Australia targets 6 GW of new renewables capacity in ‘largest ever’ CIS tender

The Australian government has announced a new national Capacity Investment Scheme (CIS) tender process will open in May seeking 6 GW of new variable renewable energy projects to replace ageing coal power generation in the National Electricity Market (NEM).

Federal Energy Minister Chris Bowen said the tender process includes a deal with New South Wales (NSW) that will provide at least 2.2 GW of new renewable energy supply for the state.

​An allocation of 300 MW for variable renewable energy will be dedicated to projects delivered in South Australia, subject to final agreement between the state and federal governments.

A market briefing on the tender will be released in early May outlining the auction process that is the first of several the government is planning to release from its CIS. Tender rounds will run in the NEM approximately every six months until 2027.

The CIS is intended to deliver an additional 32 GW of capacity, including 23 GW of renewable energy generation and 9 GW of dispatchable storage capacity by 2030, in pursuit of Australia’s target of 82% renewable generation by the end of the decade.

Selected projects will be offered long-term underwriting agreements that include agreed ‘floor’ and ‘ceiling’ revenue for investors.

Bowen said the CIS will mitigate the financial risk for investors, encouraging new investment in variable renewable energy and clean dispatchable capacity.

“We are getting on with the job of delivering practical solutions to keep the lights on for households and businesses using the cheapest, cleanest form of power – reliable renewable energy,” he said.

“Our plan is delivering the certainty and confidence the market needs to deliver the energy we need, when we need it.”

NSW is set to be the biggest beneficiary of this CIS tender that will replace the next generation auction scheduled for Q2 2024 as part of the state government’s Electricity Infrastructure Roadmap. Generation projects that are eligible for long-term energy service agreements (LTESA) tenders will be eligible to participate in the CIS tender.

The state will proceed with its scheduled LTESA tender for long-duration storage infrastructure as well as processes to award access rights for NSW’s Central West Orana and South-West renewable energy zones.

“This is a significant win for NSW electricity consumers, with the Commonwealth supporting our biggest round of generation projects yet to deliver low-cost, reliable energy to homes and businesses,” NSW Energy Minister Penny Sharpe said.

“NSW is leading the nation when it comes to delivering the energy transition. We’re already about half-way to meeting our generation target, and a quarter of the way to meeting our storage target.”

This latest tender announcement comes just days after the federal government confirmed that the first auction process for Western Australian projects, targeting 2 GWh of dispatchable power through storage for renewables, will open mid-year, subject to consultation and final agreement.

Clean Energy Council (CEC) Chief Policy and Impact Officer Arron Wood welcomed the tender update, saying the CIS is “one of the most significant policy commitments for renewable energy in our nation’s history.”

“Clean energy investors are pleased to see this progress,” he said, adding that the process “will ultimately allow projects to secure the revenue certainty required for the enormous wave of renewable energy projects necessary for Australia.”