Power benchmark hike on the cards

The average price of a battery energy storage project in Western Australia could rise a further 36 per cent, according to draft figures from the Economic Regulation Authority.

The ERA has proposed a benchmark reserve capacity of $491,700 per megawatt hour of energy generation in 2028-29 for both peak and flexible reserve capacity.

The number is 36 per cent higher than the $360,700/MWh the ERA set as the benchmark for the 2027-28 capacity year, and a potential boon for renewable energy proponents.

The benchmark is used to guide the Australian Energy Market Operator (AEMO) as it sets the price paid to energy providers into the South West Interconnected System in the years ahead.

It is modelled based on the cost estimates to build and connect a hypothetical 200MW/1,200MWh battery energy storage system to the SWIS and run it for 15 years.

When extrapolated, the figure assumes price tag of $623.7 million for an average battery storage project of that size – up from $474.4 million one year ago.

If adopted, the current price would represent another major hike in the state’s benchmark reserve capacity.

The figure climbed 57 per cent year-on-year when the 2027-28 benchmark was set last year, due to a shift away from gas-fired power generation as the state’s push to decarbonise intensified.

The ERA said this year’s further proposed jump was largely due to an increase in the amount of battery storage used in its modelling – from 800MWh to 1,200MWh.

Tracking the benchmark reserve capacity price and reserve capacity price per MW.

Last Updated: 2 February 2026

An allowance for contingency costs has been stripped from the model year-on-year, having contributed $58.8 million to the overall 2025 determination figure.

If included in this year’s estimate, the price differential would be even greater.

“We consider that contingency costs are incurred in the case that an adverse event occurs,” the ERA wrote.

“In usual circumstances, contingency costs are not incurred, and the ERA has been concerned about whether this potentially overcompensates capacity credit holders.”

The ERA said rising freight costs, materials and labour and an increase in transmission connection costs following the WA government’s move to a fixed cost model were also contributing factors.

The ERA’s estimates are informed by submissions from Landgate, Western Power and consultant GHD Advisory.

The draft number will be welcome news to renewable energy proponents, who rely on benchmark reserve pricing signals to provide investment certainty.

Opposition energy spokesperson Steve Thomas said the modelling “should set off alarm bells” for energy users.

“When the state government changed the cost basis to set the price from a gas-fired generator to a large-scale battery in 2023 it started blowing out the costs to suit its ideological messaging” he said.

“Now all Western Australians will pay the cost.

“This is yet another signal of an energy transition that will run out of puff and drive up power prices as a result.”

The ERA’s draft determination is now open for consultation, with a final number to be set in March.

What factors are driving the projected power benchmark hike,and how will it impact business operating costs and consumer electricity prices?

Power Benchmark Hike on the Cards

The energy sector is bracing for a significant shift. Recent analyses point towards an impending increase in power benchmarks, impacting electricity prices and possibly reshaping energy strategies for businesses and consumers alike.this isn’t simply about rising costs; it’s a complex interplay of factors demanding a closer look. Understanding these dynamics is crucial for navigating the evolving energy landscape.

Understanding Power Benchmarks & Their Impact

Power benchmarks serve as crucial reference points for electricity pricing. Thay reflect the cost of generating electricity from various sources – coal, natural gas, renewables, and nuclear – and are used in contracts, trading, and regulatory decisions. A hike in these benchmarks directly translates to higher electricity bills.

Here’s how it ripples through the economy:

* Increased Operational Costs: Businesses, notably energy-intensive industries like manufacturing and data centers, will face higher operational expenses.

* Consumer Price Inflation: Higher electricity costs are often passed on to consumers through increased prices for goods and services.

* investment in Energy Efficiency: A price surge incentivizes investment in energy-efficient technologies and practices.

* Renewable Energy Adoption: Higher fossil fuel-based benchmark prices can make renewable energy sources more competitive.

Key Drivers Behind the Projected Increase

Several converging factors are contributing to the anticipated power benchmark hike. These aren’t isolated incidents but interconnected trends.

* Geopolitical Instability: Global events, particularly conflicts and political tensions, substantially impact fossil fuel supply chains, driving up prices. The ongoing situation in Eastern Europe continues to be a major influence.

* Increased demand: Post-pandemic economic recovery has led to a surge in energy demand globally,straining existing supply infrastructure. The growth of data centers and electric vehicle adoption are further accelerating this demand.

* Fossil Fuel Supply Constraints: Production limitations and investment slowdowns in the oil and gas sector, coupled with declining coal reserves in some regions, are creating supply constraints.

* Carbon Pricing Mechanisms: The increasing implementation of carbon taxes and emissions trading schemes adds to the cost of fossil fuel-based power generation.

* Extreme Weather Events: Increasingly frequent and severe weather events – heatwaves, droughts, and storms – disrupt energy production and distribution, leading to price spikes. The Texas freeze in 2021 serves as a stark reminder of this vulnerability.

Regional Variations & Expected Magnitude

The extent of the power benchmark hike will vary significantly by region, depending on local energy mixes, regulatory frameworks, and geopolitical factors.

* Europe: Heavily reliant on imported natural gas, Europe is expected to experience the most ample increases. Benchmarks could rise by 15-25% in the short term.

* North America: While less exposed to direct gas supply disruptions, North America will still feel the impact through higher global energy prices.Increases of 10-18% are anticipated.

* Asia: Rapidly growing energy demand in Asia, coupled with reliance on coal, will likely lead to significant price increases, potentially exceeding 20% in some countries.

* australia: With a growing renewable energy sector, Australia may see a more moderate increase, but still faces challenges related to grid stability and transmission infrastructure.

These figures are projections, and actual increases could be higher or lower depending on unforeseen events.

Impact on Energy Trading & Contracts

The anticipated benchmark hike is already influencing energy trading and contract negotiations.

* Increased Volatility: Energy markets are experiencing heightened volatility as traders react to uncertainty surrounding supply and demand.

* Shorter Contract Durations: Businesses are increasingly opting for shorter-term energy contracts to avoid being locked into unfavorable prices.

* Demand for Fixed-Price Contracts: There’s a growing demand for fixed-price energy contracts, offering price certainty but often at a premium.

* Renewable Power Purchase Agreements (PPAs): Long-term PPAs with renewable energy developers are gaining traction as a way to hedge against volatile fossil fuel prices.

strategies for Mitigating the Impact

Businesses and consumers can take proactive steps to mitigate the impact of rising power benchmarks.

* Energy Audits: Conduct thorough energy audits to identify areas for improvement in energy efficiency.

* Invest in Energy-Efficient Technologies: Upgrade to energy-efficient lighting, HVAC systems, and equipment.

* Demand Response Programs: Participate in demand response programs, which offer incentives for reducing energy consumption during peak demand periods.

* On-Site Generation: Consider investing in on-site generation technologies, such as solar panels or combined heat and power (CHP) systems.

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