NSW tender for firming capacity exceeds expectations

Grid-scale battery storage setup (energyaustralia)
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AEMO Services has selected six projects representing 1.075GW with almost 3GWh of energy from its inaugural tender for firming capacity, which will now be fast-tracked to increase reliability by firming the state’s renewable energy generation into the future.

The successful bidders from Tender 2 of the NSW Electricity Infrastructure Roadmap include two 2-hour duration Battery Energy Storage Systems (BESS) projects, one 4-hour duration BESS project, and three demand response Virtual Power Plant (VPP) projects.

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The outcome exceeded the final indicative tender size of 930MW, which was increased from 380MW following strong additional support from the Commonwealth’s Capacity Investment Scheme.

The tender process requires projects to competitively bid the pricing terms for a financial support contract. The support payments top-up revenue the projects expect to receive from participating in the National Electricity Market. AEMO Services’ Long-Term Energy Service Agreement (LTESA) contract design means the subsidy paid by NSW electricity consumers is competitively determined and should be materially lower than financial support subsidies required under other commonly used contract structures.

AEMO Services chair Paul Moy said, “Firming capacity is a key aspect of the energy transition as the state’s coal generation exited the industry. This tender is a first step in meeting this challenge at a reasonable cost to consumers. Combined, the projects in this tender will have the equivalent capacity to supply of 8% of the total 2023 NSW summer peak demand.”

“The combination of a highly competitive tender and an innovative contract design are in the long-term financial interest of consumers. The very important contribution from the Commonwealth’s Capacity Investment Scheme programme has been a major factor in improving financial outcomes for consumers.”

Each of the successful bidders are contracted to be online by the end of 2025.

AEMO Services executive general manager, Paul Verschuer said, “AEMO Services has conducted three tenders over 12 months, two for generation and long duration storage infrastructure and one for firming infrastructure, each of these tenders has been oversubscribed,” Verschuer said.

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“The first tender for generation and long duration storage has been completed, exceeding its generation target in supporting 1.395GW of new infrastructure, alongside the nation’s first eight-hour long-duration storage lithium-ion battery.”

The results from the latest generation and long duration storage tender are expected to be announced by the end of the year. A fourth tender, opened for generation infrastructure last month.

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