Strike Energy has reached key milestones in its South Erregulla Peaking Power Plant project, with engine installations underway and a significant forecast increase in capacity payments boosting revenue prospects.
- First 12 of 20 Jenbacher engines installed onsite
- South Erregulla-1 well workover and production simulation completed
- Capacity Price for 2027/28 forecast to rise 67% to $360,700/MW/year
- Construction on track for first power by October 2026
- Capacity Credit revenue expected to exceed $30 million in year two
Project Progress and Operational Readiness
Strike Energy Limited (ASX – STX) has announced significant progress on its South Erregulla Peaking Power Plant, a pivotal project designed to deliver flexible and reliable power to Western Australia's South West Interconnected System (SWIS). The arrival and installation of the first 12 Jenbacher engines mark a major milestone, with construction activities advancing on schedule toward the targeted first generation date of October 1, 2026.
Complementing the mechanical progress, the South Erregulla-1 well has undergone a comprehensive workover and production simulation. This process included a three-day production test under operational conditions, ensuring the reservoir and surface facilities are calibrated and ready to supply gas efficiently to the power plant.
Capacity Credit Outlook and Market Implications
One of the most compelling aspects of this update is the forecasted surge in the Reserve Capacity Price (RCP) for the 2027/28 Capacity Year. According to recent Australian Energy Market Operator (AEMO) reports, the RCP is expected to reach approximately $360,700 per megawatt per annum, a 67% increase from the previous year’s $216,092. This rise reflects tightening capacity margins and underscores the growing value of reliable peaking power in Western Australia's evolving energy landscape.
Strike’s South Erregulla facility will benefit from monthly Capacity Credit payments under the Reserve Capacity Mechanism, providing a stable revenue stream independent of energy sales. The company anticipates Capacity Credit revenue of around $18.4 million in the first year of operations, increasing to approximately $30.7 million in the second year, before accounting for energy sales. This revenue stability is particularly valuable amid the energy transition challenges facing the region.
Strategic Positioning and Next Steps
Managing Director and CEO Peter Stokes highlighted the strategic importance of these developments, emphasizing Strike’s integrated gas-to-power approach and the project’s alignment with Western Australia’s transition to a cleaner, more resilient power system. The company is also preparing for the delivery and installation of the remaining eight engines by year-end, alongside the commencement of transmission connection and switchyard infrastructure groundworks.
Strike continues to collaborate closely with the Western Australian Government to optimise transmission connection timing and costs, a critical factor in ensuring the project’s seamless integration into the SWIS grid. Investors and stakeholders can track ongoing progress through Strike’s dedicated project hub online.
While the final Reserve Capacity Price confirmation from AEMO is expected by late November 2025, the current outlook provides strong validation of Strike’s market positioning and the anticipated financial returns from this strategically located asset.
Bottom Line?
With construction on track and capacity prices soaring, Strike Energy is poised to play a vital role in Western Australia’s power future.
Questions in the middle?
- Will AEMO’s final Reserve Capacity Price confirmation match current forecasts?
- How will rising capacity prices influence Strike’s long-term revenue and project financing?
- What are the potential risks or delays in transmission connection impacting the project timeline?