Out-Law News 1 min. read

Market brief provides further detail on upcoming Australian renewable energy projects tender

The Australian federal government’s new market brief has provided welcome detail on the highly anticipated first tender in its capacity investment scheme (CIS), with the first round expected to help shape the sector’s view of the impact of the scheme on the energy market.

The market brief follows the recent announcement of the tender, known as CIS Tender 1, which is set to add 6 GW of new variable renewables projects, including solar and wind generation, to the country’s national electricity market (NEM).

Of the targeted 6 GW, minimum allocations of the generation capacity will be dedicated to projects in New South Wales (2.2 GW), Victoria (1.4 GW), South Australia (300 MW), and Tasmania (300 MW). The remaining 1.8 GW of generation capacity will be allocated to projects across the NEM, based on merit assessments of individual projects.

Tim Dorgan, a corporate law expert at Pinsent Masons who specialises in the development of energy projects, said: “The sector has awaited the detail of the expanded CIS since its announcement in late 2023, and this round will start to inform the market of the effect that this cornerstone policy will have on behaviours.”

The registration period began on 16 May and will be open until 19 June, with the Tender 1 process due to commence on 31 May. The closing date for project bids assessment, known as Stage A, is 1 July. The closing date for financial value bid assessments, known as Stage B, is yet to be finalised but is likely to be in September or October, according to an indicative timetable provided in the market brief.

Projects will be assessed against seven merit criteria across Stage A and Stage B, with projects demonstrating the highest levels of merit compared to other projects in Stage A progressing to Stage B. The final weightings for each merit criteria will be provided in the guidelines but the market brief expressly states that merit criterion 4, which relates to First Nations and community engagement, and merit criterion 7, which relates to First Nations and social licence commitments, will be given a weighting of 25% each. This is an increase from 20% each in the CIS South Australia-Victoria tender round and highlights the increasing focus on these issues.

Successful bids are expected to be announced in December, and will be awarded a Capacity Investment Scheme Agreement (CISA) between the project owner and the Australian government, with a term of up to 15 years. CISAs will provide partial revenue support – as much as 90% - if a project’s revenue falls below an agreed floor. The CISA will also require projects to pay 50% of revenue above an agreed ceiling to the government.

Further information and the final CIS Tender 1 design elements will be published in the CIS Tender 1 guidelines and a draft Tender 1 CISA, both of which are expected to be released on 31 May. The federal government has also planned a webinar for potential applicants in June.

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