ASX-listers Strike Energy and Frontier Energy have each received Australian Energy Market Operator approval to supply peaking power into the South West Interconnected System.
ASX-listers Strike Energy and Frontier Energy have each received Australian Energy Market Operator approval to supply peaking power into the South West Interconnected System.
The move comes as AEMO seeks to secure additional support for the grid during times of peak use, to support the residential and commercial power needs of the state.
Strike’s approval is for a proposed, fully integrated 85-megawatt peaking gas power station which it hopes to develop to tap the South Erregulla gas field in the Perth Basin.
The company pitched the plan after it downgraded the gas reserves at South Erregulla following disappointing drill results, in a move to use the existing reserves for more than 25 years.
Its initial modelling suggested the facility could generate $40-50 million per annum over its first five years.
Pricing mechanisms for the certified reserve capacity scheme are expected to be made available in September.
“The project capitalizes on the incremental value that integrated gas to power projects can generate from the spark-spread during peak power prices and WA’s capacity credit mechanism,” Strike managing director Stuart Nicholls said.
“Upon receiving confirmation of our minimum network access quantity, we look forward to taking a final investment decision.
“Strike’s proposal to integrate the South Erregulla gas field into a dedicated peaking gas power station to firm local renewable power generation, is a clear demonstration of how Strike is using its gas endowment for a positive impact in Western Australia’s energy transition.”
Strike expects to take a final investment decision on the plant in November, with production starting in October 2026.
Its shares were unmoved at 11.20am.
Renewable-focused Frontier was another awarded certified reserve capacity by AEMO, in news which drove that company’s share price up six per cent.
The first stage of the company’s Waroona project was granted reserve capacity status, making it eligible for fixed-dollar payments from the grid operator when energy demand peaks.
Frontier estimates the status will provide payments of up to $27 million per annum, more than a third of the overall revenue expected to be generated in stage one of the project.
Frontier will be able to build on those payments by selling additional energy into the merchant market, the company said.
Waroona stage one comprises a 120-megawatt solar farm and a 80MW battery energy storage system.
Chief executive Adam Kiley said the award was an endorsement by the market regulator of the project’s credentials as an energy-producing asset.
“Reserve capacity is unique to WA and a key reason why the economics of our projects stand out significantly compared to other renewable energy opportunities throughout Australia,” he said.
“Receiving reserve capacity status is perhaps most important from a debt financing perspective, as this fixed and guaranteed revenue stream underpins the project’s debt capacity.
“The reserve capacity payments alone cover interest, debt repayments and some operating costs, allowing the company to sell its energy into the merchant market with no fixed price power purchase agreement, and to take advantage of peak energy prices.”
Frontier recently secured a deal with Infradebt for up to $215 million worth of senior project finance to support Waroona’s stage-one construction and production.
The company said its final debt quantum would be determined after confirmation of the reserve capacity price from AEMO late in September.
AEMO has historically assigned reserve capacity credits to major generators like Synergy and Alinta.
In June, the market operator dialled back its immediate forecasts of a looming shortfall in the state's main electricity grid but urged continued investment in additional capacity within WA.
