Reserve Capacity Mechanism

Reserve Capacity Price

Overview

Reserve Capacity is procured by the AEMO through the Wholesale Electricity Market (WEM) to ensure sufficient capacity is available two years ahead to meet forecast demand, as set out in the WEM Electricity Statement of Opportunities.

AEMO assigns one Capacity Credit for each megawatt (MW) of reliable capacity that a Facility or a Separately Certified Component provides in a Capacity Year. AEMO assigns these Capacity Credits as Peak Capacity Credits, Flexible Capacity Credits or a combination of both: see Flexible Certified Reserve Capacity.

AEMO pays Market Participants regulated prices for the Capacity Credits assigned to eligible facilities. The Electricity System and Market (ESM) Rules determine the eligibility for each applicable price.

  • Market participants may be eligible for Transitional, Fixed or Peak and Flexible Reserve Capacity Price.
  • AEMO calculates these prices in accordance with section 4.29. of the ESM Rules.
  • AEMO publishes the relevant prices in the Publication Table below and Market Data website nominally on 30 September 2026.

The following sections set out these details.

Market Participants may be eligible for Transitional, Fixed or Peak and Flexible Prices

Facilities assigned Capacity Credits in the 2018 Reserve Capacity Cycle (RC Cycle) receive the Transitional Price until 2028. All other Facilities receive the Peak Price unless they select a Fixed Price. Eligibility criteria apply to Facilities seeking a 5-year or 10-year Fixed price.

  • Transitional Price
    • The Transitional Price was introduced to provide a price band for existing Energy Producing Systems, reducing exposure to price volatility following Reserve Capacity Mechanism reforms.
    • The Transitional Price applies only to Facilities assigned Capacity Credits in the 2018 RC Cycle.
    • The transitional pricing regime continues up to and including the 2028 RC Cycle, after which it ceases.
  • Peak and Flexible Price
    • The annually determined Peak Price applies to New Facilities or Existing Facilities not assigned Capacity Credits in the 2018 RC Cycle. This applies unless a Fixed Price is selected and the requirements for the Fixed Price are met.
    • The Flexible Price is available to Facilities that meet the minimum eligibility requirement and are assigned Flexible Certified Reserve Capacity (CRC).
    • Demand Side Programme Facilities are eligible only for the Peak Price. They are not eligible for Transitional or Fixed Price arrangements.
  • Fixed Price
    • The Fixed Price allows Energy Producing Systems to lock in a fixed guaranteed price paid by AEMO for either a five-year or ten-year period. This can provide revenue certainty by reducing exposure to annual Price fluctuations.

    Five-Year Fixed Price - Eligibility

    Eligibility Components of Semi-Scheduled or Scheduled Facility Non-Scheduled Facility
    Has not previously received Capacity Credits The Technology Type of the component must be new or must not have been previously certified as a Separately Certified Component. The Facility must be new or must not have been previously assigned Capacity Credits.
    Facility Technology Type requirement Must form part of a Facility that is not:
    • a Non-Scheduled Facility, or
    • a Demand Side Programme.
    		 Must be a Non-Scheduled Facility.
    Energy Producing System The Technology Type of the component must be an Energy Producing System. The Facility must be an Energy Producing System.
    Commercial Operation status The Technology Type of the component must not be in Commercial Operation. Facility must not be in Commercial Operation.
    Facility Technology Type upgrade Must meet one of the following:
    • The Technology Type of the component are treated as a Facility Upgrade, or
    • All Fixed Price Components are collectively treated as a Facility Upgrade, or
    • The Facility has not previously been assigned Capacity Credits and all Technology Type of the component nominate the same Fixed Price duration.
    		 Not applicable.
    Non-Co-optimised Essential System Service (NCESS) Must not form part of a Facility subject to an NCESS contract at the date Capacity Credits are first assigned. Facility must not be subject to an NCESS contract at the date Capacity Credits are first assigned.
    Network Augmentation Funding Facility (NAFF) The Technology Type of the component must not form part of a NAFF Facility. The Facility must not be a NAFF.
    Early CRC The Technology Type of the component must not form part of a Facility to which Early CRC applies. Must not form part of a Facility to which Early CRC applies.

