New South Wales is to open its second gigawatt scale wind, solar and long duration storage tender next week as part of its long term plan to transition its grid now dominated by an ageing coal fleet to green energy.
The tender, to be managed by AEMO Services, will open on Monday and will target around 1,000MW of new wind and solar, and up to 550MW of long duration (at least eight hours) storage.
The first tender result, revealed earlier this month, proved some stunning results, including low bids what amounts to a guaranteed floor price for new wind and solar, and a landmark win for an eight hour battery project in the storage division.
What will be interesting about the second round is whether the strike prices for the Long Term Services Agreements (LTESAs) fall further from the sub-$35/MWh achieved in the first tender for solar, and the sub $50/MWh for wind.
The LTESA strike price are not a guaranteed price for the output, but a floor price that still helps provide some revenue guarantee and helps projects obtain debt and equity investments.
It will also be interesting to see the nature of the projects that win the tender. One of the winners of the first round was the 720MW New England solar farm, but much of its first stage is already built and generating into the grid.
The tenders are open to all projects not regarded as “committed” before November, 2019, and are open to projects across the state that can connect to existing grid infrastructure. It is not confined to any of the newly created renewable energy zones.
The second point of interest will be the storage tender, and whether this results in any more eight-hour battery projects, or if pumped hydro or other long duration storage projects are able to compete.
The first tender was won by a 50MW/400MWh battery project to be built by German energy giant RWE next to its Limondale solar farm. There is no indication how many other storage projects made financial bids in that tender.
There has been some criticism from pumped hydro developers about the structure of the incentives and whether they are suited to their technology. It may be that these projects will need to be supported by the NSW government’s $1 billion Energy Security Corporation, although details are not yet known.
AEMO Services chair Paul Moy said the success of the inaugural tender round, which concluded at the start of May, would serve as a running start for the coming instalment.
“We spent more than twelve months in the lead-up to our first tender working closely with investors and proponents to streamline the process and design new products to incentivise the acceleration of their energy infrastructure projects,” Moy said in a statement.
“We’ll continue to build on that work and fine-tune our offering to make sure subsequent tenders enjoy the same success.”
Moy said the strong pool of projects which had been shortlisted on non-price criteria in the first tender, but which not yet demonstrated the same financial value to electricity consumers, would provide a solid base for the next tranche of bids.
“We designed our tenders specifically to allow unsuccessful proponents to submit subsequent bids at minimal additional cost to them.
“This provides benefits to both consumers and bidders and is a key features of our rolling 10-year competitive tender schedule.
“The first tender also demonstrates the depth of the pipeline of projects that are well placed to re-submit high quality bids in this tender. We anticipate that many of these projects will be able to improve their bids and be successful.”
The tender will seek an indicative amount of 2500GWh of new generation (which equates to around 950MW of new wind or solar capacity), and 550MW of long duration storage. AEMO Services can award more or less depending on the results of the tender.
The tender will be divided into two parts, the first on non-price criteria such as community benefit and local employment, and the second on financial value.
“We expect robust competition … in this tender round, increasing over time as the tender plan progresses,” said Graham Eadie, the acting executive general manager of AEMO Services.
“In the first tender round, we saw strike prices around 40% below the levelised cost of electricity and an equivalent Contract for Difference, which demonstrates the market understands the advantages and value of the LTESA contract.”
This will be the third tender conducted by NSW, which has also cast out for offers for a minimum 380MW of shorter duration “firming capacity” – or at least two hours storage, to boost resources in the major load areas after the anticipated closure of the Eraring coal plant in late 2025.
This tender is expected to attract strong interest from battery storage projects and will also be the first at this scale to be open to demand management projects.
Listen also to: Energy Insiders Podcast: Batteries and pumped hydro fight over coal succession plans
