AEC Statement on Expansion of Capacity Investment Scheme

The Federal Government’s expansion of the Capacity Investment Scheme (CIS) is an important announcement that should accelerate the deployment of additional renewables and storage but is not without risk, according to the peak body for energy generators and retailers, the Australian Energy Council.

The Australian Energy Council’s Chief Executive, Sarah McNamara, said “the expanded CIS is aimed at helping rally investment in renewables and firming technologies, which has been flagging.

“At 32GW this is a significant injection of new generation capacity into a grid with unresolved system constraints. These include delays in transmission deployment, social licence issues, supply chain bottlenecks and the challenge of maintaining essential system services as more renewables come online.

“New generation should be delivered where it will be of most benefit to consumers, and where constraints have been addressed to ensure it delivers the best value for Government and taxpayers,” Ms McNamara said.

The expanded CIS announced today will underwrite project revenues through a ‘contract for difference’ model which is intended to de-risk and bring forward investments, but can also distort the market by dampening signals which indicate where and when energy is most valuable. Its cost will be carried on-budget, which will not impact power bills as the risks will be carried by taxpayers.

“It is now critical that the Government consults with industry to ensure that, in its design detail, the expanded CIS supports the market towards 2030. Ideally it should be a short-term measure which supports the timely entry of renewables and avoids the risks of non-delivery if market conditions change.

“Industry is committed to working with the Government and the States to ensure that our electricity grid can continue to decarbonise at pace and operate without interruption to customers into the 2030s and beyond.  Key to this is ensuring any enduring policy framework supports the right mix of energy to sit alongside renewables, namely storage and peaking generation.

“The energy industry will continue to work with the Government to deliver the energy transition on behalf of Australians. We look forward to engaging closely with the Government on the design of the expanded CIS over the coming months,” Ms McNamara said.

About the Australian Energy Council

The Australian Energy Council is the peak industry body for electricity and downstream natural gas businesses operating in the competitive wholesale and retail energy markets. AEC members generate and sell energy to 10 million homes and businesses and are major investors in renewable energy generation. The AEC supports reaching net-zero by 2050 as well as a 55 per cent emissions reduction target by 2035 and is committed to delivering the energy transition for the benefit of consumers.