16 GW of battery energy storage capacity is in the NEM pipeline to the end of 2027, a quarter of which has a long-term government-backed revenue guarantee. This is through either the Capacity Investment Scheme (CIS) or a Long-term Energy Supply Agreement (LTESA). These schemes were established to support the construction of new generation and flexible capacity.
In this article, we look at both these schemes and the battery projects that have won contracts.
What are the CIS and LTESA schemes?
The CIS and LTESA schemes were both introduced with a similar objective: to secure new, low carbon generation and flexible capacity. The key difference between the two is that the CIS is run by the federal government, while LTESAs are from the New South Wales state government.
Capacity Investment Scheme (CIS): a federal support policy for clean generation and dispatchable capacity. This is with the aim of helping Australia meet a goal of 82% renewable electricity by 2030. Contracts last 10-15 years and offer a long-term revenue cap and floor, with both values bid for in competitive tenders. The scheme supports new capacity in both the NEM and WEM.
Long-Term Energy Service Agreements (LTESA): provided to winning generation or long-duration energy storage projects forming part of New South Wales’ Electricity Infrastructure Roadmap. This policy aims to support 12 GW of new renewable generation and 2 GW of long-duration energy storage within the state by 2030. Contracts last up to 20 years, and offer a long-term revenue floor.
Minimum revenue guarantees support the construction of new projects
CIS and LTESA contracts, for battery energy storage projects, offer a government-backed guarantee of minimum revenue (i.e. a floor). This is in contrast to a capacity market which provides additional value on top of other revenues.
This guarantee helps projects, including those such as long-duration energy storage which are less commercially viable, secure financing and ultimately get built. This is the case even if the floor is never required in practice.
To balance the floor, both schemes contain a mechanism for revenues above a certain level (or cap) to be shared. In the case of an LTESA, this cap is only introduced if the floor is called upon.
Projects with contracts are free to explore different commercial arrangements for their assets. This includes other long-term contracts such as SIPS, or tolling arrangements with private parties.
Contracts are awarded in tenders run annually - or more frequently
AEMO Services operates the tenders for both schemes. The first LTESA tender opened in 2022 and four have since been completed. The first CIS tender only opened in 2024 with two since completed, the most recent in December 2024.
In both CIS and LTESA tenders, the floor level forms a key part of the bid. For the CIS scheme the cap level is also part of the bid.
However, these are not the only criteria a project is judged on. The tenders also assess:
- The company’s ability to deliver the project;
- Wider system benefits from the project; and
- Social benefits from the project and engagement with local communities and First Nations.
Batteries have been uniquely able to participate in all CIS and LTESA tenders
Different tender rounds for both CIS and LTESAs have focused on procuring different types of capacity. For the CIS scheme, this has been either generation (such as a solar farm) or dispatchable capacity (such as a battery). For the LTESA scheme, this has been generation, long-duration energy storage, and firming capacity (similar to dispatchable).
Standalone battery energy storage has been able to participate in the CIS dispatchable power tenders, and the long-duration energy storage and firming LTESA tenders. Meanwhile co-located battery energy storage is able to participate in both schemes’ generation tenders, when bid in combination with a renewables project.
The story so far for BESS
Through the four LTESA and two CIS tenders available to battery energy storage in the NEM, a total of 3.8 GW of projects have secured agreements. The majority of this - 2.3 GW - has come through the CIS. This is mostly due the latest CIS tender which saw a bumper 1.3 GW of co-located battery projects win contracts.
15 different developers have won contracts across a total of 21 different projects. The developer with the most capacity is AGL, thanks to the 500 MW Liddell BESS contracted in the second LTESA tender round.
The second highest is Elgin Energy, who secured 427 MW of contracts across three co-located projects in the most recent CIS tender.
The first LTESA projects are due online in 2025, and CIS in 2026
The first LTESA tender was launched in 2022, followed by the CIS a year later. The earlier introduction of the LTESA means we expect to see first of these projects online first. The 500 MW Liddell BESS and 65 MW Smithfield BESS are due online in 2025.
The majority of CIS projects are not expected online until 2027, when 1.6 GW of batteries with CIS contracts could start trading.
Almost 50% of this capacity is for long-duration storage...
The guarantee of a minimum level of revenue has helped four-hour duration battery projects progress, which may otherwise be less commercially viable.
Meanwhile, some LTESA tenders have explicitly targeted longer-duration systems. Three different eight-hour batteries winning contracts in the third LTESA tender: the 50 MW Limondale BESS, 50 MW Goulburn River BESS, and the 275 MW Richmond Valley BESS.
Over half of the battery capacity awarded LTESA and CIS contracts is 4 hours or longer in duration, compared to just 30% in the overall pipeline.
The tenders are technology agnostic, and in LTESA tender round 3 one alternative storage technology did win a contract: Silver City Energy Storage, an eight-hour 200 MW compressed-air storage system.
...And over 50% is co-located
Co-located battery projects can participate in generation tenders, and 1.7 GW of co-located battery projects now have contracts between the two schemes. Most of this is from the latest CIS tender, when eight co-located projects won contracts. One of these, the 200 MW Junction Rivers BESS, is co-located with a wind farm.
Another 5 GW of NEM battery energy storage could win CIS or LTESA contracts in 2025
Four further tenders across both LTESA and CIS schemes are currently underway, with battery energy storage able to participate in all of them. Three of these are focused on the NEM: LTESA tender round 5 (New South Wales only), and CIS tenders 4 and 5.
The latest LTESA tender has a target of up to 1 GW new energy storage capacity. CIS tender 4 has a target of up to 4 GW, and additional battery capacity could also come through co-located projects in tender 5. The results from the LTESA tender are expected in February, with CIS contracts announced later in the year.
Registrations for CIS tender 4 are open until 11 February 2025. More information can be found from AEMO Services here: https://aemoservices.com.au/tenders/cis-tender-4-nem-generation
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