The Reserve Capacity mechanism is intended to ensure that the South West Interconnected System has adequate installed capacity available from capacity providers, which includes generators, batteries and demand-side management options, at all times to:
- Cover expected system peak demand, including additional capacity to cover the failure of the largest system contingency and a capability to respond to frequency variations.
- Respond at very short notice to changes in demand during high ramp periods.
The Australian Energy Market Operator (AEMO) administers the Reserve Capacity mechanism.
Benchmark Reserve Capacity Prices are set for each Capacity Year based on the expected cost of a new entrant building and connecting a battery to the South West Interconnected System and other costs required to make the facility capable of supplying electricity.
From 1 July 2021, the ERA must determine the value of the Benchmark Reserve Capacity Price consistent with the method specified in the Wholesale Electricity Market Rules. This includes public consultation on the proposed values before the ERA determines the Benchmark Reserve Capacity Prices to apply in the capacity year.
From the 2025 Reserve Capacity Cycle (applying to the 2027/28 capacity year onwards), the ERA must determine both a Peak Benchmark Reserve Capacity Price and a Flexible Benchmark Reserve Capacity Price.
2025 Benchmark Reserve Capacity Price to apply to the 2027-28 capacity year
