Australia expands auction plan aiming for 32 GW new renewables, storage

Australia will expand its Capacity Investment Scheme, or CIS, to introduce 32 GW of new renewable power and storage, Climate Change and Energy Minister Chris Bowen said in a statement Nov. 23, as the nation prepares to reach a targeted 82% renewable energy in the grid by 2030.

The CIS, launched in December 2022, is a framework to drive new renewable dispatchable capacity via auctions based on floor and ceiling prices. According to the plan, the government pays the difference when revenues fall below the floor price, and the generator returns a share of profits when revenues exceed the ceiling.

"This investment will supercharge available power in the energy grid, delivering the long-term reliable, affordable and low-emissions energy system Australians deserve as our grid changes," Bowen said. "This is equivalent to around half the current National Electricity Market with its nearly 11 million customers."

Fossil fuels contributed 68% of total electricity generation in 2022, including 47% from coal, 19% gas and 2% oil, government data showed. Coal's share of electricity generation has declined from 83% in 1999-00, while the share of natural gas and renewables has increased.

Renewables contributed 32% of total electricity generation in 2022, the data showed.

The expansion will take the CIS from its current pilot stage to 9 GW of dispatchable capacity and 23 GW of variable capacity (total 32 GW) nationally, Bowen said without revealing the expected cost of CIS contracts.

The federal government said Nov. 22, it has partnered with the states and territories to deliver the CIS and joined New South Wales in announcing successful bids from six major energy projects in the state, totaling 1.08 GW of reliable capacity.

S&P Global Commodity Insights forecast Australia's energy related CO2 emissions from all sectors falling to 316 million mt in 2030 and further to 238.26 mt by 2040, from 383.47 million mt in 2023.

Agreements

The federal government will also negotiate bilateral agreements with states and territories under the existing National Energy Transformation Partnership, Bowen said.

"States will be asked to work with the Commonwealth to ensure renewables are rolled out and reliability is enhanced through objective benchmarks, an orderly transition and potential strategic reserves," the minister said.

Around half of the capacity offered under the expanded CIS will be subject to these agreements, he said. Capacity may be reallocated from any jurisdictions that don't make agreements to those that do.

In a separate statement, Queensland said its renewable generation pipeline already stands at over 60 GW, and as a result of the federal government's announcement, an additional 1.5 GW of dispatchable storage could be identified almost immediately through its publicly owned energy corporations.

Wholesale electricity prices have been below where they were in 2022, "that's in no small part due to the very high solar penetration we're experiencing at the moment," Bowen said in an interview with the ABC channel. "The more renewables set the wholesale price, the lower prices will be."

Australia's National Electricity Market is expected to see the weighted average wholesale price fall to $69/MWh in 2023, from a record high of $139/MWh in 2022, according to S&P Global. The price is expected to fall further through 2030 to $27/MWh.