Latest Australian capacity investment scheme battery projects announced

The large-scale lithium-ion battery projects, if delivered, will provide an additional 4.13 gigawatts (GW) of dispatchable battery capacity, with five selected in each of New South Wales and Victoria, four in Queensland and two in South Australia.

Chris Bowen, minister for climate change and energy, described the successful tender process as “another massive boost to the nation’s dispatchable, clean energy capability”.

The CIS provides a long-term revenue safety net that decreases financial risk for investors, ensuring more renewable energy projects are built. Long-term, the CIS aims to incentivise the deployment of 40GW of renewable and dispatchable capacity by 2030, helping deliver the Australian government’s 82% renewable electricity by 2030 target.

Tim Dorgan, an expert in renewable energy projects at Pinsent Masons, said: “winning a CIS tender gives a project a level of investment certainty that appeals to financiers and gives the project an advantage when securing financing.”  

Successful tenders enter into a capacity investment scheme agreement (CISA) with the Federal government. Under the CISA, the government underwrites the project by covering shortfall in revenue below an agreed floor, thereby absorbing downside risk. In return, projects are required to pay 50% of revenue above an agreed ceiling to the Federal government, allowing it to reclaim upside surplus. 

Leanne Olden, an expert in energy law at Pinsent Masons, said: “Of the 124 projects which participated in the most recent Tender 3 for the NEM, 16 projects were successful and will enter a CISA.”

“The minimum requirements to participate was a minimum storage duration of two hours and a minimum size of 30 MW, among other criteria. The tender process had a target of 4GW of four-hour equivalent dispatchable capacity, or 16 gigawatt hours (GWh) of dispatchable capacity, that will be operational before 31 December 2029,” she said.

“The combined capacity, if realised, of the 124 projects was an estimated 34GW of energy storage. Each project was judged on its contribution to system reliability and system benefits, project deliverability, organisational capacity to deliver project, First Nations and community engagement and financial contribution.”

While the geographic distribution of the projects spans four states, ownership is largely consolidated within a familiar cohort of developers, Akaysha Energy, Equis, ACEnergy, and Ampyr Australia. This may in part be due to the significant experience, capacity, and strategic acumen of those developers, but also raises questions as to whether the competitive design of the CIS creates barriers to entry for smaller or community-led initiatives.

CIS tenders are held approximately every six months in Australia’s National Energy Market (NEM), and every 12 months in its Wholesale Electricity Market, until the end of 2026.

The next announced CIS tender for NEM generation project bids closed on 18 February 2025. Currently, CIS tender five, which aims to deliver 1,600MW in Western Australia, and CIS tender six, which aims to deliver 2400MWh of dispatchable capacity in Western Australia, are open to applications. Both close on 7 November.

Dorgan said: “The results of this latest round of tenders can be compared against successful projects in the CIS Tender 1.”

“19 projects were successful in that tender, but it is of note that the average duration of the successful battery projects was 2.25 hours, when compared with an average duration of 3.71 hours in this latest tender,” he said.