Frontier Energy Limited (ASX: FHE; OTCQB: FRHYF) (Frontier or the Company) is pleased to provide an update of the strategy and key targets for 1H 2024 as the Company advances the development of its Stage One Waroona Renewable Energy Project (Project) in Southwest WA, towards a Final Investment Decision (FID) and construction during 2024.
HIGHLIGHTS
- Stage One of the Project will consist of a 120MWdc solar facility with an integrated four-hour 80MW battery. A Definitive Feasibility Study (DFS) is on track for February 2024
- The inclusion of a battery follows a major change in WA Government policy regarding Battery Energy Storage System (BESS)1 that makes development of a BESS financially more attractive
- Energy Policy WA’s Coordinator of Energy has now adopted a 4-hour BESS as the reference technology for Benchmark Reserve Capacity (BRCP), a change from the current reference technology of an open-cycle gas turbine (OCGT)
- Reserve Capacity Payments (RCP) for an 80MW 4-hour battery are forecast to generate ~$24 million in revenue in 2026/27 (excluding RCPs from solar)
- The Company selected this strategy following a detailed assessment of various value adding alternatives and facilities of various sizes. This analysis indicated this combination provided the strongest financial returns with the lowest capital commitment, whilst also offering a lower technical risk compared to alternatives
- Integrating battery capacity enhances the Project’s returns (compared to solar alone) through increased revenue from RCP, energy storage arbitrage (shifting of energy sales from the midday low to early evening peak prices) and reducing curtailment
- Frontier has commenced preliminary debt financing work. More information regarding this process will be released prior to the DFS
- Frontier continues to advance its dual fuel green hydrogen peaking power plant Study due for release in 2Q 2024
- Following discussions with suppliers the Company is also assessing a leasing option which could minimise upfront capital costs
- Frontier continues to assess additional opportunities to both produce and sell green hydrogen as part of its renewable energy strategy
- Frontier is fully funded through to Stage One FID with a cash balance of $12.3m2
CEO Adam Kiley commented: “Renewable energy is the most dynamic industry in Australia.
Both the Federal and State governments are continuously updating regulations and policies, while also providing new financial incentives for industry to align with these changes. These changes in policy aim to ensure Australia not only meets its decarbonisation targets, but also support growing electricity demand as the result of decarbonisation as part of this major energy transition.
In the last few months alone, the Federal Government has announced the $67 billion Capacity Investment Scheme3 (CIS). In WA, the Australian Energy Market Operator (AEMO) changed the technology for BRCP from a gas-fuelled peaking power plant to a 4-hour battery.
Frontier has and will continue to assess these ongoing changes by Government to ensure the Company is best positioned to leverage its strategy to enhance its returns for investors.
Batteries have always been considered by the Company, as it is logical to store solar energy generated during low priced periods (middle of the day) for dispatch during higher priced periods (early evening). Including this at the Project now makes financial sense, given changes to BRCP payments, whilst capital costs and efficiency of batteries have also improved significantly. Inclusion of a battery sees minimal delay in the release of our DFS, which will be announced in February.
The Company has also commenced implementation of its funding strategy, with further details to be announced in the coming weeks.
Finally, while we were disappointed not to advance to the next stage of the Federal Government’s Hydrogen Headstart program, as we believe we have the potential to be a major green hydrogen project in Australia, given the existing infrastructure and industry surrounding the Project, we remain committed to this sector in the long term and will continue to assess future opportunities to add further renewable energy capability to the Project.”
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