Maximum Reserve Capacity Price
Each year the IMO is required to determine the Maximum Reserve Capacity Price in accordance with the Market Procedure: Maximum Reserve Capacity Price.
The Maximum Reserve Capacity Price (MRCP) sets the maximum bid that can be made in a Reserve Capacity Auction and is used to determine an administered Reserve Capacity Price if no auction is required. The MRCP aims to reflect the marginal cost of providing additional Reserve Capacity in each Capacity Year. It is established by undertaking a technical bottom-up cost evaluation of the entry of a 160MW OCGT generation facility entering the WEM in the relevant Capacity Year.
The general steps in this process are:
- The IMO conducts a review of the Maximum Reserve Capacity Price and produces a Draft Report.
- The IMO publishes the Draft Report and requests submissions from the public on the review.
- The IMO reviews all submissions made and revises the Maximum Reserve Capacity Price if appropriate.
- The IMO provides a final report which is submitted to the Economic Regulation Authority (ERA) for approval.
- Following approval or further review, the IMO publishes the approved Maximum Reserve Capacity Price.
Methodology Review
The IMO is required to review the Market Procedure at least once in every five year period (Clause 4.16.9 of the Market Rules). This review was conducted during 2010 and 2011 by the Maximum Reserve Capacity Price Working Group.
This review culminated with the development of a Procedure Change Proposal to amend the Market Procedure. The Procedure Change Proposal PC_2011_06 was submitted into the Procedure Change Process on 6 September 2011 and the Final Report was published on 21 October 2011. The amended Market Procedure has now commenced.
The Procedure Change Proposal and related documents can be found on the PC_2011_06 page.
Reserve Capacity Prices
For the first Reserve Capacity Cycle, the Maximum Reserve Capacity Price was set at $150,000 per MW per year. This Maximum Reserve Capacity Price applied from Energy Market Commencement to 1 October 2008.
The graph below displays the Maximum Reserve Capacity Price and the constituent costs for each Capacity Year from 2008/09.
The following table details the Reserve Capacity Price effective in the Market. The Reserve Capacity Price is the price paid by the IMO for Capacity Credits not traded bilaterally between Participants.
| Period | Price per MW per year | Price per MW per month |
|---|---|---|
| 01/10/13 - 01/10/14 | $178,476.69 | $14,873.06 |
| 01/10/12 - 01/10/13 | $186,001.04 | $15,500.09 |
| 01/10/11 - 01/10/12 | $131,804.58 | $10,983.72 |
| 01/10/10 - 01/10/11 | $144,235.38 | $12,019.62 |
| 01/10/09 - 01/10/10 | $108,458.57 | $9,038.21 |
| 01/10/08 - 01/10/09 | $97,834.89 | $8,152.91 |
| 01/10/07 - 01/10/08 | $127,500.00 | $10,625.00 |
| 01/10/06 - 01/10/07 | $127,500.00 | $10,625.00 |
| 21/09/06 - 01/10/06 | $127,500.00 | $10,625.00 |
2012 Maximum Reserve Capacity Price (for 2014/15)
The IMO has prepared the Draft Report for the Maximum Reserve Capacity Price review for the 2012 Reserve Capacity Cycle, which requires capacity to be available from 1 October 2014 through to 1 October 2015.
The IMO proposed a draft value for the Maximum Reserve Capacity Price of $166,100 per MW per year.
The consultation period has now closed. During the consultation period the IMO received 9 submissions, which can be found below.
The final report must be approved by the ERA. The report is due to be published by the IMO by 5pm on 29 February 2012.*
Copies of the relevant documents can be found below.
* The Final Report is typically published by 31 January in accordance with clause 4.1.4 of the Market Rules but has been delayed due to the late provision of some external advice (prior to publication of the Draft Report). The IMO will be publishing an extension notice to this effect under clause 4.1.32 of the Market Rules.
Draft Report
Applicable Documents
MRCP Calculation Spreadsheet [100kB]
GHD - Review of Fixed Fuel Cost [698kB]
Documents related to stakeholder workshop - WACC (4 Jan 2012)
Submissions received during the consultation period
Alinta [3.9MB]
EnerNOC [1.8MB]
ERM Power [369kB]
Griffin Power [107kB]
Infratil Energy Australia [480kB]
Landfill Gas and Power [396kB]
Merredin Energy [486kB]
Perth Energy [247kB]
Tesla Corporation [875kB]
2011 Maximum Reserve Capacity Price (for 2013/14)
For the 2013/14 Capacity Year, the IMO proposed a final revised value for the Maximum Reserve Capacity Price of $240,600 per MW per year to the ERA. This value was approved by the ERA on 28 January 2011 in accordance with clause 2.26 of the Market Rules. The Maximum Reserve Capacity Price of $240,600 per MW per year will be effective from 1 October 2013 to 1 October 2014.
Copies of the various relevant documents can be found below.
Supporting documents for 2011 Maximum Reserve Capacity Price
Final Report
Draft Report
Applicable Documents
ERA Approval Notice [52kB]
MRCP Calculation Spreadsheet [110kB]
Landgate Land Costs [1.6MB]
GHD Fixed Fuel Costs [912kB]
The following submissions were received by the IMO during the consultation period:
Energy Response submission [55kB]
Tesla Corporation submission [475kB]
Perth Energy submission [1.1MB]
Maximum Reserve Capacity Price Archive
The Maximum Reserve Capacity Price Archive page contains all of the relevant documentation for each of the previous Maximum Reserve Capacity Price determinations.
Click here to go to access the Maximum Reserve Capacity Price Archive.