AEMO sets out tender timeline for NSW’s rapid transition from coal to renewables
AEMO Services has unveiled its proposed development pathway for New South Wales’ ambitious electricity roadmap, setting a multi-decade long transformation plan that will see renewables and storage replace the state’s ageing coal fleet.
Earlier this year, the NSW government selected AEMO Services, a subsidiary of the market operator, to manage the delivery of its Electricity Infrastructure Roadmap that targets 12GW of new wind and solar and another 2GW of long duration energy storage.
On Tuesday, AEMO Services published the 2021 Infrastructure Investment Objectives (IIO) Report that outlines its plan and rough tender timetable that will support an estimated $32 billion in new electricity infrastructure.
Central to this plan are the Long-Term Energy Services (LTES) contracts for 33,600GWh of annual electricity supplies by the end of 2029, along with contracts for 2GW of new energy storage capacity.
Tenders will be run twice a year, and AEMO will look to gradually ramp up the amount of clean energy generation available in the market across the next decade. It will start with a small pilot tender in the first half of 2022 before the first major tender later that year.
“Tenders for LTES agreements in respect of generation infrastructure projects are scheduled to occur biannually over the next ten years, with an indicative targeted volume of 500 to 2,700 GWh of electricity per year to be delivered by projects from each tender until 2030,” the report says.
It says tenders will be held to ensure that new capacity is built well before the anticipated closure of the state’s coal fired power stations, most of which will close within the next 10 to 15 years.
AEMO will also account for the ‘supply chain’ capacity for new project commissioning, avoiding the ‘lumpy’ addition of new projects that would seek investment go through a roller-coaster of peaks and troughs.
“Considering the maximum developed renewable capacity observed historically, this develops capacity more gradually than other modelled alternatives, minimising the risk of supply chain disruption and constraints across the next decade,” the report says of AEMO’s preferred pathway.
“This Development Pathway incorporates an annual maximum build of VRE in New South Wales capable of generating approximately 6,000 GWh per annum until 2030. After 2030 this limit is increased to 7,600 GWh per annum, assuming the capability of the supply chain will have expanded within the next ten years.”
“A key factor in the selection of the development pathway was the significant uncertainty regarding the precise timing of future coal plant withdrawals,” the report adds.
“Given this uncertainty, and the potential price impacts of such withdrawals, the development pathway does not seek to forecast or respond to withdrawals. Rather, the development pathway sets out a proactive build to ensure necessary infrastructure is in place to replace coal plants when they withdraw.”
This will see tenders securing hundreds of megawatts worth of new capacity being signed each quarter, for the next decade, with the tenders timed to ensure New South Wales has sufficient new generation capacity already operating before the closure of four coal fired power stations scheduled to retire over the next 15 years.
AEMO says it will be able to manage this transition, while maintaining high levels of reliability.
AEMO will run similar tenders, but at less regular intervals, to secure 2GW of new energy storage capacity, being long-duration storage with the capacity to provide at least 8 hours of backup supply.
The tenders will help attract and manage the new wind, solar and storage projects that will participate in up to five dedicated Renewable Energy Zones that will coordinate new generation projects with the network infrastructure needed to ensure they can connect and deliver power to the grid.
The new IIO report outlines AEMO’s initial thinking of when these investments will need to be made, and it is seeking feedback from industry stakeholders on the initial plan and its role as the ‘consumer trustee’.
AEMO Services says the plan would allow it to fulfil its role as the ‘consumer trustee’, delivering an energy transformation plan that minimises the cost and reliability risk faced by energy users.
“The Consumer Trustee’s role is to act in the long-term financial interests of NSW consumers,” AEMO Services’ executive general manager, Paul Verschuer, said.
“The IIO Report through the chosen development pathway and associated plan for tenders, helps provide certainty for investors and developers. The LTESA and tender design incentivise competition to build the infrastructure.”
“Together, these will lower the cost of private investment and thereby deliver the benefit to NSW Consumers,” Verschuer added.