Victoria calls for at least 600MW of new wind and solar in second VRET auction

Victoria has put the call out for another 600MW or more of new, large-scale renewable energy capacity, with the launch this week of the state Labor government’s second VRET auction.

The Andrews government on Tuesday officially released the new tender pack for the auction, with which it aims to drive investment in the state’s six designated Renewable Energy Zones and boost progress on its 2030 target of 50% renewables.

Tender documents note that bids can be submitted for hydro projects, as well as for wind and solar, and could also come from new renewable energy generating facilities that were yet to reach financial close and had not substantially commenced construction.

All eligible projects must be 10MW or more and be able to commence commercial operations on or before the end of December, 2024.

State energy minister Lily D’Ambrosio said Victoria’s second renewable energy target (VRET) auction was expected to deliver more than 2,000 new jobs and $1 billion of mostly regional investment, particularly given the “strong local content requirements” set out in the tender documents.

“We are proud to be launching the second VRET auction, a key part of our plan to source 100 per cent renewable electricity for government operations by 2025,” said D’Ambrosio in a statement on Tuesday.

“Generating new investment in renewable energy will have lasting benefits for Victoria’s economy, making energy delivery across the state more reliable and affordable.

“We’ve already created more jobs in renewable energy than any other state in Australia − this auction will deliver another boost in clean energy investment and jobs and help us reach our ambitious emissions reduction targets.”

D’Ambrosio also sent the message to potentially wary renewable energy developers that the auction would feature strengthened network requirements, and be delivered with the support of the Australian Energy Market Operator, to mitigate grid connection risks and delays.

One major change is that the underwriting agreement, through so-called “contracts for difference” would be for a 10-year period rather than a 15-year period. Bids close in early November.

While Victoria’s push to renewables has been one of the most well funded in the country, backed by an investment $1.6 billion, it has not been all smooth sailing, most notably in the form of grid congestion that has resulted in wind and solar project delays and curtailment.

As recently as last month AEMO warned of “material” constraints to the output of wind and solar projects in the state, as well as delays in connection and commissioning of projects, due to a lack of adequate transmission infrastructure to cope with the rate of development.

The West Murray Zone – part of which has been dubbed the “rhombus of regret” in reference to the shape of its network – has emerged as a major problem area for AEMO, thanks to a combination of some of the best wind and solar resources in the state and some of its most lacking in terms of grid capacity.

Major transmission upgrades are in the works to remedy this and other problem areas on Victoria’s networks, but these are enormous undertakings that, even if built on schedule, will not be in place until 2025 at the earliest.

That said, the appetite for the latest auction is expected to be strong – particularly if the response to the first VRET auction is anything to go by.

That auction, launched in November of 2017, was at the time the largest renewable energy tender held in Australia, seeking 650MW of mostly wind and solar.

The huge response from industry wound up delivering more than 900MW of capacity, from six new wind and solar farms, including Tilt Renewables’ massive 336MW Dundonnell wind farm in western Victoria, near Warrnambool, and GPG Naturgy’s 176MW Berrybank wind farm, near Geelong.

Both of those projects were earlier this month listed as the state’s top performing utility wind assets for July, with Berrybank 1 achieving a 58.4% capacity factor for the month and the 168MW first stage of the Dundonnell wind farm achieving a 55.2% capacity factor.

However, two of the projects, including the Cawarp and Cohuna solar farms, have suffered significant delays due to network congestion issues.

AEMO, which has additional responsibilities in Victoria due to its status as a Declared Shared Network, has estimated that Victoria will need at least 5.4GW of additional large-scale projects and distributed energy resources investment to meet its 2030 renewable energy target.

To help accommodate this, AEMO has also developed a Transmission Roadmap for the state detailing a $3.5 billion suite of network development projects to accommodate the REZs.

Environmental groups welcomed the launch of the second VRET auction for the contribution it would make to the state government’s commitment to halve emissions by 2030, and expressed hope that it would spur greater ambition from the top.

“State and territory initiatives such as the VRET set an example for the federal government to follow,” said Friends of the Earth climate spokesperson, Leigh Ewbank, on Tuesday.

“Community members are now looking to Prime Minister Scott Morrison to increase Australia’s 2030 target in time for the COP26 summit.”

“A commitment to match the 2030 targets set by President Joe Biden and Prime Minister Boris Johnson would be a welcome step towards aligning national climate policy with the latest science.”

The Victorian government tender pack for the VRET 2 can be found here. Submissions close on November 8, 2021, with successful applicants expected to be announced in mid-2022.