Australian government has initiated competitive Contracts for Difference (CfD) tenders aimed at supporting dispatchable renewable energy capacity coupled with energy storage—a landmark development in the country's energy policy. The Department of Climate Change, Energy, the Environment, and Water (CCEEW) characterizes this initiative as a “national framework to increase new investment in renewable and clean dispatchable energy projects.”
The origins of the scheme date back to at least the end of the previous year when Commonwealth energy minister Chris Bowen, in collaboration with state counterparts, agreed to the scheme's rollout in principle. Initially envisioned to support approximately 6GW of generation, extensive modeling by the Australian Energy Market Operator (AEMO) during a consultation period in August resulted in a significant expansion of the target.
The revised plan now aims to underwrite projects delivering a total of 32GW, comprising 23GW of variable renewable energy (VRE) generation and 9GW of dispatchable capacity, directly aligning with energy storage deployment.
Under the framework, the Commonwealth will establish a CfD structure, wherein tender participants bid a strike price. Payments will flow based on the difference between this strike price and the spot price on the National Electricity Market (NEM), which spans Australia's major interconnected states.
Already, the scheme has supported investments in New South Wales (NSW), where a recent tender for firming capacity resulted in wins for 2,800MWh of battery storage alongside three virtual power plant (VPP) projects, facilitating the integration of solar and wind VRE.
The full implementation of the scheme is set to commence in the coming months, with major tenders seeking 2,400MWh capacity from developers in Victoria and South Australia expected to launch in December. Contract awards are anticipated before the middle of the next year.
Professor Mountain, director of the Victoria Energy Policy Centre (VEPC), emphasized the significance of the Australian Government's Capacity Investment Scheme (CIS), stating, “The Australian Government's Capacity Investment Scheme is the biggest news in Australia's electricity policy for as long as we can remember.”
Stephanie Bashir, founder and CEO of consultancy Nexa Advisory, highlighted the extension of the CIS as providing investors with the certainty needed to accelerate the energy transition, with minimal market distortion.
The Clean Energy Council (CEC), a national trade association, also expressed support for the initiative, with CEO Kane Thornton noting that it represents a “significant commitment” aimed at achieving the government's goal of 82% renewables by 2030, contributing to the replacement of aging coal-fired generation with cost-effective renewable energy and driving down power prices.
