A date has been locked in for the inaugural gigawatt scale tender by the New South Wales government as it begins the momentous switch from a largely coal dependent grid to one dominated by wind, solar and storage.
According to the draft tender guidelines published by AEMO Services this week, long-term contracts will be offered for around 2,500GWh of annual clean electricity generation – equating to around 1,000MW of generation capacity, depending on the technologies selected – as well as 600MW of long-duration storage capacity, with at least eight hours of supply.
On Wednesday, AEMO Services announced that it the first tender would occur on 4 October 2022, and would be followed by a ‘rolling schedule’ of future tenders over the next decade. Projects proposed for any part of New South Wales will be eligible to participate in the tender.
The NSW government’s landmark Renewable Energy Zone framework, led by treasurer and energy minister Matt Kean, will offer long-term electricity supply contracts and transmission access rights to prospective projects.
The NSW government says the contracts, known as Long-Term Energy Service Agreements (LTESA), will help facilitate investment in new wind, solar and storage projects, while helping to de-risk the projects and lower their financing costs.
The tender will also offer the first round of access rights within the Central-West Orana Renewable Energy Zones, offering rights to up to 5.84GW of generation capacity to be located within the zone.
These access rights will provide a level of guaranteed access to the grid for projects developed within the Renewable Energy Zone and a degree of protection from curtailment.
Chair of AEMO Services, Dr Paul Moy, said date for the first tender marked an important milestone for the ‘roadmap’ and the transition of the New South Wales electricity system, and should facilitate the delivery of a significant volume of new wind, solar and storage projects.
“Since the Roadmap was enacted, more than 3.6GW of energy investment has been committed or ‘anticipated’ across NSW and AEMO Services expect nearly all of these projects to be eligible to participate,” May said.
“Many, many more projects have also sufficiently progressed through the development pipeline and are likely to be eligible.
“We expect there to be strong competition for the key contract types, LTESAs and transmission access rights, in newly created Renewable Energy Zones. The clear 10-year plan and the competitive process are designed to benefit NSW electricity consumers.”
Under the proposed contracts, successful generators will be offered 20-year contract terms under the LTESAs, allowing the projects to lock-in their future revenues for the bulk of their expected operational life.
The contracts will also include ‘zero price floors’, protecting projects from negative prices in the wholesale electricity market.
Battery projects will also be offered 14-year contractual terms, while pumped hydro energy storage projects could secure 40-year term contracts.
Acting executive general manager of AEMO Services, Melanie Koerner, said the inaugural tender would mark the start of a 10-year tender process and a significant evolution in the way investment in the electricity system is coordinated.
“Our primary responsibility is to act in the long-term financial interests of consumers. Our tender process is designed to foster competition, by providing an efficient and repeatable bidder experience for project proponents and ultimately lowering costs for consumers,” Koerner said.
“Our Q4 2022 tender is the start of our 10-year tender plan and marks a fundamental change to the way electricity investment is delivered in NSW and Australia. That scale of that transformation is reflected by the unique products on offer and the rolling nature of our tenders.”
“It’s a big moment for the Roadmap and for AEMO Services, as a newly established independent organisation, but it’s our intention that this process quickly becomes business as usual for the electricity sector,” Koerner added.
The NSW government is progressing plans to establish at least five dedicated renewable energy zones, that it expects will host at least 12GW of new wind and solar projects and 2GW of energy storage projects, to help replace the state’s fleet of ageing coal-fired power stations, set to close over the next decade.
AEMO Services is an offshoot of the broader electricity market operator, AEMO, which has been selected by the NSW government to serve as the NSW Consumer Trustee and manage the delivery of the NSW Electricity Infrastructure Roadmap.
