Energy Storage

31 May 2024

NSW Launches Largest Energy Storage Tender to Date

31 May 2024  by proactiveinvestors   

NSW has launched its largest tender for energy storage, seeking one gigawatt (GW) of new capacity that can provide at least eight hours of storage. This initiative aims to address the impending gap created by the anticipated closure of the state's remaining coal-fired power generators.

The tender for 1GW and 8 gigawatt-hours (GWh) of energy storage comes shortly after the decision to delay the closure of the 2.88GW Eraring coal-fired power station. The state is reassessing its storage needs to support the rapid deployment of wind and solar energy, particularly in the short term.

This is the largest tender under the state government’s Long Duration Storage (LDS) program, which targets a total of 2GW and 16GWh of storage capacity by 2030. Previous tenders fell short due to pumped hydro's inability to compete with newer technologies, with eight-hour batteries and a compressed air storage project emerging as the main winners.

The first of these eight-hour batteries is set to begin construction soon.

Amid ongoing debates about the necessity of long-duration storage in a renewable grid, NSW has issued a consultation paper to consider recalibrating the LDS tenders. Modelling indicates that four-hour batteries could be just as effective and more cost-efficient. Despite this, the current tender will proceed with the existing parameters, emphasising its role in enhancing electricity reliability in NSW.

The tender invites bids for long-term energy supply agreements (LTESAs), which effectively underwrite projects against downside risks and facilitate securing favourable financing. The tender is open to various technologies, including pumped hydro, batteries, and compressed air storage, though pumped hydro may struggle due to rising civil construction costs and extended build times.

This is the fifth tender conducted by NSW, following those for new generation projects, now incorporated into the federal Capacity Investment Scheme (CIS). If the LDS tender definition is reduced from eight hours to four hours, these tenders could also be included in the CIS, which seeks 23GW of new wind and solar capacity and 9GW (36GWh) of storage by 2030.

Milestones in the Electricity Infrastructure Roadmap

Simultaneously, the NSW government has opened a tender for access rights to the newly established south-west Renewable Energy Zone (REZ) around Hay. Up to 3.98GW of access rights are available in this first tender for the south-west REZ, though the number of projects vying for space is potentially ten times larger.

State Energy Minister Penny Sharpe said: “Opening this tender for long duration storage projects and access to a second Renewable Energy Zone are milestones in the Electricity Infrastructure Roadmap.

“They will deliver projects that ensure NSW has enough renewable energy generation and storage when coal-fired power stations retire. They also give certainty to investors and communities.

“Long-duration storage is a key part of our future energy system, ensuring we have power when we need it.

“The opening of the second Access Rights process will ensure the right combination of projects can connect to the grid in a way that delivers for NSW electricity consumers and host communities.

“It shows the NSW Government is delivering the transition to a renewable energy system that will allow households and businesses to access affordable, reliable and clean energy to bring down bills and greenhouse gas emissions.”

This tender coincides with the announcements of rebates for household batteries and kerbside electric vehicle (EV) chargers.

These developments follow the Eraring coal extension deal, which will provide up to A$450 million to Origin Energy over two years. The funding is aimed at maintaining half of the plant’s current output until at least August 2027.


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