An innovative market process to secure additional long-duration dispatchable energy capacity in now underway, as the Malinauskas Labor Government takes the next step to lock in a sustainable, reliable and affordable energy future.
A call for tenders is now underway inviting bids to provide 700 megawatts of long duration dispatchable capacity, a major step in implementing the state's Firm Energy Reliability Mechanism (The FERM).
The FERM was established to combat a trend towards diminishing long-duration dispatchable capacity, and underpins the State Government's long-stated belief that gas is an important firming fuel that will underpin the energy transition.
In South Australia, 75 per cent of our electricity is now generated through renewables and we are on track to hit 100 per cent net renewables by 2027 – and this achievement has only been possible because of the capacity of gas to firm the grid.
The scheme will establish contracts with eligible existing and new long-duration firm capacity power generators, effectively underwriting a portion of their revenue to create financial certainty for market proponents outside of sporadic and infrequent high price events. The availability of this firming generation will be critical for maintaining the reliability of SA's electricity system.
South Australia's current fleet of firming generators are beginning to reach the end of their operating timeframes and retire and there are currently no similar types of generation replacing it.
The State Government recently finalised a new deal with AGL to keep gas-fired electricity from Torrens Island Power Station flowing until mid-2028 – a move made necessary because of ongoing delays to the Liberal-backed Project Energy Connect interconnector.
This, together with the FERM, will ensure SA's power supply remains secure and reliable, even when the sun isn't shining and the wind isn't blowing.
The FERM will also protect South Australian consumers against potential National Energy Market-wide price and reliability risks in future years as coal-fired power stations in New South Wales and Victoria are retired.
The FERM mechanism will incentivise continued market participation for existing long-term generation operators as well as supporting the entry of new eight-hour-plus firm dispatchable capacity in South Australia.
We anticipate a range of new long-duration storage technologies will participate, in addition to gas turbines.
As put by Tom Koutsantonis
The Malinauskas Government recognises the importance of ensuring secure, reliable and resilient electricity supply for South Australia, at least cost to consumers.
All around the world, fossil fuel generators are exiting electricity grids, and these are commercial realities we have been preparing for.
South Australia was one of the first jurisdictions in the world to identify the opportunity early to harness our abundant natural resources to get ahead of these realities.
Now we are again looking to the future with an innovative energy policy that creates certainty for both consumers and generators.
The call for tenders under the Firm Energy Reliability Mechanism is a major step in this evolution - by drawing more long-duration firm capacity into the market we are supporting our energy system to grow reliably to sustain communities and the economy into the future.
Long-duration dispatchable capacity remains vital to system stability, particularly during periods of peak demand. This call for tenders seeks to attract a combination of storage and generation projects that support system security and reliability while helping put downward pressure on wholesale prices.
