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Agenda
Agenda Item Presenter
08:30 – 09:00 Tea and coffee -
09:00 – 09:10 Welcome and session introduction Simon Corbell
09:10 – 09:20 Auction overview Paul Smith
09:20 – 09:50 Key contract features Matt Dickie
09:50 – 10:20 Questions Panel
10:20 – 10:50 Morning tea -
10:50 – 11:05 Eligibility / Evaluation Matt Dickie
11:05 – 11:20 Community engagement and benefit sharing Katrina Hermann
11:20 – 11:35 Economic development / VIPP Athena Andriotis
11:35 – 12:05 Questions Panel
12:05 – 12:15 Session recap and next steps Simon Corbell
12:15 Information session concludes -
12:15 – 13:00 Lunch -
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• The Renewable Energy (Jobs and Investment) Act 2017 (Vic) sets the
Victorian Renewable Energy Targets (VRET) into legislation:
– 25% renewable energy generation by 2020, and,
– 40% renewable energy generation by 2025
• In Victoria, by 2025, the VRET will result in up to:
– 10,000 jobs
– $7.2 billion in new capital expenditure
– $2.1 billion in additional economic activity
Auction Context
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• The 2017 VRET Reverse Auction was officially opened on 14
November 2017, and will:
– deliver up to 650 MW (389,000 households),
– incentivise up to $1.3 billion of investment
– create 1,250 construction jobs over two years and 90 ongoing jobs
• The auction offers long term Support Agreements (contracts) to
proponents, to create the investment certainty required to build new
energy generation capacity.
Auction Context
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• The design of the auction has been informed by extensive
public and industry consultation by DELWP since the
VRET targets were first announced in June 2016.
Auction Context
Auction Design
Commercial & Legal Advice
VRET Scheme Stakeholder Consultation Paper
June 2016
Summary Report of VRET Stakeholder Submissions
December 2016
Industry Consultation Workshops
2016
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Auction Design
• Bids for this competitive reverse auction from renewable energy projects are submitted under a formal Request for Proposal (RFP) process on tenders.vic.gov.au
• Successful proposals will be awarded a Support Agreement (contract) with the State of Victoria, providing financial support over a 15-year period.
• RFP opened 14 November 2017
• Proponents can request further information on the auction until 31 January 2018.
• The RFP will give proponents 3 months to submit their proposals, closing on 14 February 2018. Evaluations will begin the next day.
• It is estimated that successful proponents will be notified in July 2018.
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Auction Design
• Under the Support Agreement, successful
proponents will be paid through a Hybrid payment
mechanism, which is a mix of a fixed Base Amount
and a variable Contract-for-Difference payment
(CfD).
• Proponents to bid the minimum Base Amount
payment ($/MW/year) and minimum Payment Cap
($) in two scenarios:
– LGCs transferred to State
– LGCs retained by proponent
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• 550 MW of large scale renewable energy generating systems based on wind, solar or other energy sources declared by the Minister.
• 100 MW of large-scale solar-specific renewable energy.
• 13 mandatory eligibility criteria.
• 5 evaluation criteria, that will assess value for money of each proposal, in conjunction with bid prices.
Auction Design
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Payment Mechanism
• Successful proponents will be awarded a Support Agreement (contract)
with the State and paid through a Hybrid payment mechanism
• Contract-for-Difference (CfD)
- State will set the CfD ‘strike price’ in $/MWh of eligible electricity
generated
- Two way payment mechanism, paid monthly in arrears
• Base Amount
- Proponents bid for this component to be paid by the State to the
Supplier on an annual basis ($/MW/Year)
• Payment Cap
- All projects will be subject to a project specific cap which applies to
the CfD and the Base Amount payments
- Proponents bid for this component
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Contract-for-Difference
State pays proponent
Proponent pays State
Floor
price
How a Contract-for-Difference works
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• Strike Price (referred to as ‘Contract Price’ in the
RFP) as set for eligible technologies:
– $56.52/MWh for wind projects;
– $53.06/MWh for fixed plate solar projects; and
– $56.85/MWh for single axis tracked solar projects.
• Floor Price of $0/MWh.
Contract-for-Difference
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• The Base Amount payment is a set price paid annually over
the life of the contract
• Proponents will bid for this component in the form of
$/MW/year
• The Base Amount payment is conditional on the facility having
met availability thresholds over the year:
– 90% of nameplate capacity for wind projects
– 95% of nameplate capacity for solar projects
Base Amount Payment
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• All projects will be subject to a project-specific Payment Cap.
• Once a project’s Payment Cap is reached, no further Support Payments will be made by the State to that project until any net CfD payments made to the State result in the cumulative net amount paid being below the Payment Cap.
