The federal government has modified Capacity Investment Scheme tender criteria to prioritise project deliverability, a direct response to contracted wind and solar assets failing to reach construction. This policy shift, designed to ensure auction winners actually get built, lands as NEM spot prices plummeted 59.7 per cent week-on-week to average $37.96/MWh. The market slump, driven by mild conditions and high renewable output, underscores the challenging revenue environment facing new generation projects even as policymakers work to accelerate their deployment.
On the ground, critical infrastructure is moving forward. In New South Wales, EnergyCo has signed a deed to commence substation and transmission upgrades designed to boost export capacity from a key Renewable Energy Zone to major demand centres. The work aims to de-constrain regional green energy generation, connecting the very projects the revised CIS tenders hope to secure with the state’s primary load centres. This physical progress is essential for turning policy into megawatts.
Meanwhile, the technical requirements for grid stability are evolving. A new analysis suggests grid-forming battery inverters are supplanting synchronous condensers as the preferred solution for system strength. Delays in coal plant closures and soaring costs for traditional mechanical hardware are accelerating the shift towards advanced battery technology. This trend favours storage assets capable of providing the grid’s essential heartbeat, creating new revenue opportunities for sophisticated inverter-based resources.
The project pipeline for long-duration storage, however, presents a mixed picture. In a significant blow to Queensland’s energy plan, the state government has reportedly shelved the $6 billion Mt Rawdon pumped hydro project, ending support for the 20 GWh mine-repurposing scheme. In contrast, a proposal has emerged for a 108 MW vanadium flow battery with 864 MWh of storage at a former coal mine in Muswellbrook. The eight-hour duration project highlights the growing interest in alternative chemistries like vanadium flow for long-duration applications, particularly as lithium-ion projects face shorter-duration market saturation.
International cost pressures are also diverging. An Intertek CEA report forecasts that a shift to larger 587Ah cells could drive down battery energy storage system costs through 2027, potentially offsetting recent commodity price hikes. This contrasts sharply with Lazard’s latest findings from the United States, where utility-scale storage costs have actually increased. Lazard attributes the reversal to trade restrictions on Chinese-manufactured cells, a geopolitical factor that could influence Australian procurement strategies and project economics.
Looking ahead, AEMO is progressing several key technical consultations. Stakeholders have until mid-August to provide feedback on proposed changes to the dispatch algorithm and the automated procedures for identifying intervals subject to review.