    Ten-Year Fixed Price eligibility

    New Components of a Scheduled or Semi-Scheduled Facility may nominate for the 10-Year Fixed Price, provided they meet the five-year Fixed Price eligibility criteria and one of the following criteria:

    Criteria Detail
    Criteria 1 – Capability Class 1 component assigned Flexible CRC The Facility must be:
    • classified as Capability Class 1, and
    • have been assigned Flexible CRC.
    Additional information:
    • The application for Flexible CRC must be submitted during the CRC application stage.
    • Nomination for the 10-Year Fixed Price may be made during the Bilateral Trade Declaration stage, where the quantity of traded Flexible CRC is greater than 0 MW.
    Criteria 2: Renewable Fuelled-Fuelled Component The Facility must be:
    • classified as Capability Class 1 or Capability Class 2, and
    • AEMO assesses the Facility as being exclusively fuelled by Eligible Renewable Energy Sources.
    This includes:
    • Non Intermittent Generating Systems, or
    • Energy Storage Resources.
    Additional information:
    • Market Participant must provide supporting evidence during the CRC application stage.
    • AEMO must be satisfied that the Energy Producing System will be fuelled solely by Eligible Renewable Energy Sources.
    Further guidance is provided in section 5.3 of the WEM Procedure: Certification of Reserve Capacity.
    Criteria 3: Long‑Duration Energy Storage Resource The Facility must be:
    • an Energy Storage Resource, and
    • AEMO assess the Facility as having long-duration capability.
    Long-duration requirements:
    • The Facility must be capable of sustaining its level of Peak CRC output for a duration that meets or exceeds the highest forecast Electric Storage Duration Requirement for any Capacity Year within AEMO’s Long Term PASA Study Horizon, as published in the WEM Electricity Statement of Opportunities (ESOO) for the relevant RC Cycle.
    Additional information:
    • The Market Participant may nominate for the 10 Year Fixed Price guarantee during the Bilateral Trade Declaration stage.
    • In some cases, a reduction in Assigned CRC may be required to meet the duration requirement.

Prices are calculated in accordance with the ESM Rules

Reserve Capacity Prices are expressed as dollars per Capacity Credit per year. Participants are paid within the Capacity Year, to a schedule set out in the WA Settlement Timeline, published in June of that year. Prices and payments are calculated and settled in accordance with the ESM Rules and WEM Procedure – Settlements.

  • Peak Price
    Item Description
    How the Peak Price is calculated AEMO calculates the Peak Price annually in accordance with clause 4.29.1(b)i. of the ESM Rules.
    Inputs to the formula The Peak Price formula uses:
    • the Peak Benchmark Reserve Capacity Price (BRCP); and
    • the surplus or shortfall in Peak Capacity Credits relative to the Reserve Capacity Requirement for the Capacity Year.
    Impact of Deadband Where the total assigned Peak Capacity Credits are within ±5% of the Reserve Capacity Requirement (as set in the WEM ESOO), the Peak Price is equal to the Peak BRCP.
    Outcome for 2027‑28 Capacity Year For the 2027–28 Capacity Year:
    • the Peak Reserve Capacity Requirement was 6,238 MW,
    • total assigned Capacity Credits were 6,375 MW.
    As this outcome was within the ±5% deadband, the Peak Price was set equal to the Peak BRCP of $360,700.

    The chart below presents the Reserve Capacity Requirement and the corresponding deadband range that covers the Peak Price for the 2027–28 Capacity Year.

    Peak Price Chart
  • Flexible Price
    Item Description
    How the Flexible Price is calculated AEMO calculates the Flexible Price annually in accordance with clause 4.29.1(b)ii. of the ESM Rules.
    Inputs to the formula The Flexible Price formula uses:
    • the Flexible (BRCP); and
    • the level of surplus or shortfall in Flexible Capacity Credits for the relevant Capacity Year.
    How payments are determined While the Flexible Price is calculated, payments are determined separately under clause 4.29.1F of the ESM Rules. The Flexible payment is calculated as the greater of $0 or the difference between the Flexible Price and Peak Price. This means a top‑up payment is made only where the Flexible Price exceeds the Peak Price, and only for Facilities that hold both Peak and Flexible Capacity Credits.
    Outcome for 2027‑28 Capacity Year For the 2027‑28 Capacity Year, since the Peak Price ($360,700) was higher than the Flexible Price ($180,350), no Flexible payments will be made.
  • Transitional Price
    Item Description
    Facilities subject to the Transitional Price Facilities assigned Capacity Credits in the 2018 RC Cycle are subject to transitional pricing:
    • Price Floor: $114,000,
    • Price Cap: $140,000, and
    • Consumer Price Index (CPI) adjustments apply for 10 years, commencing from the 2019 RC Cycle.
    The Transitional Pricing regime was introduced to provide stability for existing facilities during the Reserve Capacity Mechanism reforms.
    Inputs to the formula The Transitional Peak Price = min(max(PRCP, Trans_Floor), Trans_Ceiling)

    Inputs include:
    • PRCP = Peak Price for the RC Cycle (clause 4.29.1(b)(i))
    • Trans

    The chart below shows the historic trend for Transitional Peak Price and the determined Floor and Ceiling Prices.

