South Australia has taken another decisive step in its clean energy transition, launching its first-ever capacity tender to secure up to 700 MW of long-duration energy storage (LDES) and firm generation capacity. The initiative—known as the Firm Energy Reliability Mechanism (FERM)—aims to deliver dispatchable power when renewable generation falls short, particularly during hot summer evenings when demand peaks and solar output declines.
A New Framework for Reliability in a Renewable-Heavy Grid
Administered by ASL (formerly AEMO Services), the FERM tender represents the first implementation of South Australia’s new capacity mechanism, designed to strengthen reliability in one of the world’s most renewables-dominant power systems.
The state already sources roughly three-quarters of its annual electricity demand from wind and solar, but that success has underscored the need for firm, dispatchable resources to stabilise the grid during periods of low renewable output.
Under the FERM framework, projects must provide a minimum of 30 MW and be capable of at least eight hours of continuous dispatch, signalling a strategic shift toward long-duration storage—the next frontier in achieving a resilient, decarbonised grid.
Tender Structure and Timeline
The 700 MW capacity target is divided into three stages with staggered commissioning milestones:
- Category 1: 400 MW – Target operation by November 2028
- Category 2: 200 MW – Target operation by November 2029
- Category 3: 100 MW – Target operation by November 2031
Registration opened in late October 2025, with submissions due by late November. The state expects to finalise contracts around April–May 2026.
Projects will be assessed on technical readiness, commercial robustness, technology maturity, and financial strength. Successful proponents will secure long-term capacity agreements, ensuring predictable revenue streams that help de-risk investment in large-scale storage and firming assets.
Technology-Neutral—but Likely Battery-Led
While the FERM design is technology-neutral, most observers expect battery energy storage systems (BESS) to dominate bids given their flexibility, modularity, and proven performance in South Australia’s grid.
However, the tender explicitly allows other firming technologies—including pumped hydro, gas generation, compressed air, and other long-duration storage systems—to compete, provided they meet dispatchability and reliability standards. This inclusive approach acknowledges that a deeply decarbonised grid will depend on a portfolio of complementary technologies rather than a single solution.
Implications for the C&I Energy Storage Market
Although focused on grid-scale infrastructure, the FERM tender is expected to catalyse growth in the commercial and industrial (C&I) storage sector. As large-scale projects enhance grid reliability and introduce new market mechanisms, businesses are likely to invest in behind-the-meter batteries to manage peak demand, reduce energy costs, and participate in flexibility markets.
South Australia’s structured and transparent approach—combining clear capacity targets, staged timelines, and bankable contract models—offers a replicable blueprint for other regions pursuing the same balance between energy security and decarbonisation.
A Model for Renewable-Rich Economies
As legacy coal and gas plants continue to retire, South Australia’s proactive capacity planning sets a benchmark for other high-renewables jurisdictions. Its earlier investments—such as the 238.5 MW / 477 MWh Blyth Battery—have already demonstrated how fast-deploying storage assets can stabilise the grid and create new market value through arbitrage and frequency services.
With the FERM tender now targeting long-duration assets, South Australia is scaling that success, paving the way toward a more flexible, reliable, and low-carbon energy future.
