The New South Wales (NSW) Government is looking to unlock a significant pipeline of large-scale renewable energy and storage projects in the run-up to the planned retirement of its aging thermal-generation fleet, starting with a 3,000 MW pilot Renewable Energy Zone (REZ) in the State’s Central-West. The initiative was unveiled as part of the administration’s new Electricity Strategy, which seeks to encourage clean and affordable technologies to take pressure off the grid and reduce electricity bills by $40 per year.
“We want to create a competitive, low-cost market that delivers resilient energy supply while putting downward pressure on electricity prices,” Energy Minister Matt Kean said. “Not only does this Strategy help us achieve that, it will attract $8 billion in investment for emerging energy technologies in NSW, diversifying our energy supply and creating jobs for the future.”
While coal-fired generators still provide 80% of the state’s electricity, the government is well-aware of the fact that four of the state’s five remaining coal clunkers are set to reach the end of their technical lives and close by 2035, starting with the Liddell Power Station in April 2023. In its new strategy, the government explicitly states that firmed wind and solar are the cheapest type of new reliable generation, and businesses and investors are seeing this opportunity. “As at October 2019, NSW has more than 100 private sector proposals to build large renewable generators. If built, these generators would total 17,700 MW of generation capacity within the State, and inject $24 billion of investment into regional NSW,” the strategy says.
The NSW government has a long-term plan to deliver three REZs in the State’s Central-West, New England and South-West regions, which builds on the NSW Transmission Infrastructure Strategy and supports the implementation of the Australian Energy Market Operator’s Integrated System Plan. While the administration expects it will take “a number of years” to design, develop and build the Central-West REZ, construction of a pilot REZ in the Central-West region is slated to begin in 2022, following extensive consultation with local communities.
It is expected that the pilot REZ in the Central-West region would unlock up to 3 GW of new generation by the mid-2020’s and be worth around $4.4 billion in private sector investment. Once fully developed, it will provide power for around 1.3 million homes and support 450 construction jobs in the local region. According to the government, the Central-West region was chosen for the first pilot REZ because it benefits from “significant existing investment and investor interest, with around 4,500 MW of projects either approved or in the planning system, relatively low build costs, and a strong mix of energy resources”.
The Clean Energy Council welcomed the NSW Electricity Strategy, saying it would help remove the barriers to new clean energy investment and unlock the state’s enormous renewable energy potential. “While there’s still plenty of work to be done, it’s a great step forward for NSW and will undoubtedly help build confidence to invest in new clean energy projects in the state,” CEC Chief Executive Kane Thorton said. “With recent CEC analysis revealing a 60% reduction in clean energy investment over the past 12 months, this is exactly the type of commitment we need from government to address the current challenges facing investors.”
Key projects for energy security
In addition to delivering Australia’s first coordinated REZ, the Electricity Strategy sets out other initiatives to respond to the changing electricity system, including a new Energy Security Safeguard to drive the roll-out of energy efficiency technologies and smart appliances that use electricity when it is cheap and off-peak, and an Energy Security Target to ensure there is enough capacity in the electricity grid on the hottest days, even with the two largest generating units offline.
The government recognizes that there is a risk of breaching the Energy Security Target in the summer of 2023-24 after the Liddell power station closes without final investment decision on five key projects. These projects include: • a 250MW gas peaking plant at Newcastle (AGL) • a 320MW gas peaking plant at Tallawarra (Energy Australia) • four large-scale 50MW batteries (AGL with Maoneng Group) • the 50MW Darlington Point Battery • projects funded under the Emerging Energy program.
In addition to the private projects committed over the next few years, the tight reserve condition will be partially mitigated by the Queensland-NSW and Victoria-NSW interconnector upgrades. But if required, the NSW government says it has five options to enhance firm supply or reduce peak demand: 1. Fast track the development of the HumeLink interconnector to unlock up to 1200MW of existing capacity, of which 500MW would be available during periods of peak demand, and 2000MW of new reliable capacity following the completion of Snowy 2.0 2. Accelerate a further upgrade of the Queensland-NSW Transmission Interconnector Upgrade (378MW) 3. Use the NSW Government’s electricity contracts to stimulate private sector investment in firm generation 4. Expand the Emerging Energy program 5. Increasing scheme targets under the Energy Security Safeguard.
“We are the first state in Australia with an electricity strategy, and this strategy sends a strong signal to market that NSW is the number one place for investment in reliable and sustainable generation,” Minister Kean said. “As our existing power generators approach the end of their lives, we need to ensure low-cost alternatives are coming online which can deliver reliable electricity supply. While there will always be extreme events which impact the grid’s reliability, our Electricity Security Target will mean that changes to the State’s energy mix do not come at the expense of our system’s reliability.”