Capacity Investment Scheme streamlined by Australia federal government

Launched in 2023, the objective of the CIS is to incentivise development of 32 gigawatts (GW) of renewable capacity, comprising of 23GW of generation capacity through solar and wind projects and 9GW of dispatchable capacity to achieve the Australian federal government’s target of 82% renewable energy by 2030 and place downward pressure on electricity prices.

In his announcements, Bowen said that the Capacity Investment Scheme tenders are consistently oversubscribed. The six tenders that have launched already account for more than half of the total required capacity, equalling 12.3GW of generation and 6GW of dispatchable capacity. A reduction to the timeline to finalise tenders will lead to projects and developers knowing the outcome sooner and allowing for rebids into subsequent tenders.

Bowen acknowledged that while the Capacity Investment Scheme provides industry investment certainty, the sector still faces challenges in relation to social licenses, workforce constraints and approval times. To further assist the sector, the federal government is working with the states and the industry to alleviate the constraints through the implementation of renewable energy transformation agreements.

The current CIS Tender 4 – NEM Generation follows a two-stage tender process where project bids were submitted under stage A, answering various eligibility and merit criteria.  During stage B, project bids were then shortlisted and invited to submit financial value bids in a form of a commercial offer for acceptance by the federal government. Project bids are assessed at each stage based on distinct merit criteria before a final recommendation is provided to the federal government with an additional stage of due diligence potentially occurring, where applicants may need to submit additional information.

The federal government’s announcement to streamline the process suggests that project bids will need to be submitted in a form already capable of acceptance and measured against new merit criteria. The reduced timeline may also limit the Q&A process, therefore reducing opportunities for applicants to engage with AEMO, Australia’s energy market operator, to clarify information related to the tender.

In a recent briefing note sent to industry, the federal government has announced four new tenders with two tenders for the Wholesale Electricity Market (WEM) and two tenders for the National Electricity Market (NEM). The briefing note confirmed a move to a single stage tender process, requiring proponents to submit all aspects of their bid – including a full financial bid –at the same time. The proposed upcoming CIS tender rounds are: 

• Tender 5: WEM Generation – August 2025 
• Tender 6: WEM Dispatchable – August 2025 
• Tender 7: NEM Generation – September 2025 
• Tender 8: NEM Dispatchable – November 2025

A reduction in stages for future CIS auctions, alongside reduced timelines to help avoid overlapping tender rounds, may create more certainty, but it increases the importance of a competitive bids in an already extremely competitive auction. Applicants should therefore ensure bids submitted demonstrate value against relevant merit criteria, and where necessary seek advice.

The CIS is only one of the important regimes crucial to a successful transition. Further reforms in relation to connection to the electricity grid and the approvals processes may be required to support the energy transition.

Co-written by Liam Donald of Pinsent Masons.