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Federal scheme to unlock $10b investment in firming power
Angela Macdonald-SmithJun 28, 2023 – 10.30pm


Minister for Climate Change and Energy Chris Bowen said the scheme would drastically improve energy security. Alex Ellinghausennone

The Energy Security Board, then the top policy adviser to federal and state energy minsters, in 2021 recommended a mechanism that also could provide support for coal and gas power stations. But that was rejected by state energy ministers, who took control of designing the mechanism last August, tweaking it to rule out any potential payments for fossil fuel plants.

Announcing the initiative with the NSW government, federal Minister for Climate Change and Energy, Chris Bowen, said it “will drastically improve energy security with large-scale batteries and other zero-emission technology that can quickly dispatch cleaner, cheaper renewable energy when it’s needed”.

He said a decade of “energy policy chaos” had resulted in 4GW of dispatchable power generation capacity exiting the east coast grid, with only 1 GW to replace it, “leaving us extremely vulnerable to international shocks”.

NSW Energy Minister Penny Sharpe pointed to the large number of companies wanting to invest in NSW’s energy system, signalling that “any risks around grid reliability can be resolved by accelerating the development of a clean, reliable, consumer-focused energy system”.

AEMO head Daniel Westerman last week warned that investments in “firming” technologies are urgently needed to fill the gaps when renewable energy is not available, with storage needing to expand 30-fold by 2050.

Slow progress on installing replacement clean power supply and the transmission needed to connect far-flung wind and solar farms has stoked worries about whether the grid will be able to handle the looming closure of coal plants without prices shooting higher or risks to power supply. Delays in projects such as the huge Snowy 2.0 pumped hydro storage project have compounded the concerns.

The NSW scheme will use a tender process to ensure the most competitive projects secure support, helping reduce the price for power. It is expected to use a “cap and collar” system that guarantees a minimum price for power for the project owner and a maximum price paid by the buyer, giving both sides certainty on revenues and costs, respectively.

The similarity of the federal scheme to NSW’s existing underwriting system firming power using “long-term energy service agreements”means it is being rolled out first in that state, with similar auctions of firming capacity to be announced by October in South Australia and Victoria.

So far, bids representing more than 3.3 GW of firming capacity have been submitted under NSW’s 380MW tender round, so the addition of the federal scheme should allow more projects to go ahead. AEMO’s Services division is assessing the project applications to form a short list for the initial tender, with the successful projects to be announced by the end of September.

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