As Australia’s energy system undergoes rapid transformation, the New South Wales (NSW) government is taking a decisive step to future-proof its electricity grid. In a strategic move unveiled at the 2025 Australian Clean Energy Summit in Sydney, NSW’s Minister for Climate Change and Energy, Penny Sharpe, announced a new competitive tender to secure 500MW of firming capacity. This initiative is a timely response to growing concerns over grid reliability, as coal plants retire and the share of variable renewable energy increases.
The tender, set to launch later this year, will be administered by ASL (formerly AEMO Services). It specifically targets commercial and industrial energy storage (C&I ESS), gas peakers, and virtual power plants (VPPs), and prioritizes projects in the state’s key urban centres—Sydney, Newcastle, and Wollongong. The aim: to lock in flexible, dispatchable capacity by 2028 to cover peak demand events like summer heatwaves and winter cold snaps.
A Measured Response to Emerging Reliability Risks
This procurement drive follows fresh analysis from the Australian Energy Market Commission (AEMC), whose 2024 Reliability & Security Report flags potential shortfalls in NSW’s electricity supply starting in 2027–28. Without additional firming resources, the state could struggle to maintain grid stability during high-demand periods. Similar risks loom for South Australia and Victoria, reinforcing the urgent need for scalable and reliable energy storage technologies across the National Electricity Market (NEM).
Unlike traditional fossil-fuel-based peaking plants, battery energy storage systems (BESS) offer the flexibility and rapid response times essential for modern energy systems dominated by intermittent renewables. As solar and wind continue to displace coal, firming technologies like C&I ESS and grid-scale batteries will be indispensable in smoothing out supply fluctuations and maintaining system reliability.
Building on Momentum from the First Tender
The upcoming tender builds on the success of NSW’s inaugural firming capacity round in 2023. That round supported several major projects, including:
- AGL’s 500MW/1,000MWh Liddell BESS, which repurposes a former coal site into a clean energy asset.
- Akaysha Energy’s Orana battery (415MW/1,660MWh), one of the largest in the pipeline.
- Iberdrola’s Smithfield battery (65MW/130MWh), providing fast-response power in urban Sydney.
- NSW’s first large-scale virtual power plant, enhancing grid interactivity and consumer participation.
Together, these projects exemplify how large-scale storage and digital energy networks can play a pivotal role in delivering reliable power while supporting decarbonization goals.
Commercial & Industrial Energy Storage in the Spotlight
The tender’s emphasis on urban regions signals a significant opportunity for the commercial and industrial (C&I) sector. As companies face rising energy costs and pressure to decarbonize, C&I battery storage is becoming an increasingly attractive solution. These systems can reduce peak demand charges, provide backup power, and participate in grid services—while also aligning with corporate sustainability strategies.
Europe has already seen the value of distributed energy resources (DERs) in bolstering grid resilience. With similar trends now accelerating in Australia, NSW’s latest policy move could drive parallel outcomes: faster deployment of flexible storage, greater market competition, and stronger private sector investment in C&I ESS.
A Forward-Looking Strategy
By targeting firming capacity in key load centres and embracing emerging technologies like VPPs, the NSW government is demonstrating a forward-looking approach to energy planning. This isn’t just about plugging short-term gaps; it’s about laying the groundwork for a more resilient, decarbonized energy future.
For developers, investors, and energy users alike, the message is clear: there is space—and need—for innovative, scalable energy storage solutions in Australia’s evolving power landscape.
As the tender unfolds in the months ahead, all eyes will be on how NSW navigates the challenge of securing firm capacity while enabling the energy transition. One thing is certain—battery energy storage systems and C&I ESS are no longer fringe technologies. They’re rapidly becoming essential tools in the clean energy toolkit.
