AEMO Services has initiated the tender process for Round 1 of the NSW electricity infrastructure tenders under the NSW Electricity Infrastructure Investment Roadmap (the Roadmap), being 2,500 GWh of annual generation and 600MW of long duration storage. We provide a guide for developers looking to bid for projects that would either connect to the Central-West Orana Renewable Energy Zone or to the existing grid.
Registration for bidding is now open - and with tender commencement on 4 October, developers should already be considering how to present a competitive bid.
The draft tender pack that AEMO released includes 110 pages of guidelines for Round 1. In our guide, we summarise the key information from that document, providing an outline of the key steps in the tendering process and the main aspects of two of the key parts of the process:
- Project Bids and Financial Value Bids that Proponents need to submit, and
- the Merit Criteria against which AEMO Services will assess bids.
We also summarise the key terms of the LTESA products developers can bid for under Round 1.
Once Proponents have registered for the tender round, Bids will proceed in two stages: a Project Bid and then, for shortlisted Proponents, a Financial Value Bid. The stages of the tender process and corresponding key dates are as follows:
Late August 2022 - Tender Registration
To be eligible to submit a Project Bid, Proponents must:
- create an account and complete the online registration to register for the Tender Round
- upload an executed Tender Process Deed
4 October 2022 – Project Bids Open
- Proponents complete the online forms and Returnable Schedules needed to complete their Project Bids
28 October 2022 - Project Bids Close
- The Project Bid submission period ends
- AEMO Services commences the Project Assessment to identify Project Shortlist Proponents
Mid December 2022 - Invitation to Submit Financial Value Bid
- AEMO Services invites Project Shortlist Proponents to submit a Financial Value Bid
- Proponents submit a Financial Value Bid with the required information (see below)
- Proponents provide a Security for Process Bond
Late January 2023 - Financial Value Bids Close
- Financial Value Bid submission period ends
- AEMO Services completes the Financial Value Assessment, Portfolio Assessment and due diligence
- AEMO recommends a list of Recommended Bids to either the Scheme Financial Vehicle (for LTESAs) or Energy Corporation of New South Wales (for Access Rights)
March – April 2023 - Unsuccessful Proponents Notified
- AEMO Services notifies all unsuccessful Proponents and provides an opportunity for feedback within probity considerations
March 2023 - Selected Bids Announced
- AEMO Services notifies Selected Proponents of their successful bid
Bids for projects intending to connect to the CWO REZ
The Central-West Orana Renewable Energy Zone (CWO REZ) is the first NSW renewable energy zone selected for private sector development by the Energy Corporation of New South Wales. The CWO REZ comprises a number of energy hubs and transmission lines connecting the energy hubs, which will connect to existing transmission and distribution networks. It is structured as a PPP and is currently in procurement.
Access to the CWO REZ is governed by the CWO REZ Access Scheme, which is a limited physical connection model with a single tier of access rights. The physical capacity that Proponents can connect to the REZ is limited to an initial allocation based on a target transmission curtailment level and an initial aggregate maximum capacity cap. Of particular note under this scheme is:
- an Access Right Holder for an approved Project under the CWO REZ Access Scheme will be required to enter into one or more Access Right agreements including a Project Development Agreement (PDA). Under the PDA there are sunset dates for achieving financial close and commercial operations.
- standalone storage and load assets connecting to new CWO REZ network infrastructure will require an Access Right, but it is expected that such assets will be exempt from paying the Access Fee.
Proponents of projects intending to connect to the CWO REZ can bid for either a CWO REZ Access Right or a CWO REZ Access Right and a Long Term Energy Service Agreement (LTESA).
Bids for projects intending to connect to the existing grid
If a project is planned to connect to the existing grid under the open access regime, proponents can submit a bid for, depending on the type of project, either a Generation LTESA or a Long Duration Storage LTESA. Any such project must, however, demonstrate 'Outstanding Merit' in accordance with section 48(3) of the Electricity Infrastructure Investment Act 2020 (NSW). Although the meaning of this term is to be developed under the regulations, the general concept is that the project will need to demonstrate greater merit (by reference to the Merit Criteria) than the lowest scored project within a REZ seeking the same type of LTESA.
Scheme Financial Vehicle Products
- Over a contractual term of 20 years, offers a series of options to enter a cash settled swap for 2 years.
- The swap profile is generation following - in our earlier article on Access rights and LTESA for NSW Renewable Energy Zone projects, we explained why we expected fixed shape fixed volume contractual shape LTESAs would be less popular than variable volume generation LTESAs.
- Proponents to bid the fixed price, contracted percentage and repayment threshold price.
Long Duration Storage LTESA
- For storage units with a registered capacity that can be dispatched for at least 8 hours.
- Over a contract term of up to 40 years for pumped hydro and 14 years for chemical batteries, offers a series of options to receive annuity payments for 2 years.
- Proponents to bid the annuity cap and net revenue threshold.
AEMO Services will assess Proponents' Project Bids against six merit criteria (MC):
1. Technical and commercial viability requirements (MC 3 – 5):
- Impact on electricity system (MC3)
- Pathway to commercial operation (MC4)
- Capacity to deliver Project (MC5)
2. Social licence commitments requirements (MC 6 – 8):
- Land use (MC6)
- Community engagement (MC7)
- Regional economic development (MC8)
The Social License requirements include objective measures relating to both baseline requirements and stretch goals. These baseline requirements and stretch goals cover a range of aspects of a project from supply chain inputs to innovation, employment (training and diverse participation), and environmental sustainability.
Projects which are progressed to the Financial Value Bid Stage will be assessed against the following merit criteria:
- Financial value (MC1)
- Commercial departures (MC2)
Preparing a compelling bid
In order to satisfy the Project Bid merit criteria a proposed project will need to be at a relatively advanced stage (e.g. in relation to planning and tenure) of project development. This will naturally limit the number of projects that will be able to bid for CWO REZ Access Rights and/or LTESAs under Round 1. Projects that are not sufficiently advanced will have the opportunity to bid for future tender rounds; the Roadmap envisages the delivery of 12 GW of renewable energy and 2 GW of LDS and AEMO Services has flagged a 10 year tender plan to award LTESAs, with tenders to be run every 6 months.
The nature of the requirements provide guidance to Proponents about preparing a compelling bid:
- Prepare a complete bid, written with the goal of demonstrating how your project is an attractive proposition for NSW Government by reference to the merit criteria and, in particular, any demonstrated positive impact of your project on NSW electricity consumers' bills
- Provide supporting evidence for how your bid meets and / or exceeds the requirements associated with the merit criteria
With the challenges that renewable energy projects have faced in connecting to the grid, participation in the tendering process is likely to be attractive for many developers.