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Australian Renewable Energy Generation Facility and Energy Storage System Tender Opinion Issued

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According to foreign media reports, the Australian government recently launched a public consultation on the capacity investment plan. The research firm predicts that the plan will change the rules of the game for promoting clean energy in Australia.

Respondents had until the end of August this year to provide input on the plan, which would provide revenue guarantees for dispatchable renewable energy generation. Australia’s Energy Minister Chris Bowen described the plan as a “de facto” energy storage deployment target, as storage systems are required to enable dispatchable renewable energy generation.

The Australian Department of Climate Change, Energy, Environment and Water has published a public consultation document setting out the proposed approach and design for the plan, followed by consultation.

The government aims to deploy more than 6GW of clean energy generation facilities through the program, which is expected to bring A$10 billion ($6.58 billion) in investment to the energy sector by 2030.

The figure was derived through modeling by the Australian Energy Market Operator (AEMO). However, the scheme will be administered at the state level and adjusted according to the actual needs of each location in the energy network.

That’s despite Australia’s national and territory energy ministers meeting in December and agreeing in principle to launch the scheme.

Dr Bruce Mountain, an energy economics expert at the Victorian Energy Policy Center (VEPC), said earlier this year that the Australian federal government would be primarily responsible for overseeing and coordinating the project, while implementation and most of the key decision-making would take place at the state level.

Over the past few years, the market design reform of Australia’s National Electricity Market (NEM) has been a protracted technical debate led by the regulator, as the regulator included coal-fired generation facilities or gas-fired generation facilities in the design proposal, Mountain pointed out. The debate has reached an impasse.

The key detail is the exclusion of coal-fired and natural gas generation from the plan

The Australian government is partly driven by climate and clean energy action, with Australia’s energy minister responsible for that and seeking to strike deals with state energy ministers, who are constitutionally responsible for managing electricity supply.

By the end of last year, Mountain said, this had led to the Capacity Investment Scheme being announced as a mechanism with the basic details of excluding coal and gas generation from compensation under the scheme.

Energy Minister Chris Bowen confirmed the program would launch this year, following the release of Australia’s national budget in May.

The first stage of the scheme is expected to be rolled out this year, starting with tenders in South Australia and Victoria and a tender in New South Wales administered by the Australian Energy Market Operator (AEMO).

According to the consultation paper, the scheme will be rolled out gradually between 2023 and 2027 to help Australia meet its electricity system reliability needs by 2030. The Australian Government will re-evaluate the need for further tenders beyond 2027 as required.

Public or private utility-scale projects that complete financing after December 8, 2022 will be eligible for funding.

Quantities solicited by region will be determined by the reliability needs model for each region and translated into bid quantities. However, some design parameters have yet to be determined, such as the minimum duration of energy storage technologies, how different energy storage technologies will be compared in bid evaluation and how Capacity Investment Scenario (CIS) bids should evolve over time.

Tenders for the NSW Electricity Infrastructure Roadmap are already underway, with tenders for generation facilities oversubscribed, with 3.1GW of intended bids against a tender target of 950MW. Meanwhile, bids for 1.6GW of long-duration energy storage systems were received, more than double the bidding target of 550MW.

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