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The Federal Government announced it will establish a Capacity Investment Scheme (CIS) to provide a national framework for ensuring energy remains abundant and affordable as Australia transitions to more renewables in the grid.

The CIS will work to drive renewable dispatchable capacity and ensure reliability in Australia’s energy market.

This new revenue underwriting mechanism will unlock around $10 billion of investment in clean dispatchable power to support reliability and security as the energy market undergoes its biggest transformation since the industrial revolution.

The Capacity Investment Scheme will ensure Australian households and businesses can count on the increasingly renewable energy they use being available when they need it.

It will help ensure that in future, Australia has an ongoing supply of cheap, renewable, domestically produced energy, regardless of global conditions.

Federal Minister for Climate Change and Energy, Chris Bowen, said jurisdictions had been working hard to deliver solutions to the reliability challenges in a rapidly changing global energy market.

“The Capacity Investment Scheme is essentially a keep the lights on mechanism. Australian households, industry and the energy market are all moving with their feet towards more affordable renewable energy,” Mr Bowen said.

“The Capacity Investment Scheme will ensure the reliable power we need is delivered as this transition continues.

“The scheme will create construction and operations jobs in clean energy projects, especially in the regions.”

Open tenders will determine the projects to gain CIS support, which will help decrease risk for investors and spur more investment.

An agreed revenue ‘floor’ will help cover project operating costs and debt repayments, with the Federal Government paying the difference when revenues fall short, and a share of profits returned whenever revenues exceed an agreed ‘ceiling’.

Energy ministers’ support builds on consultation from the Energy Security Board’s proposed approach in December 2021 and collaboration between all ministers on the scale of the task ahead.

The CIS will work alongside the National Energy Transformation Partnership, and the Rewiring the Nation plan – these policies will work in unison to ease power prices and make energy cleaner and more secure.

Climate Council Head of Advocacy, Dr Jennifer Rayner, voiced support for the scheme.

“Wind and solar power backed by batteries and pumped hydro is the recipe for cheap, clean and reliable energy. This decision is the strongest signal yet that Australia’s energy future is renewable, with all governments now working to deliver this,” Dr Rayner said.

The Federal Government will release further details on the scheme in the coming months, with a view to the first auction occurring in 2023.

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