Frontier Energy Reports Record Western Australia Electricity Prices in 2025

• Western Australia wholesale electricity market averaged $88 per megawatt hour in 2025, an 11% increase from 2024
• Reserve capacity pricing for 2027/28 set at $360,700 per megawatt, a 67% increase from previous year
• Frontier secured 88.06 megawatts of capacity credits at fixed price of $360,700 per megawatt for five years (2027-2032), representing approximately $32 million annual revenue
• Western Australian government committed to closing coal-fired generation by 2029, with coal currently accounting for 28% of electricity generation
• Company accelerating Stage Two expansion study with results expected in first half of 2026

Frontier Energy Limited (ASX:FHE) is an Australian-based, Perth-anchored renewable energy company focused on solar and battery storage projects in Western Australia. The company is developing the Waroona Renewable Energy Project, consisting of 120 megawatts of solar generation and an 81.5 megawatt, 6.9-hour battery energy storage system. The project's design enables storage of solar energy during daytime for dispatch during evening peak demand periods.

Wholesale and Capacity Price Performance in 2025

Western Australia's wholesale electricity market operates independently from the National Electricity Market serving eastern Australia. The wholesale energy market averaged $88 per megawatt hour in 2025, compared to $66 per megawatt hour in 2022. Peak period pricing from 4pm to 10pm averaged $120 per megawatt hour in 2025, down from $152 per megawatt hour in 2024.

The Reserve Capacity Mechanism provides payments to generators based on forecast peak demand requirements. For the 2027/28 capacity year, the reserve capacity price was set at $360,700 per megawatt, compared to $216,000 per megawatt for the previous year. Frontier secured 88.06 megawatts of capacity credits at this price for a five-year period from 2027 to 2032, representing approximately $32 million in annual capacity payments prior to inflation adjustments.

The price increase reflected a change in benchmark technology from gas turbine to four-hour lithium-ion battery in the pricing methodology.

Chief Executive Officer Adam Kiley stated:

"Average wholesale electricity prices and the reserve capacity price, the two main revenue sources for the Project, reached record highs in 2025."

Generation Capacity and Scheduled Closures

The Western Australian government has committed to closing state-owned coal-fired power stations by 2029. Coal accounted for 28% of electricity supply on the South West Interconnected System in 2025, whilst gas provided 29%. Renewable energy represented 40% of supply in 2025, compared to 39% in 2024.

Scheduled closures include the Collie coal facility in 2027, the Muja coal plant by 2029, and several gas facilities by 2031. These closures will remove 6.6 terawatt hours of annual generation and 1,694 megawatts of capacity from the grid. The Australian Energy Market Operator forecasts demand growth of 3.7 terawatt hours, bringing total replacement requirements to approximately 10.3 terawatt hours by 2031. Total generation across the system in 2025 was 22.4 terawatt hours.

One renewable energy facility, the Cunderdin solar and battery project (128 megawatts solar, 55 megawatts 4-hour battery), commenced operations in 2025. This was the second renewable energy generation facility developed on the system since 2021. Several standalone battery storage projects were also added during the year.

CEO Adam Kiley commented:

"This strategy is further strengthened when considering the impending closure of gas and coal-fired generation facilities on the SWIS before 2030, that is forecast to cause a major generation gap in the market."

Stage Two Expansion Study

Frontier Energy is accelerating its Stage Two expansion study in response to market conditions. The Stage Two site has existing development approval and comparable landholding size to Stage One. The study will examine project sizing and configuration, with results expected in the first half of 2026.

The benchmark technology for reserve capacity pricing shifted to battery storage in 2025, moving from gas turbines in the previous methodology. Peak period electricity pricing averaged $120 per megawatt hour in 2025, down from $152 per megawatt hour in 2024, following the addition of new battery storage facilities to the grid. Negative price periods (below $0 per megawatt hour) decreased to 5.5% of trading intervals in 2025, compared to 21.8% in 2024.

Independent electricity price forecasts for Stage One's debt financing process are scheduled for release shortly. Stage One continues to progress through financing following the allocation of 88.06 megawatts of capacity credits in October 2025. The company reports that Stage Two study results will be available in the first half of 2026.

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