Energy storage system.

The Federal and New South Wales Governments are looking to improve energy security and reliability across the state by implementing the Capacity Investment Scheme (CIS); a national framework to increase new dispatchable renewable capacity. 

The scheme is intended to attract investment in the cheapest form of reliable energy – firmed renewables – and ensure reliability and affordability in Australia’s rapidly changing energy market.

The partnership between State and Federal Government, announced on 29 June, will deliver almost 1GW of additional dispatchable capacity, eliminating the forecast shortfall in 2028-29 flagged by the Australian Energy Market Operator (AEMO).

The CIS will more than double the 380MW of firmed capacity to 930MW in the NSW Energy Roadmap’s firming tender, through Federal funding that will underwrite investment for up to an additional 550MW of firmed capacity.

Bids representing more than 3.3GW total capacity have already been submitted to the State 380MW firming tender round, meaning there is still a significant amount of firmed renewable projects ready to be unlocked by today’s announcement and support the grid over the long-term.

Future CIS tenders:

  • The overall Capacity Investment Scheme will unlock around $10 billion of investment and add 6GW to support grid reliability and security
  • Any eligible projects that have reached Final Investment Decision since the CIS was initially announced in December 2022 are eligible for support under the CIS, to avoid any delay in investment
  • The next CIS auction will be in South Australia and Victoria, and will be announced by October.
  • The Department of Climate Change, Energy, Environment and Water will be conducting further industry consultation on the scope and design of the national scheme.

The New South Wales CIS will support grid-scale dispatchable generation and storage such as batteries, pumped hydro or other dispatchable capacity.

Federal Minister for Climate Change and Energy, Chris Bowen, said the scheme would increase crucial investment in dispatchable renewable energy to improve the security and reliability of the New South Wales grid, as well as put downward pressure on prices.

“This announcement will drastically improve energy security with large-scale batteries and other zero emission technology that can quickly dispatch cleaner, cheaper renewable energy when it’s needed, like when the sun isn’t shining and the wind isn’t blowing,” Mr Bowen said. 

New South Wales Minister for Energy, Penny Sharpe, said, “The large number of proponents wanting to invest in New South Wales is a clear indication that we can transform our energy system and that any risks around grid reliability can be resolved by accelerating the development of a clean, reliable, consumer-focused energy system.”

AEMO Services welcomed the announcement that the firming tender round of the New South Wales Electricity Infrastructure Roadmap will be significantly augmented through the first funding commitment of the CIS.

AEMO Services Executive General Manager, Paul Verschuer, said the Federal support for up to an additional 550MW of firming infrastructure enables AEMO Services to increase the indicative tender size from its original minimum of 380MW.

“We’re very pleased that the State and Commonwealth Governments are working together to capture the potential of the infrastructure projects in this tender pipeline,” Mr Verschuer said.

“The tender processes we designed for New South Wales are attracting strong interest from the market, and the projects bidding for this round represent a combined firming capacity of more than 3,300MW.

“This is a clear sign that the Roadmap tenders can deliver the investment New South Wales needs to meet consumer demand and create an efficient, cost-effective energy system that works in the long-term financial interest of energy consumers.

“It is an extraordinary chance to fast-track a large suite of firming infrastructure which will provide stability and reliability to underpin new renewable energy generation in the State, and we’re glad that both governments are committed to realising that opportunity.”

AEMO Services Chair, Paul Moy, said that New South Wales energy consumers should be encouraged that such a strong market response was emerging so early in the Roadmap’s tender schedule.

“This is an outstanding level of participation for our tender for firming infrastructure, and builds upon the inaugural tender for generation and long duration storage that was around five times oversubscribed.”

AEMO Services uses a two-stage tender process – the first assesses a project’s social licence commitments, deliverability and quality of proponent. The second assesses a project’s financial value.

Dr Moy said that the process is designed to select the best value projects on behalf of New South Wales consumers.

“Our duty to act in the long-term financial interests of consumers will always be paramount, and this additional investment from the Federal Government and increased tender size won’t affect that scrutiny.

“We provide guidance to the market on the size of infrastructure we are seeking to support, but ultimately, we can award more or less if it is in the long-term financial value of consumers. This is exactly what we did in our first tender for generation and long duration storage,” Dr Moy said.

AEMO Services has assessed all proponent bids to form a shortlist, which will shortly be invited to submit a financial value bid. Further information will be provided to tender participants over the next few weeks to enable them to prepare for the next stage of the tender.

This is the second tender run by AEMO Services, with the third tender seeking approximately 950MW of generation and 550MW of long duration storage.

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