Victorian Government announces Australias most ambitious energy storage targets

What you need to know

• On 27 September 2022, the Victorian Government announced that it will introduce Australia's most ambitious energy storage targets. The targets include at least 2.6 GW of energy storage capacity by 2030 and at least 6.3 GW of energy storage capacity by 2035. 
• The targeted storage capacity is intended to provide additional dispatchable energy to support the Victorian Government's legislated renewable energy ambitions (50% by 2030 target), while reducing wholesale spot price volatility and the need for traditional thermal generation in the Victorian electricity market. 
• It is envisaged that the storage targets will be met through a range of storage technologies, including short and long duration storage applications, including aggregated household and community chemical battery storage, utility-scale chemical battery and pumped hydro storage and hydrogen-based technologies.
• The targets will be legislated to provide certainty for storage developers and investors and are accompanied by a $157 million funding package.   
• Details of the specific policies and/or scheme architecture that will facilitate the targeted investment and deployment of the energy storage capacity is still to be developed.  The Victorian Government has however suggested in a stakeholder briefing that it is working with the Federal Government and other NEM states on the development of the proposed NEM-wide capacity mechanism that would support storage investment.  In parallel, they are also working on policies that will remove some of the challenges currently impacting energy storage deployment.  This may include reforms to networking pricing rules and rewarding energy storage technologies for system and network services. 
• In addition to the energy storage target, the Victorian Government also announced that it will invest $119 million from the $540 million Renewable Energy Zone Fund in a new 125 MW/250 MWh battery energy storage system (BESS) (with grid forming inverters) in the Murray REZ following the conclusion of a competitive tender process for non-network services facilitated by AEMO (on behalf of the State).  The new BESS will provide system strength services to the Murray REZ under a 20 year system support agreement with AEMO.  It remains to be seen whether a similar process will be utilised by the Victorian Government to support additional utility scale energy storage deployment in the future as part of its targeted storage ambitions.  
• It was also announced that a further $38.2 million from the Energy Innovation Fund will be designated to four clean energy projects, including $7 million for a new 100 MW/200 MWh BESS at Terang. 

What you need to do

• The Victorian Government is currently seeking stakeholder feedback on the existing barriers to storage deployment and potential opportunities to accelerate storage investment in Victoria.
• Stakeholders who are interested in being involved in this consultation process should email victorianenergystoragetarget@delwp.vic.gov.au.
• Following this consultation process, the Victorian Government intends to release a consultation paper later this year.
• We will continue to keep you updated on further developments relating to the energy storage target as the consultation process progresses.

Author: Kate Phillips, Partner; Dale Gill, Senior Associate; Joshua Hetzel, Lawyer; and Sofia Skobeleva, Graduate.