The Commonwealth Government has announced a major expansion to the Capacity Investment Scheme, which follows a year of significant changes in renewable energy policy across Australia.

Key takeouts

  • The Commonwealth Government announced an expansion to the Capacity Investment Scheme, and will implement a series of auctions to secure 32GW of new wind, solar and storage capacity.
  • The expanded Capacity Investment Scheme follows the results of the first tender for NSW being announced on 22 November 2023, with six projects representing more than 1GW of battery storage capacity selected.
  • Throughout 2023, there have been significant developments in renewable energy policy across Australia, with a trend for increasing direct Government participation in the energy market.

One of the key trends in 2023 has been the increased Government involvement and investment in energy projects and infrastructure, with more direct participation in the energy industry and collaboration with the private sector.

Most recently, on 22 November 2023, the Federal Government announced plans to significantly expand the Capacity Investment Scheme (CIS) as a key platform to achieve the target of 82% renewables nation-wide by 2030.

Initially, the CIS was aimed at driving investment in six gigawatts of 'dispatchable' energy and storage by 2030. The expanded CIS increases that aim five-fold, to 32 gigawatts by 2032 and expands the projects to which it will apply – 23 of the 32 gigawatts will be for 'variable' clean energy projects (being, wind and solar).

The latest policy announcement follows a year of significant changes in energy policy throughout Australia. With the end of 2023 approaching, it is a good time to revisit recent legislative reforms and policy measures across Australia, both at Commonwealth and State levels, in the past year.

Commonwealth: Expanded Capacity Investment Scheme

The CIS will involve the Federal Government seeking competitive tenders for renewable energy generation and storage, with successful bidders entering into long-term revenue agreements with the Government. The agreements will have a revenue floor and ceiling. Where revenue earned by a project exceeds the revenue ceiling, the proponent pays the Government an agreed percentage of revenue. If the revenue is below the floor, the Government will pay the proponent a percentage of that amount below the floor.

The CIS was initially aimed at driving investment in six gigawatts of 'dispatchable' energy and storage by 2030. The expanded CIS has increased to 32 gigawatts, and will also apply to 'variable' clean energy projects. 23 gigawatts will be available for 'variable' (wind and solar) and the remaining 9 gigawatts will be available for 'dispatchable' energy and storage (batteries and pumped hydro).

The Federal Government will also negotiate new bilateral Renewable Energy Transformation Agreements (RETAs) with state and territory governments under the National Energy Transformation Partnership. Through RETAs (which will reflect the unique needs of each state and territory), states and territories will work with the Federal Government to ensure delivery of new renewables projects. This collaboration may include commitments to: improve reliability by maintaining agreed reliability benchmarks, manage an orderly transition, and invest in strategic electricity reserves.

18 of the 32 gigawatts offered under the CIS will be subject to RETAs. Capacity may be re-allocated from any state or territory that does not make the necessary commitments compared to those that do.

Tenders for the South Australia and Victoria CIS are now open, with bids due in mid-December 2023. The tender is targeting an indicative 600MW of four-hour equivalent or 2400MWh of dispatchable renewable generation and storage across both states.

Queensland: New energy transition legislation introduced

On 24 October 2023, the Energy (Renewable Transformation and Jobs) Bill 2023 (Bill) was introduced to Queensland Parliament to implement the State Government's Queensland Energy and Jobs Plan.

The key aspects of the Bill are:

  • Renewable energy targets: The Bill will legislate the State's renewable energy targets of: 50% by 2030; 70% by 2032; and 80% by 2035.
  • Public ownership: The Bill commits the State to maintaining public ownership of energy infrastructure. The public ownership targets legislated in the Bill are: 54% or more of 'generation assets'; 100% of 'transmission and distribution assets' (namely, except where excluded by regulation, economically regulated transmission and distribution networks in Queensland and the REZ transmission network for a REZ); and 100% of 'deep storage assets' (being pumped hydro energy storage that have a minimum generating capacity of 1,500MW for 24 hours and are prescribed by regulation).
  • Priority transmission investments: The Bill introduces a priority transmission investment framework to facilitate the construction of critical new transmission infrastructure. The framework allows the State to identify, assess and declare a project as a PTI, and to direct Powerlink to construct declared PTIs which can be later inserted into Powerlink's regulated network.
  • Renewable energy zones: The Bill introduces the framework for the Queensland Renewable Energy Zones, and includes the authority to declare parts of Queensland to be REZs. The draft Queensland REZ Roadmap released in July 2023 for consultation identified 12 potential future REZs targeted to be developed and connected to the grid by 2035, with the first REZ declarations proposed to be made in 2024.
  • Queensland SuperGrid Infrastructure Blueprint: The Bill mandates the review of the 'Queensland SuperGrid Infrastructure Blueprint' by 31 May 2025 and every two years thereafter. The Bill also proposes amendments to the Electricity Act 1994 (Qld) to assist in the deployment of new grid supporting technologies such as batteries and synchronous condensers under the Ministerial Infrastructure Designation process.
  • Job Security Guarantee and Fund: The Bill includes the 'Job Security Guarantee' to provide employment opportunities and benefits to employees at publicly owned coal-fired power stations (and other prescribed facilities) who are affected by the energy transition, and establishes the $150 million Job Security Guarantee Fund.
  • Governance and advice: The Bill establishes three advisory bodies: the Queensland Energy System Advisory Board; the Energy Industry Council; and the Queensland Renewable Energy Jobs Advocate. Together, they will facilitate and oversee the implementation of the Bill's targets and frameworks and advise on the impacts to industry, workers and communities through the energy transformation.

