New era as NSW energy grid turns to renewables

The first tender for renewable ­energy and long-duration storage contracts in NSW opens on ­Tuesday.

NSW Treasurer and Energy Minister Matt Kean. Picture: NCA Newswire / Gaye Gerard

The first tender for renewable ­energy and long-duration storage contracts in NSW opens on ­Tuesday, marking the launch of an energy policy the government says will save the average household about $130 a year.

A series of biannual tenders over 10 years is planned to help ­replace retiring coal-fired power stations with an electricity grid dominated by wind, solar and long-duration storage.

The Electricity Infrastructure Roadmap is the state’s landmark energy policy designed to shift the generation capacity from four out of five of NSW’s coal-fired power stations, which are scheduled to retire in the next 11 years.

The NSW government is progressing plans to establish at least five dedicated renewable energy zones that will host at least ­12 gigawatts of new wind and solar projects – enough to power the equivalent of 5.8 million homes – and 2GW of energy storage projects such as pumped hydro over the decade.

NSW Treasurer and Energy Minister Matt Kean said: “This is the biggest renewable energy policy in Australia’s history.

“(Russian President Vladimir) Putin’s illegal invasion of Ukraine has put enormous ­pressure on power prices and shows why we need to fast-track our plans to ­replace ageing power stations and reduce our reliance on generation that relies on volatile international commodity prices,” Mr Kean said.

As well as savings of about $130 a year on a typical household electricity bill between 2023 and 2040, the move is forecast to be worth about $430 a year for an ­average small business.

The indicative size of the inaugural tender is 2500GW of ­annual generation and 600 megawatts of long-duration storage, but more or less can be awarded if it is deemed in the long-term ­financial interests of NSW electricity consumers.

It is anticipated the generation projects would achieve commercial operation before 2025, while the energy-storage projects would come online before 2027.

Since the roadmap was ­enacted, more than 3.6GW of ­energy investment has been committed or “anticipated” across NSW and most projects are ­expected to be eligible to ­participate.

Under the proposed contracts, successful generators will be ­offered 20-year contract terms, allowing the projects to lock in their future revenues for the bulk of their expected operational life.

The contracts will also include “zero price floors”, protecting projects from negative prices in the wholesale electricity market.

Battery projects will be offered 14-year contractual terms, while pumped hydro energy storage projects could secure 40-year term contracts.

All of NSW’s five coal-fired power stations are due to close by 2040, with EnergyAustralia’s historic Mt Piper plant outside ­Lithgow the last to go.