A key milestone in the transformation of the New South Wales (NSW) electricity network has been reached with AEMO Services, serving as the NSW Consumer Trustee, announcing details of the inaugural tender round for new large-scale generation and long-duration storage as the state government strives to get ahead of the retirement of coal-fired generators.
AEMO Services, an independent subsidiary of the Australian Energy Market Operator (AEMO), announced on Wednesday that the first tender round for new large-scale wind, solar and storage projects will commence on 4 October 2022. Tender registrations will be open from late August.
The tender, the first in a rolling schedule that will continue over the next 10 years, is designed to select projects capable of delivering new large-scale energy infrastructure as the NSW government looks to implement its Electricity Infrastructure Roadmap.
The Roadmap, launched in 2020, sets out a path to bring at least 12 GW of renewable energy generation capacity and 2 GW of long-duration storage online by 2030 as the state prepares for the exit of its coal-fired generators.
AEMO Services said its first tender is expected to deliver about 2,500 GWh of annual generation and 600 MW of long-duration storage although it has the discretion to increase that capacity. It is anticipated the generation projects would achieve commercial operation before 2025 while the energy storage projects would come online before 2027.
The tender will include Long-Term Energy Service Agreements (LTESA) and access rights for projects intending to connect to existing transmission and distribution infrastructure with AEMO Services saying it will provide certainty for investors and developers.
The tender will also offer LTSEAs and access rights in the Central-West Orana Renewable Energy Zone (REZ), which is tipped to deliver at least 3 GW of renewable energy after a call for registrations of interest attracted 113 registrations, totalling 27 GW and valued at $38 billion.
AEMO Services said developers of new large-scale wind, solar and storage projects across NSW are encouraged to apply.
AEMO Services chair Dr Paul Moy said the announcement of the first tender was an important milestone for the electricity market transition in NSW.
“Since the Roadmap was enacted, more than 3.6 GW of energy investment has been committed or ‘anticipated’ across NSW and AEMO Services expect nearly all of these projects to be eligible to participate,” he 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.”
Under the proposed contracts, successful generators will be offered 20-year terms under the LTESAs. The contracts will also include zero price floors. Battery projects will be offered 14-year contracts, while pumped hydro energy storage projects would secure 40-year deals.
AEMO Services acting executive general manager Melanie Koerner said the LTESA and tender design incentivise competition, ensuring that the Roadmap’s infrastructure objectives would be met.
“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,” she 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.”
All of NSW’s five operating coal-fired power stations are due to close by 2040 at the latest, with AGL’s Liddell plant in the Hunter the first go with a scheduled close in 2023.
Origin Energy’s Eraring power station, also in the Hunter, will be closed in 2025 while Delta Electricity ‘s Vales Point plant is due to be decommissioned in 2029. AGL’s Bayswater coal-fired power plant is set to close “no later than” 2033 while EnergyAustralia’s Mount Piper plant near Lithgow is scheduled to shut in 2040.
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