Reserve Capacity Price

The administrative Reserve Capacity Price is the price paid by AEMO for Capacity Credits in the Wholesale Electricity Market (WEM). AEMO calculates the price based on a formula set in the WEM Rules. Key components of the Reserve Capacity Price include the Benchmark Reserve Capacity Price (BRCP) and the level of excess capacity each Capacity Year.  

The Minister for Energy amended the WEM Rules on 11 February 2020 to implement changes to the Reserve Capacity Price from the 2019 Reserve Capacity Cycle. The pricing curve has been sharpened to increase the responsiveness to the level of excess capacity. The pricing curve will continue to be based on the BRCP and three key points:

  • Price cap – The price cannot exceed 1.3 times the BRCP.
  • Absolute zero point – if excess capacity exceeds 30 per cent, the Reserve Capacity Price will fall to zero.
  • Economic zero point – if excess capacity exceeds 10 per cent the price will fall to 50 per cent of the BRCP, which is considered low enough to discourage new Facilities from entering the market.

The WEM Rule amendments have introduced transitional arrangements for generation Facilities that have been assigned Capacity Credits in the 2018 Reserve Capacity Cycle. Transitional Facilities will receive a price floor of $114,000 and a price cap of $140,000 (CPI adjusted) for 10 years. 

New generation Facilities will have the option of taking the floating Reserve Capacity Price calculated each Capacity Year or locking in the price they receive in their first year of entry for five years (Fixed Price Facility). 

Demand Side Management Facilities will receive the floating Reserve Capacity Price but are not eligible to be a Transitional or Fixed Price Facility.  

More details on the rule amendments can be found here.

In accordance with clause 4.20.5AA of the WEM Rules, AEMO publishes a summary of the aggregate quantity of Capacity Credits assigned at each price for the relevant Reserve Capacity Cycle.

Reserve Capacity Prices for the 2019 Reserve Capacity Cycle (2021-22 Capacity Year)

Price

$ per MW per year

Total Capacity Credits assigned (MW)

Reserve Capacity Price

$78,573.33

 117.500

Reserve Capacity Price for Transitional Facilities

$114,000.00

 4,807.347

There are no Fixed Price Facilities or Special Reserve Capacity Prices for the 2019 Reserve Capacity Cycle.

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