NSW Government's New Electricity Infrastructure Roadmap Focuses on Investment in Storage and Renewables
The New South Wales ("NSW") government recently released its Electricity Infrastructure Roadmap setting out a 20-year plan focused on delivering growth through investment in storage and renewables.
The NSW government's Electricity Infrastructure Roadmap is a plan to deliver the major infrastructure needed to create a modern electricity system to NSW consisting of cheap, clean, reliable, affordable, and low carbon electricity that provides benefits for regional communities and reduces the cost of electricity. Harnessing NSW's natural energy resources through investment into wind, solar, batteries, and pumped hydro technologies, the ultimate purpose of the Roadmap is to create a long-term contract investment market and reduce the cost of capital for investors.
Five Foundational Pillars
- Driving investment in regional NSW;
- Delivering energy storage infrastructure, focused on batteries and pumped hydro projects;
- Delivering Renewable Energy Zones ("REZs"), which will entail coordinating regional transmission and renewable generation;
- Keeping the grid secure and reliable by ensuring reliable and appropriate backups are in place; and
- Harnessing opportunities for industry, attracting new industries to the state with access to clean, cheap, and reliable energy.
Goals of the Roadmap
The Roadmap aims to achieve the following by 2030:
- Attract AUD$32 billion in private investment to the sector;
- Deliver 12GW of new transmission capacity through 3 REZs;
- Deliver 2GW of storage;
- Create 6,300 construction and 2,800 ongoing jobs;
- Reduce electricity bills (for the average household, the expected annual savings on electricity bills will be around AUD$130; for a small business, the average annual savings on electricity bills is estimated to be AUD$430); and
- Reduce carbon emissions by 90 million tonnes.
New Project Incentives
Under the Roadmap, a focus is investment in large-scale storage projects. New projects will be incentivised through the use of the new Electricity Infrastructure Investment Safeguard ("Safeguard") backed by Long Term Energy Services Agreements ("LTEs"). The Safeguard is intended to drive long-term electricity infrastructure investment. The LTEs will be awarded through a competitive reverse auction process and will protect successful developers from market returns below their investment cost through the use of put options. These will provide investors with the opportunity to give optional access to a competitively set minimum price for their energy service.
Indicative project eligibility criteria for the Safeguard are broad but currently include projects that are:
- Capable of registration as scheduled or semi-scheduled on the National Electricity Market in NSW;
- Backed by parties with appropriate commercial and technical capabilities;
- Capable of participating in AEMO's central dispatch process;
- For REZ generation projects, capable of registration under the Renewable Energy (Electricity) Act 2000 (Cth);
- Not receiving certain financial support; and
- In receipt of any necessary approvals or have credible plans to obtain such approvals.
The Safeguard may eventually lower the weighted average cost of capital for investors by 0.64 to 1.30 basis points for new generation projects, leading to a lower wholesale cost of electricity and substantial economic growth for NSW.
Next Steps
Aimed at increasing investment, announcements from the NSW government indicate that the process will be streamlined to speed up approvals of the REZs. The objectives include spurring investor confidence, enabling the Roadmap's focused projects in storage and renewables, bringing about stability, and reducing prices.
