Victoria opens auction for 600MW of new renewable energy

Out-Law News | 13 Sep 2021 | 1:48 am | 1 min. read

The government of Victoria, Australia has issued tender documents for the second Victorian Renewable Energy Target Auction (VRET2).

The reverse auction is seeking 600 megawatts (MW) of new renewable energy capacity in Victoria to help with increasing the state’s renewable energy generation by 40% by 2025 and 50% by 2030. VRET2 is also part of the Victorian government’s longer-term policy of achieving net zero emissions by 2050.

The VRET2 auction is now open and will close on 9 November 2021, with successful projects being announced mid-2022.

Successful projects will be awarded a capped contract for difference (CfD) support agreement with the state for a 10-year support term, with an option for the Victorian government to transfer the support agreement to a sleeved arrangement via an energy retailer during the support term.

Leanne Olden of Pinsent Masons, the law firm behind Out-Law, said: “While the support term offered on VRET2 is shorter than the 15-year support term on the first VRET auction, VRET2 nonetheless offers developers an opportunity to secure long term support for their project with little counterparty credit risk.”

“Additional benefits to developers who choose to participate in VRET2 will be the additional support from the Australian Energy Market Operator to manage the connection risk for their projects,” she said.

In assessing projects, the Victorian government has indicated it will focus on proposals for mitigating grid risk, projects which have reduced impact on the network infrastructure, contributions to community engagement, the local economy and benefit sharing. It is understood that while location within the Renewable Energy Zones is not a pre-requisite, projects located in areas with sufficient grid strength will be preferred.

In order to be eligible to be successful in the VRET2 auction, projects will need to be new solar, wind or hydro projects which are of a minimum 10MW capacity, which need to be yet to achieve financial close and not have substantially commenced construction, and able to achieve commercial operation by 30 December 2024.

According to an official statement, projects in this auction are expected to create 2,000 new jobs and attract A$1 billion (US$718 million) private investment, with the power generated being used to power public facilities including hospitals, schools, Melbourne’s train network and other infrastructure and services of the Victorian government.