NSW seeks a gigawatt of long duration storage, and access rights to 4GW in new renewable zone

The NSW government and its agent AEMO Services have confirmed that the next tender for long duration storage and the first auction of access rights to one of the state’s biggest renewable energy zones will commence this month.

NSW is looking for a gigawatt of long duration storage, which at the preferred multiple of a minimum eight hours storage equates to at least eight gigawatt hours, and is seen as essential as the state prepares to say goodbye to its remaining coal fired power stations over the next decade.

The first tenders for the long duration storage came up short, mainly because there were no pumped hydro projects in a position to be competitive, and the idea of eight-hour batteries were still in its infancy.

The first tender secured one project – a 50 MW, 400 MWh battery to be built at Limondale by RWE, while the second tender secured another two big battery projects, one 49 MW, 392 MWh battery at Goulburn River to be built by Lightsource bp, and a massive 275 MW, 2200 MWh battery to be built by Ark Energy in the Richmond Valley.

That tender also secured a contract for the 200 MW, 1600 MWh Silver City compressed air project planned for near Broken Hill, where a cavern created in an underground zinc mine will be enlarged and used as a storage reservoir.

The NSW government remains hopeful that it can attract pumped hydro projects to the latest tender, known as tender 5, given that several have made progress on planning and design, although it remains to be seen whether the project developers see the structure of the proposed long term energy service agreements (LTESA) as sufficiently supportive of their projects.

The LTESAs are designed to effectively remove the downside risk of a project and make getting finance easier at good terms. It appears to work for battery storage, which has multiple potential revenue opportunities because of their flexibility, but is less clear if it is sufficient to get pumped hydro over the line.

The only two pumped hydro projects being built in Australia are the Kidston project in north Queensland, which will be the first in four decades when complete next year, and the Snowy 2.0 project, which is running disastrously over budget and over time.

The storage tenders in NSW had been run in tandem with tenders for new generation, but this will now shift to the Commonwealth-run Capacity Investment Scheme, with some six gigawatts of new capacity to be tendered in a process that also begins this month, with 2.2 GW minimum reserved for NSW.

However, even though the CIS will seek 9 GW of “four storage” over the next few years, NSW will continue its own long duration storage tenders which seek at least eight hours of storage, and a total of at lease 2 GW minimum.

Meanwhile, NSW has also announced it will offer access rights to the south-west renewable energy zone, with up to 3.8 GW available initially. The access rights are designed to “secure” the rights to grid access without major constraints on the grid.

A process to offer access rights to the central west orana zone, the first renewable energy zone in NSW, has already been launched by the state government body EnergyCo.

There are a host of proposed gigawatt-scale projects in the area, considered a hot spot initially for solar and now also for wind energy, as ITK analyst David Leitch recently wrote about on these pages.