Frontier Energy tags a battery to its Waroona energy project following WA policy change

Frontier Energy includes four-hour, 80MW battery to Stage 1 of its Waroona renewable energy project
Changes to WA state Government policy make inclusion of a battery financially attractive
Preliminary debt financing work under way

Special Report: Frontier Energy has much to cheer about after a major change in WA State Government policy regarding battery energy storage systems delivered improved returns for Stage 1 of its Waroona renewable energy project.

The planned Stage 1 development consists of a 120MWdc (megawatts of direct current) solar facility that is currently the subject of a definitive feasibility study which is on track for completion in February.

Waroona is a key plank in Frontier Energy’s (ASX:FHE) plan to become a significant renewable energy provider in WA, with plans in place to have a generation capacity of more than 1GW – enough to power more than 1 million homes.

The company also owns two grid connections, which will be capable of exporting >1GW renewable energy to the grid, and freehold landholding of 868ha ideal for solar, hydrogen and other renewable energy opportunities following its merger with Waroona Energy last year.

Enhanced returns

FHE has now opted to include an integrated four-hour 80MW battery after the WA Government adopted a four-hour battery energy storage system (BESS) as the reference technology for its Benchmark Reserve Capacity Price (BRCP).

This represents a change from the current reference technology of an open-cycle gas turbine.

The company selected the combination of solar and battery after a detailed assessment indicated that it offered the strongest financial returns with the lowest capital commitment, whilst also presenting a lower technical risk compared to alternatives.

Reverse Capacity Payments (RCP) for an 80MW 4-hour battery are forecast to generate ~$24 million in revenue in 2026/27. This excludes RCPs from the solar generation.

“Renewable energy is the most dynamic industry in Australia,” FHE chief executive officer Adam Kiley said.

“Both the Federal and State governments are continuously updating regulations and policies, while also providing new financial incentives for industry to align with these changes.

“These changes in policy aim to ensure Australia not only meets its decarbonisation targets, but also support growing electricity demand as the result of decarbonisation as part of this major energy transition.

“In the last few months alone, the Federal Government has announced the $67 billion Capacity Investment Scheme3 (CIS). In WA, the Australian Energy Market Operator (AEMO) changed the technology for BRCP from a gas-fuelled peaking power plant to a 4-hour battery.”

Kiley added that batteries were always a consideration for the company as they are logical for storing solar energy generated during low priced periods (middle of the day) and for dispatch during higher priced periods (early evening).

“Including this at the project now makes financial sense, given changes to BRCP payments, whilst capital costs and efficiency of batteries have also improved significantly,” he noted.

“Inclusion of a battery sees minimal delay in the release of our DFS, which will be announced in February.”

Next steps

FHE has now started preliminary debt financing work which it expects to release more detail on prior to completion of the DFS.

It also continues to assess additional opportunities to both produce and sell green hydrogen as part of its renewable energy strategy.

Progress has been made on its study of a 120MW hydrogen-fuelled, dual-fuel peaking power plant which – following discussions with suppliers – will also consider a leasing option to reduce the initial capital cost compared to the owner/build option.

 

This article was developed in collaboration with Frontier Energy, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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