The federal government formerly opened the second of its six gigawatt (GW) wind and solar tenders on Thursday, as new data pointed to a record 7.5 GW of new capacity in 2024 that will help put the country’s renewable energy target back within reach, if not yet on track.
The Capacity Investment Scheme is seeking a total of 32 GW of new capacity (23 GW of wind and solar generation and at least 9 GW of four hour storage capacity) to help it meet its target reaching 82 per cent renewables by 2030, a key plank of its current and future climate policies.
The first 6 GW tender has already been closed, but even before the winning projects are announced, registrations for the second tender have now opened as the government seeks to fast track the underwriting deals and project construction.
Registrations opened on Thursday, with guidelines and bids opened on December 13, and first stage bids closing in February. Short listed projects will be invited to submit financial offers by May, but the winners will not be announced until next October, well after the federal election.
The new 6GW tender will be known as Tender 4 (the first 6 GW tender was Tender 1 and there are two other storage tenders also underway), and eligible projects will bid for an underwriting agreement that provides a price floor – to enable certainty and cheaper financing – and an agreement to share excess profits with the government.
NSW will be the biggest beneficiary, able to tap up to 7.1 GW over the two tenders as it faces the most significant, and urgent, transition for its ageing and increasingly unreliable coal fired power generators to a grid dominated by renewables and storage. It will get a minimum 2.2 GW in the latest tender.
Already, the NSW government has chosen to step in and underwrite an extension of the Eraring coal generator – the biggest in the country – because of its fears of price spikes before the next state election.
But the wisdom of that commitment is being questioned in the light of the multiple coal outages, including at Eraring, that placed the state’s grid under enormous stress this week, and required the state government to ask consumers to use less power, and for the market operator to source emergency reserves.
The Clean Energy Regulator says in its latest quarterly report that between 7.2 GW and 7.5 GW of new wind and solar capacity is expected to be added under the renewable energy target in 2024, beating the previous record of 7.16 GW in 2020.
However, this includes 3.15 GW of rooftop solar that will added to the nation’s grid during the year as households and businesses continue their “love affair” with the technology, and use it to duck rising bills.
Still, Carl Binning, the acting chair of the CER, says there has been a substantial jump in the approved capacity of large scale wind and solar projects in 2024, with more than 4.2 GW expected to be accredited this year.
In particular, he cited the country’s two biggest wind farms – the 923 MW MacIntyre project in Queensland and the 756 MW Golden Plains project in Victoria.
The CIS is designed to accelerate the roll out of large scale projects to at least 6 GW a year. Ironically, already partially built projects such as Golden Plains are likely to emerge as winners of the CIS underwriting agreements, having taken a bet and gone early with their construction.
Binning also noted that the substantial increase in large scale renewable energy projects has seen a significant fall in the price of large scale certificates to around $27.5, from above $40/MWh just a few months ago.
“This year we expect about 51,000 gigawatt hours of generation for wind and solar power stations, well above the annual statutory target (of the 2020 renewable energy target) of 33,000 GWh,,” he said, noting that voluntary cancellations will represent about 10,000 GWh of demand additional to the target.
The new tender comes as the Climate Change Authority also called for the government to “strengthen, broaden, lengthen and embed” the CIS to not just close the gap to the 2030 renewables target, but also to underpin an ambitious overall emissions reduction for 2035.
The CCA’s annual progress report underlines the fact that – apart from the controversial land use loophole Australia secured at Kyoto, and which many argue does not represent actual emissions reductions – the only part of the economy cutting emissions has been the electricity sector, thanks to the growth in renewables.
The CCA says they CIS should be embedded in legislation and – subject to the outcomes of the post-2030 market review that was kicked off earlier this week – should be extended beyond 2030. The CIS is currently scheduled to finish its round of tenders in 2027, with winning projects to be delivered by 2030.
The CCA also says priority should be given to projects that do not require extensions of the shared transmission network, and cites combined solar and battery projects in particular.
It also wants distribution networks to be used more effectively, particularly given many of the big transmission projects included in the Integrated System Plan were running late and may not be built in time, and calls for the approval process for large scale wind and solar to be sped up significantly.
“AEMO and transmission network service providers (TNSPs) appear to lack sufficient capacity to handle the quantity of new connection applications that will need to be assessed,” the CCA writes.
“And it is not clear how long different types of projects are currently taking to obtain connections. Improving this information could set realistic expectations for project proponents, and better support progress tracking.”
The CCA, now chaired by former NSW energy minister Matt Kean, also urged the government to appoint an “Energy Transition Coordinator” to drive and monitor the pace and scale of the transition.
“The scale, complexity and interdependence of investment and action required by many bodies for decarbonising the electricity system necessitates strong coordination – across the energy market, across levels of government, and across portfolios within governments,” it writes.
“The authority recommends a new, senior, full-time role – Energy Transition Coordinator – be created within the Minister’s department.
“The Energy Transition Coordinator, backed by a small team of experts, would support the Minister (and through the Minister, the Energy and Climate Ministerial Council) and liaise with stakeholders to drive Australia towards its energy and emissions targets.”
It said its tasks should include advising on CIS targets, tracking progress and identifying measures to overcome barriers and accelerate action.
Subscribe up to our free daily newsletter to get the latest news & analysis delivered strahttps://reneweconomy.com.au/sign-up-for-our-daily-newsletter/ight to your inbox!