• The CfD payment component will continue to be calculated each month, and if the cumulative payments return to be below the cap, then payment from the State to proponents will resume.
• Proponents are asked to bid the minimum Base Amount and Payment Cap they would require to support their project.
Payment Cap
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• Proponents bid the minimum Base Amount
payment ($/MW/year) and minimum Payment Cap
($) in two scenarios:
– 100% of LGCs transferred to State
– 100% of LGCs retained by proponent
• The State will select the option that presents the
best value for money
Large-Scale Generation Certificates
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Support Agreement scope
• Term
– A Support Agreement will be for a length of 15 years under
the 2017 auction
– The anticipated supply date will be a date prior to 30
September 2020, agreed between the State and the
Supplier during the tender process
• Commitments made under the VIPP and the Major
Projects Skills Guarantee will form a part of the
Support Agreement
Support Agreement
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• The Support Agreement contains a number of Conditions Precedent that must be satisfied, including:
– the State accepting the Supplier's Safety, Health & Environment Plan, Communications and Community Engagement and Benefit Sharing Plan, and Industrial Relations Management Plan;
– The Supplier providing a Security to the State
– the occurrence of financial close under the supplier’s financing documents.
• Suppliers have 6 months to satisfy conditions precedent
Conditions Precedent
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• The Supplier is obliged to meet the key Project
Milestones by specified Milestone Dates
• The key Milestones are:
– financial close;
– submission of a draft Safety Health & Environment Plan,
Community Engagement and Benefit Sharing Plan and
Industrial Relations Management Plan;
– commencement of construction; and
– execution of the Connection Agreement.
Project Milestones
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• If there is a change in law which increases or
reduces the costs incurred or to be incurred by the
supplier, the supplier is entitled to pass through
50% of the additional costs, and must pass through
50% of the reduced costs, as an adjustment to the
Contract Price or the Base Amount.
• This sharing mechanism is subject to a threshold of
$500,000
• The Support Agreement also contemplates:
– Repeal/amendment of the Federal RET – no change
– NEM Design Changes – good faith negotiations
– Market Disruption Events – good faith negotiations
Change in Law
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Proponent Eligibility Criteria
• The eligibility criteria are designed to guarantee the capacity of
generating systems, and a minimum standard of proponent and
project quality and viability
• 13 eligibility criteria in total
• Proponents must comply with all of the eligibility criteria
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Proponent Eligibility Criteria
EL 1: The proponent must be a non-tax exempt Australian company or subsidiary
under the Corporations Act 2001 (Cth) or a wholly or majority owned Commonwealth or
Australian state or territory government body.
EL 2: The proponent must propose one contracted entity to be legally responsible for
the proponent’s proposal and Support Agreement.
EL 3: The proponent and/or the contracted entity must not be, or become, bankrupt,
insolvent, or be in, or enter into, administration, receivership or liquidation, or take
advantage of any statute for the relief of insolvent debtors at any time during the RFP
process.
EL 4: The proponent and/or the contracted entity must not have had a judicial decision
relating to employee entitlements made against it (not including decisions under
appeal) and not have paid the claim.
EL 5: The proponent and/or the contracted entity must not have been named as an
organisation that has not complied with the Workplace Gender Equality Act 2012 (Cth).
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Project Eligibility Criteria
EL 6: The proposal must be for a facility with a renewable energy
generating system based on wind, solar or other energy sources declared
by the Minister.
EL 7: The proposal must be for a facility which establishes a single
generating system that is able to qualify as a ‘large-scale’ renewable
energy project under the Renewable Energy (Electricity) Act 2000 (Cth),
and therefore be eligible to create and register LGCs. The capacity must
be as determined at its point of connection to the NEM.
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EL 8: The facility in the proposal must:
• be no less than 10 MW nameplate capacity at its point of
connection to the interconnected national electricity system;
• have already registered, or have commenced registration
with AEMO, as an Intending Participant or as a Registered
Participant; and,
• have submitted a complete Connection Application to the
connecting Network Service Provider, including completed
grid connection studies.
EL 9: The proposal must be for a new facility.
Project Eligibility Criteria
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EL 10: The proposal must be for a facility that is able to commence commercial operations in, or
prior to, September 2020.
EL 11: The proposal must be for a facility with a live planning permit from the relevant authority.
EL 12: The proposal must be for a facility whereby a minimum of 10% of the Project Total
Estimated Labour Hours, will be undertaken by Apprentices, Trainees, or Engineering Cadets
under the Major Projects Skills Guarantee (MPSG).
