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A divided path: Connecting to renewable energy zone (REZ) or existing grid

The primary goal of Renewable Energy Zone (REZ) development is to coordinate renewable energy projects, particularly wind, solar, and hybrid projects, within specific locations. This ensures efficient electricity generation, transmission, and storage while optimising the network augmentations required to support power transmission.

Since the NSW Government’s first declaration of the Central-West Orana Renewable Energy Zone (REZ) in 2020—followed by the formal establishment of the Central-West Orana REZ Access Scheme in December 2022—many other REZs have been developed across NSW and Australia.

The South-West REZ is one of five major REZs established by the NSW Government. Stretching from Darlington Point in the east to Red Cliffs in the west, this region boasts abundant solar and wind resources. However, data from the Energy Synapse Platform indicates that the area currently suffers from poor marginal loss factors (MLF) as well as high levels of curtailment due to network constraints.

Several new transmission projects are being developed in the region, including Project EnergyConnect, which is currently under construction, and VNI West, which remains in the planning phase. EnergyConnect is projected to be completed by 2027, while VNI West is anticipated to be fully operational by 2030 under the Step Change scenario. These projects are expected to significantly enhance network capacity in the area.

Tender results announced for South-west Renewable Energy Zone Access Rights

AEMO Services, appointed by the NSW Government, launched the South-West REZ Access Rights tender in May 2024. Securing an Access Right is an essential step in being able to connect to a REZ and is awarded based on a competitive multistage merit assessment, which considers both project and financial value criteria.

The results of the South-west REZ Access Rights tender were finally announced on 23 April 2025. 3.56 GW of combined capacity was awarded across four projects:

1,460 MW Yanco Delta Wind Farm developed by Origin Energy;

1,007 MW Dinawan Energy Hub (wind, solar and BESS) developed by Spark Renewables;

831.2 MW Pottinger Energy Park (wind and BESS) developed by Someva and AGL; and

262.3 MW Bullawah Wind Farm developed by BayWa r.e.

One of the biggest advantages for developers connecting to a REZ is greater curtailment certainty. For example, the South-west REZ has a 3.86% Target Transmission Curtailment Level (TTCL) as stated in the tender guidelines. As a result, many renewable energy developers are eager to secure Access Rights to REZs. Our research indicates there are at least 28 projects located within the South-West REZ area with a total capacity of about 15 GW. Most of this capacity has missed out on securing an Access Right. This highlights a key risk for companies who are developing projects in REZs.

Many other REZs remain in the pipeline, with numerous renewable energy developers still awaiting connection opportunities. Project developers now face a divided path—either waiting for future REZ tenders, which depend heavily on transmission network augmentations, or advancing their projects by seeking opportunities elsewhere, in the increasingly limited existing network capacity.

The Energy Synapse Platform is widely used by utility-scale project developers and investors in the electricity sector to understand the locational value of wind, solar, battery, and pumped hydro projects across the National Electricity Market (NEM). This includes insights on marginal loss factors, capacity factors, revenue, and curtailment—key considerations for project developers as the market matures and integrates increasing volumes of renewable energy generation. Request a demo. 

Author: Mohamad Afin Faisol, Analyst at Energy Synapse.

Capacity Investment Scheme (CIS) Consultation Paper – high level summary

The Australian Government has released a public consultation paper seeking feedback on the design of the Capacity Investment Scheme (CIS). Responses are due by 31 August 2023.

We have put together a high-level summary of key elements of the scheme in this article.

Objective of the Capacity Investment Scheme

The CIS aims to encourage new investment in clean dispatchable capacity, support reliability, and reduce the risk of price shocks in Australia’s rapidly changing energy market.

The CIS expects to bring forward at least $10 billion of new investment and 6 GW of clean dispatchable capacity by 2030.

How the CIS works

There will be a series of competitive tenders seeking bids for clean generation and storage projects to fill expected reliability gaps.

Projects that are successful in the tender process will be offered long-term Commonwealth underwriting agreements for an agreed revenue “floor” and “ceiling” (see Figure). If the project earns more revenue than the “net revenue ceiling”, the owner will pay the Commonwealth an agreed percentage of revenue above the revenue ceiling. In contrast, if the project earns less revenue than the “net revenue floor”, the Commonwealth will pay the project owner an agreed percentage of the shortfall below the revenue floor (but not below zero).

This design is intended to increase investor certainty, while still giving project proponents flexibility in how they participate in wholesale electricity and contract markets.

Geographic coverage

The Capacity Investment Scheme is expected to be a national scheme covering the National Electricity Market (NEM) on Australia’s eastern seaboard as well as Western Australia’s Wholesale Electricity Market (WEM). The Australian Government is also exploring options to support capacity in the Darwin-Katherine Electricity System (DKIS).

Eligible projects

It is expected that projects will need to meet the following eligibility criteria:

– Produce zero Scope 1 emissions. Coal and gas projects (including blended fuel projects) will not be eligible. Note that storage projects that charge from the grid are considered to have zero scope 1 emissions and thus are eligible.

– Have a capacity of at least 30 MW (this requirement might be reduced in the WEM).

– Demonstrate that the project can contribute to system reliability. Standalone wind or solar PV projects will not be eligible due to their variability. However, VRE + storage hybrids are expected to be eligible. Demand response projects may also be eligible if they are capable of reducing demand for at least four hours. Storage projects are expected to have flexibility in how they bid in the CIS. For example, a 100 MW/200 MWh battery may bid as a 2-hour 100 MW dispatchable asset or a 4-hour 50 MW dispatchable asset.

– Be registered with AEMO and intend to participate in the central dispatch process.

– Use established/proven technology.

– Achieve financial close from 8 December 2022 onwards. Projects that have achieved financial close before 8 December 2022 will be not be eligible.

– Projects that are already, or will be, in receipt of revenue support from Commonwealth or state and territory governments will not be eligible for the CIS tenders. LGCs, ARENA grants, CEFC are all ok and will not impact eligibility.

– Projects can be privately or publicly owned.

Expected timeframes for CIS tenders

Tenders for the Capacity Investment Scheme are expected to be progressively rolled out from 2023 through to 2027 to meet reliability needs between FY2026 and FY2030. The reliability targets are expected to be expressed in terms of capacity (MW), medium storage (4-hour) equivalents.

The first phase of the CIS is expected to involve:

– Partnership with NSW Electricity Infrastructure Roadmap announced on 29 June 2023. This will involve Commonwealth support for up to 550 MW of firmed capacity, in addition to 380 MW already committed by NSW.

– South Australia / Victoria tender. Tender arrangements will be announced by October 2023.

Further details on the national roll out of the CIS are expected to be outlined by the end of 2023.

Feel free to contact us if you have any further questions.