ERA approves benchmark reserve capacity price for 2019/20

ERA – Economic Regulation Authority

Jan 31
ERA approves benchmark reserve capacity price for 2019/20

On 31 January, the Economic Regulation Authority (ERA) approved the Benchmark Reserve Capacity Price (BRCP) for the 2019/20 Capacity Year at $149,800 per MW.  In previous years, this has been referred to as the Maximum Reserve Capacity Price.  The equivalent figure for the 2018/19 Capacity Year was $159,800 per MW.

This approval of the Australian Energy Market Operator’s (AEMO) calculation of the benchmark, follows a public consultation exercise undertaken by the AEMO at the end of 2016.  The draft report on the BRCP was published on 21 November 2016, with submissions due by 2 December.  Concerns raised by stakeholders included:

  • assumptions and methodology used to calculate the costs of a ‘theoretical’ new entrant power station;
  • the methods used to determine components for the weighted average cost of capital; and
  • how the methodology used to calculate BRCP may change through the Electricity Market Review process.

The ERA is due to conduct its 5-yearly review of the BRCP methodology and market procedures in 2017 and will take stakeholders’ concerns into account in its review.

Background

The BRCP is either (i) the maximum per MW capacity price that can be offered in a capacity auction, or (ii) if there is no auction, then it is an input into the calculation of the administered Reserve Capacity Price.

BRCP is calculated as a full bottom-up calculation of costs for a new 160MW Open Cycle Gas Turbine to enter the South West Interconnected System.  Costs determined include capital construction and land costs, access costs to connect to the transmission network, the fixed operating and maintenance costs, a margin for financing and legal costs and an appropriate cost of capital.