The Australian federal government is to seek 10 gigawatts of new wind and solar capacity this year, along with 3 GW of dispatchable capacity, as it races to meet its ambitious target of 82 per cent renewables by 2030.
The tender program for 2024 – comprising a 6 GW tender for wind and solar in the next quarter, and another 4 GW in the second half of the year – was flagged in a new paper that sets out how the expanded Capacity Investment Scheme will operate.
The tenders will be the biggest ever held in Australia, and come as the country falls behind its 2030 renewables target, with analysts saying that the roll out needs to be accelerated, particularly in NSW, the largest grid.
And it comes amid increasing pressure from conservatives in their campaign stop the construction of large scale renewables, and keep coal fired power plants open until nuclear can be built, which would not be possible until some time after 2040.
The federal and state governments agreed last year to expand the CIS to 32 GW, which would include 23 GW of new generation and an expanded target of 9 GW of dispatchable capacity, broadly described as four hours of storage.
The first auction of 600 MW of storage (2,400 MWh) – targeted for Victoria and South Australia – is already underway, with initial offers closing last Friday. But the scale of the tender process will accelerate dramatically in the next round of tenders.
The release of the schedule, and proposals for how the tenders will be managed, came as federal and state energy ministers met in Canberra to discuss this and other matters, and as speculation intensifies over the future of coal fired power facilities such as Eraring, the country’s largest.
The plan for the CIS program is to hold tenders every six months, and basically lock in projects by 2027 so they can be built by 2030, although there is still some question whether technologies such as pumped hydro could meet that deadline.
The new CIS paper canvasses a range of proposals for the upcoming tenders, and appears to be settling on a design that is close to the current long term service agreements (LTESAs) used by the NSW government. These in affect provide a floor price which enables developers to seek cheaper finance from bankers.
There are a few surprises, however – including the suggestion that hybrid facilities (such as a solar farm paired with a neighbouring battery) will only be able to bid into the generation component, and not the dispatchable component.
Another suggestion that will provoke discussion is the requirement that big batteries have their capacity available in case of any declared grid emergency, particularly a Lack of reserve 3 (LOR 3), when the market operator flags the need to shed load because there is not enough supply to meet demand.
The concern from storage developers may be that it is often difficult to predict when an LOR3 might occur (one happened in Victoria last month during the storms), and so maintain enough capacity for those times, but authorities may say that that is the point.
Christiaan Zuur, from the Clean Energy Council, estimates that the 23 GW of renewable capacity sought through the CIS will equate to $52 billion of investment, and the 9 GW of dispatchable capacity will represent another $15 billion.
Zuur noted that the tenor of the contracts are focused on 15-year timeframes, which does not reflect the lifetime of the renewable contracts, although developers will be able to seek their own contracts with commercial buyers, which will presumably secure a higher payment.
Eligibility for the auctions will be limited to those wind and solar projects that had not reached “committed” status before November last year, and to dispatchable projects that not reached that same status by December, 2022. This will restrict the ability of projects that are already under construction or built to cash in on the scheme.
Zuur also notes that virtual power plants and demand response initiatives may also get a look in for future dispatchable capacity auctions, but not in the initial rounds. All eligible projects need to be sized at 30 MW or more.
He said the LOR3 trigger will be the biggest talking point.
“I appreciate why the scheme has been designed with these operational triggers,” They want these assets there when they are needed most. The question is on the best way to ensure that.
“The problem with the LOR3 trigger is that if those notices come out of the blue, then storage providers will be covering more charge at all times, limiting their access to more revenue streams. That will go to how much the scheme costs.”
Zuur also said there remains a question over how longer duration storage assets, such as pumped hydro, which take longer to build, will fit into the scheme.
The release of the paper also came as Green Energy Markets released an analysis that suggests NSW is falling behind other states in delivering its share of what’s needed to meet the national 82 per cent renewable energy target by 2030.
The GEM report indicated a 7.5 GW gap in capacity requirements in NSW, far more than any other state. It noted that Western Australia is ahead of its target, although it might need more renewable capacity to meet increased demand from electrification.
The NSW government, at the same time, issued a statement saying that 18 wind, solar and battery projects had received planning approval, equating to 7.6 GW of generation and storage capacity.
It said a further 29 renewable energy projects are in the planning process and another 70 new projects are about to be submitted for department approval. The state is in the process of redrawing its planning guidelines, although some of these proposals have sparked controversy.
“These approvals represent the NSW Government’s commitment to accelerate the transition to renewables so households and businesses have reliable access to clean and affordable electricity,” state energy minister Penny Sharpe said in a statement.
“NSW is now about halfway towards our 2030 renewable generation target, and over a quarter of the way there on our long-duration storage target.”
See also: Biggest wind farm would “never have been built:” SEC slams new planning rules in NSW
