The New South Wales (NSW) government has launched a new tender for firming capacity, as it looks for another 500 megawatts (MW) to fill the gap from the retirement of its ageing coal fired power stations.
The state government is looking for bids from technologies including batteries, virtual power plants and gas generators to rapidly fill or pull electricity demand at short notice, under Long-Term Energy Service Agreements (LTESA) contracts.
The priority is for projects that can be built by 2027/28, and can support the needs of the equivalent of 200,000 households in Sydney, Newcastle and Wollongong, cities forecast to be most prone to electricity shortages by that time, particularly during heatwaves or cold snaps.
The firming tender focuses on capacity rather than storage, and will be announced on Tuesday by NSW energy minister Penny Sharpe. It forms part of the state’s infrastructure road map which is seeking multiple gigawatts of wind and solar capacity, long duration storage and is also auctioning grid access rights in newly created renewable energy zones.
Sharpe says the NSW energy market is very tightly balanced.
“We know the state faces reliability risks as we navigate the exit of coal fired power stations,” she said during the announcement at the Australian Clean Energy Conference today.
“Replacing four large coal fired power stations with lots of smaller renewable energy sources isn’t easy, as many of you know, even today, with the power station still operating, the supply demand balance remains tough. There is not much fat in the system.”
In an earlier statement Sharpe said the NSW government would always make decisions “to keep the lights on and the energy transformation underway”, and is proactively managing the risks that come with rebuilding an energy system.
The latest auction follows a successful tender in 2023 for firming capacity that originally sought just 380 MW but was rapidly expanded to 980 MW and ultimately delivered 1.075 gigawatts after it was paired with the federal government’s Capacity Investment Scheme.
The CIS explicitly rules out gas, but state auctions can allow gas peaker plants provided they surrender carbon offsets. However, given the difficulty in obtaining gas turbines on the open market, as cited by the latest edition of the CSIRO’s GenCost reports, and industry sources, it may be difficult for gas projects to meet that timeline.
The successful projects in the 2023 tender were AGL’s 500 MW Liddell battery, Akaysha Energy’s 415 MW Orana battery, Iberdrola’s 65 MW Smithfield battery, and 95 MW of capacity put together by Enel X in a three-part virtual power plant.
The new auction is separate to the CIS, which is currently holding another tender for a minimum 4 GW of four-hour equivalent dispatchable capacity, and whose winners are due to be announced by the end of September.
The NSW government is nervous about the 2027-2028 summer, which comes just after its deal with Origin Energy to keep parts of the 2.88 GW Eraring power station open comes to an end.
That arrangement is supposed to finish in August 2027 under an “underwriting arrangement” to cover losses from the Eraring operation of up to $225 million a year. Eraring must be closed in full by 2029.
New greenhouse gas regulations on the way
NSW is also beefing up the way it handles greenhouse gas emissions, with new regulations released today requiring about 200 industrial premises to measure and mitigate emissions.
The new requirements will be phased in starting with the biggest polluters, such as coal mines, and require annual emissions reporting, climate change mitigation and adaption plans, specific mitigation plans and emissions measurement.
Ultimately it will apply to all environment protection licensees that emit more than 25,000 tonnes of carbon dioxide equivalent per year, a group covering every industry from chemical facilities to large manufacturers and big feedlots.
The new requirements are accompanied by a shift in thinking about greenhouse gases, from climate emission to being like any other regulated pollution.
“We need to treat greenhouse gases like any other pollutant we regulate. EPA licensees currently contribute half of NSW’s total greenhouse gas emissions,” NSW Environmental Protection Authority (EPA) CEO Tony Chappel said in a statement.
“Introducing new requirements and guidance for industry is essential as we move towards a climate resilient future.”
The new regulations are targeting methane, a gas that is 80 times as potent as carbon dioxide and a real problem for particularly NSW and Queensland coal mines. one one of the most emission CSIRO is reviewing methane measurement options for the EPA, suggesting this will cover the state’s highly polluting coal mines as well.
Coal mines generate the largest source of fugitive methane for EPA licensees in NSW, ahead of landfills, Renew Economy understands, and the EPA has asked CSIRO to review methane measurement tech to better manage these.
None of this should come as a surprise to the state’s large emitters: the NSW EPA has been telegraphing this since at least January this year, when it released a new guide for “Large Emitters” across the economy, with the clear expectation that the state’s biggest coal miners will set out “ambitious emissions reductions goals” that align with the state’s climate targets.
