Frontier Energy’s dream of delivering a solar project to supply the South West Interconnected System took a hit today, when it lost out in a push for grid capacity credits.
The company, which only a month ago welcomed former Premier Mark McGowan as chair of its board, hoped to supply the grid across the 2026/27 capacity year from a yet-to-be-built solar farm at Waroona.
Its debt financing facility – of up to $215 million from a firm backed by Mike Cannon-Brookes – was contingent on the award of capacity credits.
The company is now back at the finance drawing board.
Frontier’s missing out in AEMO’s round of certified capacity credits may not have been a surprise for those with an eye for the fine print.
Under WEM rules, if there are applications for 103 per cent or more of AMEO’s target reserve capacity for the state’s wholesale electricity market, then projects which request a fixed reserve capacity pricing model over five years are excluded from its modelling.
Frontier, seeking certainty in support of its project finance, fell into that category.
In June, AEMO flagged a capacity target for the WEM of 5,696 megawatts for the 2026-2027 period (a one-year span beginning in October).
AEMO’s certified reserve capacity grant in August flagged 6,228MW worth of potential electricity which could support the grid.
The reserve capacity was more than nine per cent higher than the target.
In its release to market, Frontier highlighted that an influx of batteries supported by generous non-co-optimised essential system services (NCESS) incentive payments had changed the equation in the state.
NCESS can be secured from outside existing WEM mechanisms if AEMO perceives there to be a threat to system security or reliability.
That significant investment was credited with balancing the market and saw battery proponent Neoen receive as much as $591,000 per megawatt of storage, more than double the benchmark capacity price.
Frontier said incentives of this nature – given to Neon, Synergy and Alinta – combined with the rule around five-year fixed pricing, had essentially ruled it out of a spot in the grid.
That’s despite recent Business News analysis which found there were currently no major wind or solar projects in construction in the state’s South West.
Subsequent BN analysis pondered whether the rate of battery delivery had outpaced the rate of renewables and transmission investment, creating an imbalance of a different kind.
A battery influx is clearly unlikely to be an issue in the long term, when there is a need for batteries to support a decarbonised grid.
But the short-to-medium term could look a little more awkward, as renewables and the transmission lines connecting them to the grid catch up.
Frontier executives, meanwhile, will address the snub in an investor call tomorrow morning.
It remains hopeful of a win in the federal government’s Capacity Investment Scheme, where competition is fierce.
Its shares fell more than 40 per cent in trade today.
Charging ahead
One battery which did receive capacity credits was Nomad Energy and Atmos Renewables’ proposed $220 million, 100MW facility to be built at Merredin.
That project will store energy generated at the Merredin solar farm, with targeted delivery in Q4 of 2026 as the capacity period kicks off.
Construction on the facility is expected to begin in the second quarter of this year.
The Merredin battery will be part of an expected influx of 1,500MW of new utility batteries expected to come online in the next 15 months, according to Energy Policy WA coordinator of energy Jai Thomas in conversation with Business News last month.
Mr Thomas expects wind and solar to follow.
Gas will also play its role, based on the award of credits revealed today.
John Poynton-chaired Strike Energy’s proposal to build a gas-fueled peaking plant at its South Erregulla project was another winner, a boost for a company which was troubled at the project by lower-than-expected reserves which prompted a mass share sell-off earlier in 2024.
Coal-ed shoulder
AEMO’s certified capacity credits look to have spelled the end for the Muja 6 coal-fired power station at Collie, with the operation missing out for the 2026-2027 period.
Muja 6 was supposed to close late in 2024, but had its life extended through to April 2025 by former Energy Minister Bill Johnston in August last year.
The plant will run on standby through the coming summer months.
Muja 7 and 8, which are slated for closure later in the decade, did receive capacity credits.
The closures are part of the state government’s ambition to wean off coal fired power by the end of 2030.
The privately-owned, government-subsidised Bluewaters Power Station was also granted capacity credits.
The project has been a political football, with the state government sinking hundreds of millions into its ongoing operation to support the grid.