Frontier Energy secures 88.06 MW of peak capacity credits for its Waroona Renewable Energy Project, guaranteeing $160 million in revenue over five years and underpinning its financing strategy.
- 88.06 MW peak capacity credits assigned for 2027-2028 cycle
- Guaranteed $160 million revenue over first five years via fixed Reserve Capacity Price
- Battery storage duration increased to 6 hours to maximise capacity credits
- Energy prices in WA market rising, boosting additional revenue potential
- Financing negotiations underway, supported by secured capacity credits
Securing Capacity Credits – A Milestone for Waroona
Frontier Energy Limited has achieved a critical milestone by securing 88.06 MW of peak capacity credits for Stage One of its Waroona Renewable Energy Project in Western Australia. These credits, assigned by the Australian Energy Market Operator (AEMO) for the 2027-2028 Reserve Capacity Cycle, translate into a guaranteed revenue stream of approximately $32 million annually based on the expected Reserve Capacity Price (RCP) of $360,700 per MW. Locked in as a fixed price facility for the first five years, this ensures at least $160 million in capacity credit revenue, providing the financial certainty essential for project financing.
Strategic Battery Upgrade to Maximise Returns
In response to updated regulatory requirements, Frontier has increased the battery storage duration from the initially planned 4.75 hours to at least 6 hours. This adjustment aligns with the 2025 Electricity Statement of Opportunities report by AEMO, which raised the minimum Energy Storage Resource Obligation Duration (ESROD) to six hours for capacity certification eligibility. By scaling up the battery, Frontier maximises capacity credits, thereby enhancing revenue potential. Encouragingly, the cost per megawatt of battery storage has declined since the original feasibility study, potentially offsetting the increased scale.
Rising Energy Prices Complement Capacity Revenue
Beyond capacity credits, Frontier anticipates additional revenue from energy sales, Large-scale Generation Certificates, and other market opportunities. The Wholesale Energy Market (WEM) in Western Australia has seen average energy prices rise to $94 per megawatt-hour in 2025, up 18% from the previous year. Peak period prices (5pm–9pm) have averaged $134 per megawatt-hour, benefiting Frontier’s hybrid approach that combines low-cost solar generation with battery storage to discharge energy during high-demand periods. This strategy positions Waroona to capitalise on favourable market dynamics.
Financing Pathway and Market Implications
With capacity credits secured and revenue streams clarified, Frontier is actively negotiating with strategic investors and financiers to finalise funding arrangements. The guaranteed revenue from capacity credits significantly de-risks the project, enhancing its attractiveness to both equity and debt providers. This financial foundation not only supports the development timeline but also offers flexibility to optimise capital structure for shareholder value. Market watchers will be keen to see how Frontier balances cost management, particularly with the larger battery system, against evolving energy market conditions.
Bottom Line?
Frontier’s secured capacity credits and strategic battery upgrade set the stage for Waroona’s financing and future growth amid rising energy prices.
Questions in the middle?
- How will final Reserve Capacity Price confirmation impact projected revenues?
- What are the cost implications and financing terms for the increased battery capacity?
- How might evolving energy market prices influence Waroona’s long-term profitability?