Western Australia: Green tape reduction

On 16 November 2023, the Western Australian Government announced a new legislative exemption to reduce environmental approval timeframes as part of its $22.5 million 'Green Energy Approvals Initiative'. To streamline approvals, an exemption order made under the Environmental Protection Act 1986 (WA) will enable the Minister for Lands to grant an option to lease Crown land to proponents of renewable energy projects while their proposal is under assessment by the Environmental Protection Authority. There will be no impact on current environmental assessments.

In addition, the Western Australia Government has committed to introducing climate change legislation with targeted consultation currently underway.

New South Wales: REZ developments and establishment of Energy Security Corporation

NSW released the Network Infrastructure Strategy (Strategy) in May 2023. The Strategy coordinates the connection of network infrastructure to new generation and storage facilities in the five REZs across NSW to meet the objectives of the Electricity Infrastructure Investment Act 2020 (NSW). EnergyCo is leading delivery of the first five REZs.

The Strategy proposes a number of network infrastructure options for the Central-West Orana, New England, South West and Hunter-Central Coast REZs with a total capacity of 14GW to be delivered by 2033 at the latest. There are further options that may be considered beyond 2033 to deliver an additional 10GW as needed.

The draft Energy Policy Framework was also released for public consultation on 14 November 2023, with comments due by 18 December 2023. It comprises a series of guidelines for wind and solar energy generation and transmission infrastructure to help the industry, communities and consent authorities identify, assess, avoid, and mitigate impacts.

In addition, on 7 September 2023, the NSW Government committed to establishing the Energy Security Corporation, with initial funding of $1 billion. The Government also committed an addition $800 million to the Transmission Acceleration Facility, to connect the State’s REZ to the grid sooner. Once established, the Energy Security Corporation will make investments in commercial projects (similar to the way the Clean Energy Finance Corporation operates) including investments in storage projects, addressing gaps in the market, and improving network reliability.

The Commonwealth's expansion of the CIS coincided with the announcement of the successful NSW Electricity Infrastructure Roadmap firming tender (Tender 2 under the Roadmap) which was delivered in partnership with the CIS (with the Commonwealth underwriting 550MW of firmed capacity). The six successful projects include three batteries and three separate virtual power plants (a network of connected solar and battery systems that work cohesively to operate as a single power plant), with a total of 1,075MW (exceeding the indicative 930MW targeted by the tender).

Victoria: Relaunch of the State Electricity Commission

In 2023, the Victorian Government announced the relaunch of the State Electricity Commission (SEC) as a government-owned renewable electricity enterprise. The SEC was previously Victoria’s sole government electricity supplier before Victoria’s state-owned electricity assets were privatised in the 1990s.

On 26 October 2023, the Victorian Government released the SEC's 12 year Strategic Plan 2023-2035. As part of its strategic plant, the SEC will invest an initial $1 billion towards building 4.5GW of new power through renewable energy and storage projects, with announcement of its pioneer investment by the end of 2023.

The SEC will also take responsibility for Victorian Renewable Energy Target (VRET 1 & 2) and Bulgana contracts, and begin servicing Victorian Government energy requirements, from 2025.

A bill to enshrine the State having a controlling interest in the SEC and the SEC's objects, including its participation in renewables, was introduced into Parliament on 15 November 2023.

South Australia: New hydrogen and renewable energy legislation

The Hydrogen and Renewable Energy Act 2023 (HRE Act) was passed by both Houses of the South Australian Parliament on 16 November 2023. The HRE Act will commence by proclamation in 2024 to implement a licencing and regulatory regime for large-scale hydrogen and renewable energy projects.

The HRE Act consolidates land access, environmental impacts and native title rights into a single regulatory process and streamlines investment in renewable projects. Similar to REZs, the HRE Act introduces 'release areas' where developers and investors can bid for access to wind and solar resources on government-owned land. It is intended to cover the entire project life cycle, starting at the investigative and land acquisition stages, and concluding at the infrastructure decommissioning and land rehabilitation stage.

Further information can be found in our recent HRE Act alert.

The MinterEllison team will continue to monitor the progress of these updates, and any impacts for businesses. If you have any queries or would like to discuss how your business may be impacted, please contact our team.