    Transitional Price Chart
  • Transitional Flexible Price
    Item Description
    How the Transitional Flexible Price is calculated AEMO calculates the Transitional Flexible Price using the formula set out in clause 4.29.1G of the ESM Rules.
    How are payments determined The Transitional Flexible Price is determined as the greater of $0 and the difference between:
    • the Transitional Peak Price, and
    • the Flexible Price.
    This means a Transitional Flexible payment is only payable where the Transitional Peak Price exceeds the Flexible Price.
    Outcome for 2027‑28 Capacity Year Under the transitional provision in clause 1.63.10(e)(viii) of the ESM Rules, AEMO was not required to determine the Transitional Daily Flexible RC Price for the 2025 RC Cycle. Accordingly, no payments will be issued to Market Participants under the Transitional Daily Flexible Price for the 2025 RC Cycle.
  • Fixed Peak and Flexible Price
    Item Description
    Eligibility Eligible new Facilities or Separately Certified Components may choose to receive the annually determined Reserve Capacity Price, or to fix their Reserve Capacity Price for a period of five or ten years from their first Capacity Year, subject to meeting the applicable eligibility conditions, see Eligibility section above.
    Nomination process Market Participants nominate eligible Facilities or Components for either a five‑year or ten‑year Fixed Price in their Trade Declaration by the deadline specified in clause 4.1.14 of the ESM Rules. New Facilities that nominate a Fixed Price option are generally subject to the Network Access Quantity (NAQ) priority order. However, ten‑year Fixed Price Facilities may still be assigned Capacity Credits in certain circumstances.
    Outcome for 2027‑28 Capacity Year The Fixed Peak Price for the 2027‑28 Capacity Year was $360,700 and applied to 267.215 MW. AEMO did not determine the Transitional Daily Flex Price based on the transitional clause under clause 1.63.10(e)(viii) of the ESM Rules. Accordingly, no payments will be issued to Market Participants under the Fixed Daily Flexible Price.

Publication Requirements

Under clause 4.20.5AA of the ESM Rules, AEMO publishes:

  • Aggregate Capacity Credits assigned at each price, and
  • Transitional Ceiling and Floor amounts.

The Market Data Site contains price information for the 2025 RC Cycle.

Reserve Capacity Price determination for the 2025 Reserve Capacity Cycle (2027-2028 Capacity Year)

Reserve Capacity Price type Description $ per MW per year $ per MW per Trading Day Total Capacity Credits assigned (MW)
Peak Reserve Capacity Price The price per Peak Capacity Credit for a RC Cycle, calculated under clauses 4.29.1 and 4.29.1AA of the ESM Rules. $360,700.00   2,059.182
Flexible Reserve Capacity Price The price per Flexible Capacity Credit for a RC Cycle, calculated under clause 4.29.1F. As Flexible Daily Price was lower than the Peak Daily Price, no additional $180,350.00   1,688.256
Transitional Peak Reserve Capacity Price The price per Peak Capacity Credit for Transitional Facilities or components as per clause 4.29.1B of the ESM Rules. $177,636.121 $485.34 4,048.744
Transitional Flexible Reserve Capacity Price* The price per Flexible Capacity Credit for Transitional Facilities or components (clause 4.29.1G of the ESM Rules). N/A N/A N/A
Fixed Peak Reserve Capacity Price Price per Peak Capacity Credit for Fixed Price Facilities or Fixed Price Components, calculated under clause 4.29.1D each RC Cycle $360,700.00 $985.52 267.215
Fixed Daily Flexible RC Price* Daily price per Flexible Capacity Credit for Fixed Price Facilities or Components, calculated under clause 4.29.1H of the ESM Rules each RC Cycle. N/A N/A N/A

1 For the 2025 RC Cycle, the Transitional Floor Price is $144,646.54 per MW per year, and the Transitional Ceiling Price is $177,636.12 per MW per year.

* As the requirement to publish Transitional Daily Flexible Reserve Capacity Price and Fixed Daily Flexible Reserve Capacity Price remains under clause 4.20.5A(b)(iiiA) and 4.20.5A(b)(v), AEMO has consulted with EPWA who has acknowledged this to be a manifest error. The policy intention is to not determine or publish these prices. As such, AEMO will not be publishing these values for the 2025 RC Cycle.

Historical Prices

Reserve Capacity Prices since market start are available on the Market Data Site.

  • Peak Reserve Capacity Prices (since market start).
  • Flexible Reserve Capacity Prices (which were introduced in the 2025 RC Cycle).

Reserve Capacity Prices since market start

The Reserve Capacity Prices since market start are available below and can also be found on the Market Data Site.

Peak Reserve Capacity Prices have existed since market start, while Flexible Reserve Capacity Prices have been introduced from the 2025 RC Cycle.

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