Bowen targets 32 GW of renewables with ‘super charged’ investment scheme

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The federal government has announced a major revamp of the Capacity Investment Scheme (CIS) as it seeks to accelerate the development of renewable power generation and storage capacity needed to meet its objective to raise the share of renewables in Australia’s energy mix to 82% by 2030.

The initial aim of the CIS, signed off by the Commonwealth, and all state and territory governments in December 2022, was to drive investment in 6 GW of “dispatchable” clean power projects. That ambition will now be lifted to 9 GW of storage capacity and 23 GW of variable renewable generation, for a total of 32 GW nationally.

“This investment will supercharge available power in the energy grid, delivering the long-term reliable, affordable and low-emissions energy system Australians deserve as our grid changes,” Bowen said in a statement.

The CIS, to be delivered in cooperation with the states and territories, involves the government underwriting new investments in renewable generation and storage through ‘contract for differences’ that are won through a competitive tender.

These contracts include pre-agreed floors and ceilings for revenue earned by any one project. If the revenue is lower than agreed, the federal government pays the shortfalls, guaranteeing projects a baseline income. If revenues exceed the agreed price ceiling, the government will take a share of profits.

Bowen said the scheme seeks to provide certainty for renewable investors which has historically impeded the progress of renewable generation and storage projects.

“We’ve had some very good progress, but we need more progress,” he said. “We’ve got a massive pipeline of renewable energy investment in Australia. But we want it moving to final investment decision more quickly, and we want it making its way through the planning systems more quickly, and really, what we’re announcing today will see that happen.”

“It’s also an indication that we are competing in a world very hungry for capital, hungry for supply chain elements where every country in the world really is on the same journey as us, moving to a very high proportion of renewables, and we’ve got to make sure Australia is as certain and as welcoming an investment environment as we can for renewable energy.”

The expanded CIS will hold auctions at six monthly intervals until 2027, in partnership with those state and territory governments that sign onto renewable energy transition plans. The first of the auctions is expected to be launched in April 2024.

The government said the costs of the CIS contracts will not be disclosed to ensure that the “reverse auctions achieve the best bang for buck for taxpayers.”

“We need to keep bidders with their pencils sharp, we want them competing against everyone else and not knowing what the Commonwealth expects,” Bowen said.

CIS tenders have already been rolled out in South Australia and Victoria, and in New South Wales (NSW) where the results of the first pilot auction were announced this week. The successful projects, three large batteries and three virtual power plants, will deliver more than 1 GW of dispatchable power across the state.

“I think that shows what sort of results we can achieve with a well‑designed, well-calibrated policy like the one we’re announcing today,” Bowen said.

As well as delivering its portion of the underwriting, the federal government said it will negotiate agreements with the states and territories to ensure renewables are rolled out and reliability is enhanced through objective benchmarks, an orderly transition, and potential strategic reserves.

The federal government said 18 GW of the 32 GW capacity offered under the expanded CIS will be subject to these bilateral agreements. Capacity may be re-allocated from any jurisdictions that don’t make agreements to those that do.

Commonwealth underwriting will only support renewable projects but the individual jurisdictions can determine the form of the strategic reserve.

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