The Australian government will supercharge its program of underwriting renewable energy generation and clean dispatchable capacity by significantly expanding the next auction in its flagship Capacity Investment Scheme policy.
Federal Energy Minister Chris Bowen has announced that the next competitive tender in the Capacity Investment Scheme (CIS) will be increased in size by two-thirds to 10 GW as the government seeks to ensure the timely delivery of new wind and solar generation and storage facilities as the nation transforms its coal-reliant energy system.
Bowen said the next auction will be seeking 6 GW of renewable energy generation rather than the original 4 GW, and 4 GW of dispatchable power, rather than 2 GW as initially planned.
“So that’s a total of 10 GW of new energy to be tendered over coming months and delivered by December 2029,” he said, adding that the market briefs for the tender round will be “released shortly and the tender process will be open in mid-November.”
Bowen said the increased tender target comes after an overwhelming response to the first rounds of the commonwealth-funded CIS[2] that has been designed to encourage new investment in renewable energy generation and clean dispatchable capacity to support reliability in Australia’s rapidly changing energy market.
The CIS is seeking a total of 23 GW of new wind and solar and 9 GW of energy storage capacity by 2030 in pursuit of Australia’s target of 82% renewable generation by the end of the decade.
Selected projects will be offered long-term underwriting agreements that include an agreed revenue ‘floor’ to help cover project operating costs and debt repayments, with the government paying the difference when revenues fall short, and sharing profits whenever revenues exceed an agreed ‘ceiling’.
“We designed a capacity investment scheme to support clean, reliable renewable energy projects,” Bowen said. “I expected it to work well, and it’s working better than I thought it would.”
“We have very strong investment appetite for delivering more renewables quickly.”
The first of the CIS tenders, seeking 600 MW / 2,400 MWh of dispatchable capacity, such as big batteries to be built in Victoria and South Australia[3], was 32 times oversubscribed. The first national tender[4], which was seeking 6 GW of generation capacity, attracted more than 40 GW of projects.
“The market response for this was huge. Massively oversubscribed,” Bowen said.
“Our first national tender for 6 GW of variable generation, had 40 GW of bids register and 27 GW of very high-quality bids go through to the next stage.”
“This market interest confirms for me that the pipeline of good quality renewable projects is strong.”
Bowen said more new solar, wind and battery capacity has reached financial close in Australia in the first 10 months of this year than in all of 2023 with another 5.5 GW of capacity due for financial close in the next five months.
Data from the Australian Energy Market Operator (AEMO) shows that there is already more than 21 GW of committed and actionable projects in the system to be delivered by 2034.
The boost to the CIS tender target comes as the share of renewables in the National Electricity Market (NEM) surged to a record 75% on Sunday.
The new milestone was reached on Sunday at 11.15 (AEST) when the share of renewables reached 75.2% for the first time in a five-minute trading period, eclipsing the previous peak of 74.4% set 14 days earlier.
The biggest contributor was rooftop solar, which delivered a record share of 52%, up from 50.4% achieved on October 20.
Geoff Eldridge, principal adviser at Global Power Energy which tracks data from the NEM, said the records demonstrate the increasing dominance of renewable energy[5] in Australia’s main grid.
“Over half of NEM’s demand was met by rooftop PV alone,” he said. “As coal continues to decline, and renewable energy reaches new milestones, the focus on energy storage and grid management becomes even more critical to maintaining stability and supporting Australia’s clean energy future.”
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References
- ^ Posts by David Carroll (www.pv-magazine-australia.com)
- ^ commonwealth-funded CIS (www.pv-magazine-australia.com)
- ^ big batteries to be built in Victoria and South Australia (www.pv-magazine-australia.com)
- ^ first national tender (www.pv-magazine-australia.com)
- ^ increasing dominance of renewable energy (www.linkedin.com)
- ^ editors@pv-magazine.com (www.pv-magazine-australia.com)