Six big battery projects are in line to receive capacity payments in Western Australia, in a significant reshaping of the state’s grid as it accelerates its transition away from coal.
The six batteries – two at Collie, two in Wagerup and one each in Kwinana and Merredin – have been included in a list of generators assigned the status of certified reserved capacity in that state’s grid for 2026/27, which means they could play a key role in ensuring the lights stay on in future years.
The final allocation of capacity credits will be decided at the end of September, and while the state’s first big battery at Kwinana has been included in the capacity allocation for the three preceding years, and Neoen’s Collie battery for 2025/26, this is the first time so many batteries and so much capacity has been recognised.
The W.A. grid has long had a capacity payment component – likely because of its isolation from the rest of the grid and its inability to export and import to other states. The capacity payments have not been without controversy, often making generous payments to facilities, such as diesel peaking plants, that do not get used for years on end.
Regulatory authorities toyed with the idea of a capacity market in Australia’s main grid, the National Electricity Market, but their insistence that it be open to fossil fuel generators led to accusations of a “coal-keeper” measure to keep coal generators open for longer than needed.
In the end, companies like Origin went to state governments to negotiate their own capacity, or underwriting agreements, to keep facilities like the giant Eraring coal generator open for at least another two years.
The inclusion of so many big batteries in the W.A. grid’s reserve capacity list is a landmark for that grid, particularly given that the last of its coal fired generators is likely to close by 2030 – before any other state in Australia that is still burning coal. (South Australia closed the last of its coal fired generators in 2016).
The Australian Energy Market Operator’s list of projects with reserve capacity certification include what will be the country’s biggest battery, Neoen’s 560 MW, 2240 MWh Collie battery, along with nearly as big (500 MW and 2,000 MWh) Collie battery being built by state owned generation company Synergy up the road.
The two batteries in Kwinana – the already complete 100 MW/200 MWh first stage and the under construction 200 MW/800 MWh second stage – are also included, as is the 100 MW, 200 MWh Wagerup battery being built by Alinta.
The other batteries included have not yet begun construction. They are the 100 MW, 400 MWh Merredin battery proposed by Atmos Renewables and Nomad Energy, and Frontier Energy’s 80 MW/360 MWh Waroona battery that will be paired with a solar farm, also near Wagerup.
According to the AEMO list, Neoen’s Collie battery is up for 492 MW, Synergy’s Collie battery 500 MW , the Kwinana batteries 268 MW, Merredin 94.5 MW, Waroona battery and solar hybrid 87 MW, and Alinta’s Wagerup 48.7 MW.
At more than $125,000 per megawatt, the capacity payments could be both lucrative and important to the battery economics.
Indeed, Frontier have a taste of that in a detailed assessment of the Waroona project’s economics, which we reported on here.
The significant part of all this is that rated battery capacity now makes a total of 1,489 MW out of the 6,228 MW identified by AEMO. The actual capacity credits will be allocated at the end of September, and will be valid for the year from October 1, 2026.
Battery storage is a relatively new addition to the W.A. grid, with the first battery – the 100 MW, 200 MWh facility at Kwinana – starting operations just last year.
But that is changing quickly, with second stage being added to the Kwinana facility, the Alinta battery and the two Collie batteries already under construction.
The biggest fillip has come from lucrative contracts to soak up solar in the middle of the day and inject it back into the grid in the evening peaks. These two-year contracts have underpinned the Neoen and Synergy Collie batteries, which are among the biggest in the world.
Meanwhile, another 500 MW and 2,000 MWh of battery storage capacity will be sought in the first of the federal government’s Capacity Investment Scheme auctions to be held later this year.
Some analysts have argued that the energy only market in Australia’s main grid may no longer be fit for purpose to encourage new investment, and could be distorted by the impact of the CIS, which seeks to underwrite the bulk of capacity – 23 GW of wind and solar and 9 GW of storage – to meet the country’s 2030 renewable energy target.
A possible re-writing of the market rules – yet another attempt – is being planned to come into effect at the end of the decade, and there will be a major push, despite the objections of some fossil fuelled power station owners, to ensure that any capacity component is restricted to low or zero emission facilities.
