7 million for an average battery storage project of that size – up from $474.4 million one year ago. 

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

The figure climbed 57 per cent year-on-year when the 2027-28 benchmark was set last year, due to a shift away from gas-fired power generation as the state’s push to decarbonise intensified.

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

An allowance for contingency costs has been stripped from the model year-on-year, having contributed $58.8 million to the overall 2025 determination figure. 

If included in this year’s estimate, the price differential would be even greater.

“We consider that contingency costs are incurred in the case that an adverse event occurs,” the ERA wrote.

“In usual circumstances, contingency costs are not incurred, and the ERA has been concerned about whether this potentially overcompensates capacity credit holders.”

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

The ERA’s estimates are informed by submissions from Landgate, Western Power and consultant GHD Advisory.

The draft number will be welcome news to renewable energy proponents, who rely on benchmark reserve pricing signals to provide investment certainty.

Opposition energy spokesperson Steve Thomas said the modelling “should set off alarm bells” for energy users.

“When the state government changed the cost basis to set the price from a gas-fired generator to a large-scale battery in 2023 it started blowing out the costs to suit its ideological messaging” he said.

“Now all Western Australians will pay the cost.

“This is yet another signal of an energy transition that will run out of puff and drive up power prices as a result.”

The ERA’s draft determination is now open for consultation, with a final number to be set in March.