Bowen takes capacity tender out west in search of 2GWh of energy storage

The federal government is to take its Capacity Investment Scheme across the Nullarbor to Western Australia within just a couple of months, with an initial tender for 2,000MWh of energy storage projects to be opened mid-year.

Federal energy minister Chris Bowen said on Friday that his department is preparing to launch the first CIS tender for WA’s wholeslae energy market (WEM) in June, with an indicative target of 500MW of four-hour equivalent (2 GWh) “clean dispatchable capacity.”

Bowen says the WA tender is subject to final agreement between the federal and state governments, and to the “unique WA energy grid,” with consultation on the design features of the scheme now open until April 29.

All up, the CIS is expected to target an indicative 6.5 TWh of solar and wind (around 2GW of installed capacity) and 1.1 GW of four-hour equivalent (4.4 GWh) dispatchable capacity, or storage, in the WEM from now until 2030.

Because of its isolated nature – WA’s main grid has no connections to other networks – the state finds itself at the forefront of managing the switch to wind and solar, made more challenging by the huge penetration of rooftop solar, particularly in the main grid in the south-west, where it is already the biggest generation system.

According to the Clean Energy Council, the penetration of renewables on WA’s main grid reached 35 per cent in 2023, with the majority of that coming from rooftop solar.

A 2023 demand forecast for the WEM said more than 50GW of wind and solar would be needed to meet burgeoning demand, including from miners, heavy industry, and aspiring green hydrogen producers.

This makes the federal government’s focus on energy storage for the first tender an interesting choice, considering Western Australia has some heavy lifting to do on building more large-scale solar and wind generation capacity.

Already a number of big batteries are being built in the state, including the second-stage 200 MW, four hour (800 MWh) BESS being built by Synergy at Kwinana; Neoen’s 219MW, 876 (MWh) battery at Collie; and Synergy’s 500 MW, four hour battery near the same town.

And big batteries seem likely to dominate this first tender for energy storage projects, after an in-depth report to the state government last year all but wrote off pumped hydro for the state due to the “multiple challenges” it would face being developed on the main grid.

The tender specifies that projects yet to reach financial close – or that reached financial close after the announcement of the Capacity Investment Scheme on 8 December 2022 – are eligible for the tender.

According to the design paper, eligible projects for the June WA tender will be expected to be in operation no later than October 2027 and to enroll in the state’s Reserve Capacity Cycle by 2025, a mechanism to ensure sufficient generation capacity in WA’s main grid, the South West interconnected system (SWIS).

Participants in the Reserve Capacity Mechanism (RCM) are required to have a certain amount of reserve generation capacity set aside for the Australian Energy Market Operator to call on if it determines that insufficient capacity is available to satisfy demand.

According to the design paper, projects must have a capacity equal to or greater than 30MW to participate, and virtual power plants, demand response or other virtual aggregation and flexible loads will not be eligible for the 2024 tender – but may be eligible in future rounds.

The federal government says following the June 2024 tender, future CIS tenders for the WEM, which will cover both renewable capacity and storage capacity, would be conducted on an annual basis, in advance of each year’s Reserve Capacity Mechanism (RCM) process.

“We’re getting on with the job of boosting affordable, reliable, renewable power for Western Australians, where and when they need it. That’s exactly what this imminent investment round is all about,” Bowen said on Friday.

“The Coalition wasted a decade undermining new renewable generation and infighting, and now they want to gamble our energy security on risky reactors, which are too slow to keep Australia’s lights on.”

“Families and businesses across Western Australia deserve a plan backed by the experts, not Dutton’s plan to leave them in the dark.”

The WA tender is the latest in federal Labor’s Capacity Investment Scheme, which aims to deliver 32GW of new renewable and storage capacity across the nation out to 2030, to fill gaps created by the closure of coal and gas generators. 

Around 2,400 megawatt hours (MWh) of storage capacity is being sought for Victoria and South Australia, while the winners of the first NSW auction were announced in November last year, including two of Australia’s biggest battery projects.