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The Federal Government has launched its Underwriting New Generation Investments program, aimed at providing financial support to gas, coal, pumped hydro or battery-backed projects.

According to the Government, the program will provide financial support to facilitate the development of new firm generation capacity. It will be technology neutral, providing a level playing field to enable the best and lowest cost generation options to be supported. All technologies allowed under Australian law will be eligible under the program, including ‘greenfield’ and ‘brownfield’ projects, such as upgrades or life extensions of existing generators.

The additional supply will be required to be firm or firmed. This does not need to be solely provided through a single generation project, but could be firmed through a combination of generation, storage, demand response and financial contracts packaged through a retailer or other brokerage service provider. For example, the output of a variable renewable generator could be firmed through contracts with one (or more) gas generators, or by co-locating a storage device with the generator.

The multi-phased program will be open over four years, until 2022-23. Each phase will be tailored, based on expert advice, so as to be fit for purpose in delivering on the program’s objectives.

In launching the program, the Government stated that it reserves the right to determine the appropriate support mechanisms and the assessment criteria that will best achieve the program’s outcome and objectives for each phase of the program.

The new program has been met with some cynicism, being described as a mechanism to allow the government to get what it wants – more funding for coal projects – and a last ditch effort to make an impact on the energy industry before the federal election.

Further, the Federal Government has also issued a new Investment Mandate for the Clean Energy Finance Corporation (CEFC) to pursue projects aligned to the Government’s focus on securing more firmed power for the National Energy Market.
The Government has directed the CEFC to support the development of a market for firming intermittent sources of renewable energy and to prioritise investments that support more reliable, 24/7 power.
An additional provision requires the CEFC to prioritise its investments with a view to support increased reliability and security of electricity supplies.
The CEFC will have to take into consideration the potential effect on reliability and security of supply when evaluating renewable energy generation investment proposals.

Industry players have also voiced concern over whether the program will actually generate any investment, given the uncertainty that still remains around Australia’s long-term energy policy plans.

However Hydro Tasmania’s CEO, Steve Davy, welcomed the program, saying,  “The future market remains uncertain, and the industry requires a safeguard regulatory mechanism to unlock the dispatchable flexible capacity that Australia badly needs.

“The Underwriting New Generation Investment program could reduce that uncertainty and make dispatchable capacity projects like pumped hydro a far more secure investment.

“A strong framework will support an orderly transition for the market which is in the best interests of consumers.”

The ROI process under phase one will be open from 13 December 2018 with responses due by 23 January 2019.

Detailed guidance on phase one of the program, including final assessment criteria, will be published prior to the commencement of a formal request for proposals in the first quarter of 2019.

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