NSW Enhances Solar-Battery Hybrid Underwriting for Upcoming Coal Replacement Tenders
New South Wales (NSW) has announced a strategy aimed at maximising the potential of solar-battery hybrid projects, as the state prepares to launch two significant tenders designed to enhance renewable energy capacity and assist in phasing out Australia’s largest coal-fired power stations.
ASL, a subsidiary of the AEMO responsible for overseeing federal and state renewable energy and storage tenders, has unveiled its preferred approach to provide targeted support for solar-battery hybrids. This technology is gaining traction across Australia, primarily due to the decreasing costs of battery cells and the simplicity of implementation.
Massive Tenders on the Horizon
During the latter half of this year, NSW is set to conduct two major tenders totalling 5 gigawatts of new generation capacity. The state anticipates that solar-battery hybrids will play a “crucial role” in achieving these tenders and in meeting its 2030 energy targets.
While the state remains enthusiastic about large-scale wind projects and expects interest in wind and battery hybrid solutions, the wind sector has faced obstacles in entering the market, such as elevated costs, planning challenges, and delays in essential transmission infrastructure.
Why Solar-Battery Hybrids Are Leading the Pack
Solar-battery hybrids have recently become prevalent in both federal and state tenders due to their lower costs, aligning well with the energy demands of diverse customers, despite the fact that none are yet operational on a large scale within Australia’s primary grid.
Earlier this year, ASL sought industry feedback on creating a bespoke Long Term Energy Supply Agreement (LTESA), which would cater to the distinct operating and revenue characteristics of solar-battery hybrids. These systems can store excess energy for later use, addressing issues such as solar curtailment and providing reliable power during evening peak times.
Preferred Options for Energy Agreements
ASL has opted for one of two options proposed by industry experts, focusing on the actual energy exports of individual projects instead of adhering to a predefined structure. According to ASL, this method is favoured as it reflects true generation and export capabilities and is seen as more appealing to financial institutions.
This proposal incorporates both upside and downside risks, aiming to enhance downside protection to attract debt funding. ASL is also considering implementing annual payment limits, which are anticipated to be finalised ahead of the next tender in the coming three months.
The Future of Renewable Energy in NSW
NSW’s plan to hold these two generation tenders comes as its allocation within the federal government’s Capacity Investment Scheme is poised to be exhausted. The state requires additional wind and solar resources, especially if the remaining four coal-fired power stations are decommissioned within the next decade.
Should solar-battery hybrids succeed in these upcoming tenders, a significant increase in energy storage capacity can be expected, which would not only facilitate peak power distribution but also help new solar initiatives steer clear of negative pricing during the day.
“ASL anticipates that solar-battery hybrids could significantly contribute to these tenders and the 2030 Infrastructure Roadmap,” the document states. “ASL maintains a technology-neutral stance and supports all generation projects, including wind. It is expected that hybrid wind projects will also participate in the hybrid generation LTESA. Standalone solar and wind solutions will similarly have the opportunity to bid for the current generation LTESA.”
