Federal and all state and territory energy ministers have endorsed a Capacity Investment Scheme (CIS) which will incentivise more clean renewable energy and storage into the electricity market, where and when it is needed.
The new revenue underwriting mechanism will unlock around $10 billion of investment in clean dispatchable power to support reliability and security as the energy market undergoes its biggest transformation since the industrial revolution.
By accelerating new investment, the scheme will encourage an ideal mix of storage and renewable technologies needed in the system over the coming decade.
Open tenders will determine the projects to gain CIS support, which will help decrease risk for investors and spur more investment.
An agreed revenue ‘floor’ will help cover project operating costs and debt repayments, with the Government paying the difference when revenues fall short, and a share of profits returned whenever revenues exceed an agreed ‘ceiling’.
The CIS will complement rather than overlap with existing State schemes such as the NSW Electricity Infrastructure Roadmap, and therefore not alter competitive tenders currently underway.
The Scheme will work alongside the National Energy Transformation Partnership underway, and the Rewiring the Nation plan – these policies will work in unison to ease power prices and make energy cleaner and more secure.
The CIS will:
- make energy prices lower and more stable for homes and businesses;
- attract even more new investment in renewable electricity backed by batteries, pumped hydro and other long duration storage technologies;
- provide a kick start for domestic battery manufacturing in Australia; and
- drive a huge reduction in Australia’s largest source of emissions.
Minister for Climate Change and Energy Chris Bowen said jurisdictions had been working hard to deliver solutions to the reliability challenges in a rapidly changing global energy market:
“The Capacity Investment Scheme is essentially a keep the lights on mechanism. Australian households, industry and the energy market are all moving with their feet towards more affordable renewable energy. The Capacity Investment Scheme will ensure the reliable power we need is delivered as this transition continues.”
“I thank my state and territory counterparts for endorsing the Capacity Investment Scheme today. By working collaboratively, the Commonwealth and jurisdictions are delivering the best possible outcomes for all Australians,” Minister Bowen added.
“The scheme will create construction and operations jobs in clean energy projects, especially in the regions.” he said.
“The energy market has been changing for some time – but federal leadership had been too hamstrung by cynical politics on energy to acknowledge it or plan for it. Australian jurisdictions today took another step to turn that around for households and businesses.”
The Government will release further details on the scheme in the coming months, with a view to the first auction occurring in 2023.
