Disappointment as tender for access rights to NSW renewable energy zones delayed

One of the key components of the NSW renewable roadmap that will lead the country’s biggest grid beyond coal has been delayed in what could be a significant set-back for the roll out of projects in the state’s new renewable energy zones.

The latest tender, Tender 4 – which was flagged last week and formally announced on Tuesday – was to include so-called access rights, effectively a mechanism to allow wind, solar and battery storage project developers to reserve their place on the grid without fear of unnecessary curtailment.

But Tender 4 will now not include the access rights after a decision was made by AEMO Services and EnergyCo to pull that part of the tender at the last moment.

The delays adds to the concerns about the fate of the renewable roadmap in NSW, particularly after the newly commissioned O’Reilly report suggested that the 2.88 GW Eraring coal plant be kept open for longer to ensure no reliability shortfalls.

Officials blamed the delay of the access rights tender on the “complexity” of the new mechanism and the difficulty for developers in how to value them.

But project developers told RenewEconomy, on the condition of anonymity because of the sensitivity of their position, that this was not true, they were keen to go ahead and they were upset by the delays because they had spent millions of dollars preparing for them.

The developers said the issue reflected continuing problems that have plagued the roll out of the renewable infrastructure roadmap, including planning blockages, transmission delays, cost overruns, and emerging social licence issues.

The first access rights were to be offered in the state’s first renewable energy zone, the Central West Orana REZ located between Dubbo and Orange, and which could hold up to 5.8 GW of new generation and storage capacity.

Tender 4 will now only include bidding for underwriting agreements – known as LTESA’s or Long Term Energy Supply Agreements – for new wind and solar projects, which effectively guarantee a minimum revenue stream that in turn helps developers secure lower cost finance to build the projects.

Around 3,000 GWh of new generation – equivalent to about 1gigawatt of new solar and wind capacity depending on the mix – will be offered, as they have in tenders 1 and 3. Tender 1 has already been awarded and the results of Tender 3 – which also includes some long durations storage – are due to be released later this year.

The results of another tender, Tender 2, that is focused on up to 930 MW of short term storage solutions is also due to be announced in coming weeks.

The tender for the access rights is now scheduled for the first half of 2024. It remains to be seen what the impact this will have on projects jockeying for a position on the grid in these areas, and the rollout of renewables and the inevitable implications for the retirement of coal projects.

The big question is over the future of the 2.88 GW Eraring coal fired power station, which is tentatively scheduled to close in August, 2025.

That timing is now subject to negotiations between the owner, Origin Energy, and the NSW government. It may result in some units being kept open for another two summers, but the cost of that extension is not known.

NSW is proposing five renewable energy zones, in a bid to bring some sort of co-ordination to the roll out of large scale wind and solar, and to ensure that there is sufficient grid and transmission capacity.

Some of these zones, and the transmission lines that will go with them, are running into social licence issues, with growing opposition fuelled by conservative media and the federal Coalition.

The access rights are supposedly designed to guarantee the right to connect and to not be subject to heavy constraints. But other parts of the grid will not be subject to the same mechanism, and projects bidding for the underwriting agreements do not have to bid for access rights, and can be located anyway.