The Victorian Government released the following consultation paper in respect of the proposed Victorian Renewable Energy Auction Scheme (Scheme) on Friday 5 August 2016.

See our previous article on this topic here.

Under the Scheme, the Victorian Government aims to auction additional capacity in order to deliver Victoria’s renewable energy generation targets (25 per cent by 2020 and 40 per cent by 2025). Key elements of the Scheme proposed to date are:

  • 5,400 megawatts (MW) to be auctioned, with at least 20% allocated to large-scale solar.
  • Offering a long term contract for difference (CfD) of between 10-20 years for electricity (and potentially LGCs).
  • Auction evaluation criteria include value for money, contribution to Victorian economic development, community engagement.

There are a number of similarities between the proposed Victorian Scheme and the ACT Government’s recent wind and solar reverse auctions (ACT Scheme). A high level comparison based on the currently available details is set out in the table below:

ACT Government Scheme

Proposed Victorian Government Scheme

Maximum total size

650 MW

Up to 5,400 MW

Technology allocation

Wind: ~600MW

Large-scale solar: ~40MW

Proposed to have a minimum of 20% allocated to large-scale solar.

Type of contract

Contract for difference (set out in the Deed of Entitlement (Deed)), with FiT support payment entitlement calculated as: (FiT ‘strike price’ – spot price for the period) x quantity of electricity

Two-way CfD, with proponents required to pay the scheme administrator where the spot price exceeds the FiT strike price.

Reference spot price based on half hourly NEM price.

A broadly similar CfD structure is proposed.

Considering including a floor on the spot price equal to zero, below which the proponent will not be entitled to payment under the CfD.

Considering either a monthly average or half hourly NEM price as reference spot price.

Treatment of large-scale generation certificates (LGCs)

Proponent required to surrender to the ACT Government all LGCs produced in respect eligible electricity for which the proponent has received a FiT support payment.

Up to 2020: considering whether LGCs may be traded by proponents or included within the auction process to be resold by the Victorian Government.

Post-2020: proponents required to surrender all LGCs to the Victorian Government.

Key contract terms

Counterparty: ACT, represented by the Environment and Planning Directorate, with Actew AGL administering.

Term: 20 years from ‘Completion Date’ (as bid by proponents)

Counterparty: potentially the State, a statutory agency, an electricity distribution business, or an electricity transmission business.

Term: proposed between 10-20 years.

Minimum/maximum generation

Minimum: proponents are required to supply minimum annual quantity of electricity every 12 months after the Completion Date. Failure to do this will be a breach of the Deed, but does not carry a specific economic penalty.

Maximum: the Deed specifies a maximum annual quantity of electricity for which the proponent is entitled to a FiT support payment.

Minimum: proposed that penalties would apply to compensate the State where the minimum volume is not delivered.

Maximum: propose to have cap on the maximum volume.

Location of projects

No specific requirement for projects to be located within the ACT, and the majority of projects for which feed-in tariffs have been granted have not been located within the ACT or the Australian capital region.

Under section 11 of the Electricity Feed-in (Large-scale Renewable Energy Generation) Act 2011 (ACT), the Minister is able to grant a FiT entitlement in respect of a project located:

  • in the Australian capital region; or
  • outside the Australian capital region if the Minister is satisfied that the proposal offers exceptional economic development benefits to ACT renewable energy industries and minimises costs to electricity consumers.

The evaluation criteria (and weighting) for the wind auction were:

  • Risk to timely project completion (weighting: 50%)
  • Local community engagement (weighting: 20%)
  • ACT economic development benefits (weighting: 20%)
  • Reliance on Treasury Financial Guarantee (weighting: 10%)

The proposed auction evaluation principles do not contain any specific requirement for projects to be located in Victoria. However, the themes of the principles, as well as the balance of the consultation paper and accompanying media releases, are focussed on economic development and other benefits for Victoria.

The proposed auction evaluation principles include:

  • Value for money
  • Contribution to Victorian economic development (including Victorian jobs, development of supply chains, maximising local content, promotion of local industry competitiveness, regional development)
  • Network connection progress and cost
  • NEM metering
  • Timely construction and operation
  • Contribution towards Victoria’s targets
  • Community engagement

The Victorian Government is seeking input from stakeholders in respect of a range of aspects of the Scheme, including:

  • Scheme structure (including interaction with other Federal policies).
  • Structure for award of funding.
  • Contract structure and terms.
  • Scheme administration and cost recovery.
  • Auction evaluation principles.

The final date for providing submissions is 31 August 2016. Submissions can be sent to: renewable.energy@delwp.vic.gov.au