EL 13: The proposal must demonstrate local community support by satisfying the standards of
the ‘involve’ spectrum level of engagement as described in the Community Engagement and
Benefit Sharing Guide.
Project Eligibility Criteria
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• The State intends to evaluate correctly submitted proposals, that
comply with all the Eligibility Criteria.
• Key considerations in the State’s evaluation of proposals to determine
best value for money for the State will include:
– Bid prices with and without LGCs for:
1. the Base Amount, and
2. the Payment Cap.
– Performance against five Evaluation Criteria.
Project Evaluation
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• Proponents must make a price bid by submitting a completed Proponent Information Form, to reflect each of the following:
– in the case that LGCs are transferred to the State:1. Base Amount ($/MW/year – 30 June 2017)
2. Payment Cap ($ – 30 June 2017)
– in the case that LGCs are retained by the proponent:1. Base Amount ($/MW/year – 30 June 2017)
2. Payment Cap ($ – 30 June 2017)
• In the reverse auction, lower price bids will be favoured.
• The State also retains the right to select its preferred LGC treatment pathway for each proposal.
Bid Prices
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Evaluation Criteria
Number Criteria Weighting
EV1 Financial capability and
commercial viability
25%
EV2 Technical capability and viability 25%
EV3 Economic development 25%
EV4 Community engagement and
shared benefits
15%
EV5 Impact on existing electrical
network infrastructure
10%
• While bid prices are a primary variable in the State’s
determination of value for money, the State requires other
important factors to be considered in order to properly address
the wider objectives of this scheme – this is achieved through
evaluation of each proposal against the five criteria below.
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• This criterion accounts for:
– progress in obtaining required financial approvals,
– the financial capacity of the proponent,
– the funding strategy to deliver the project.
• It looks at the proponent’s detailed financial modelling, using the
financial spreadsheet template provided as part of the RFP.
EV1 – Financial Capability and Commercial Viability
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• This criterion evaluates all aspects of the Project’s technical
specifications with a view to determining its technological viability.
• This will include all technology used, forecast production,
maintenance plans, and technical risk.
• What is the feasibility of the project completing construction and
starting on time?
EV2 – Technical Capability and Viability
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• This criterion measures a proposal’s contribution to economic
development in Victoria and the renewable energy industry.
• It will assess the positive impact of a project on the economic
development of services and manufacturing industries, regional
development, demonstrable development of supply chains and
broader economic benefits, such as headquarter locations, job growth
and research and innovation activities.
EV3 – Economic Development
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1. Major Projects Skills Guarantee (MPSG)
Proponents are required to submit an MPSG Compliance Plan. The MPSG
mandates that at least 10% of work carried out on Victoria’s major projects,
valued at more than $20 million, must be undertaken by apprentices,
trainees or engineering cadets. The 10% requirement applies to contract
works in their entirety and extends to all of the works specified as part of
contracts for those projects. Projects will be scored higher if they can
exceed the 10% requirements.
2. Local Investment Plan (LIP)
Proponents should submit a Local Investment Plan using the Local
Investment Guide provided as part of the RFP, outlining their commitment
and approach to increasing capital investment in the renewable energy
industry, manufacturing and associated industries in Victoria, outside of the
renewable energy facility bid into the auction.
EV3 – Economic Development
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3. Victorian Industry Participation Policy (VIPP)
Proponents are required to provide a Local Industry Development Plan (LIDP)
complying with VIPP Strategic Project Framework. Strategic Projects are projects with
a total project value of $50 million or more, excluding maintenance and operational
costs. Strategic Projects are subject to rigorous local content requirements to help drive
additional economic activity and jobs.
To assess how a Project will meet VIPP’s requirements, proponents will be required to
attempt and meet local content figures of 64% for wind and solar projects. Projects will
be scored higher if they can exceed the local content figure.
EV3 – Economic Development
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• This criterion measures a proposal’s community engagement and will be assessed against a best-practice approach that builds relationships with local communities and meaningfully empowers communities to participate in and shape a project’s development, construction and operation.
• Shared benefits will be assessed on the project’s approach to the distribution of financial benefits.
• Proponents must submit documents as outlined in the Community Engagement and Benefit Sharing in Renewable Energy Development – A Guide for Renewable Energy Developers
EV4 – Community Engagement and Shared Benefits
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• This criterion evaluates projects on their impact on transmission
networks and favours minimal direct and indirect transmission
network connection and augmentation costs.
• Where appropriate, projects that also assist with grid stability, grid
reliability, and network and energy security will be favourably
evaluated.
EV5 – Impact on Existing Electrical Network Infrastructure
Community Engagement and Benefits Sharing
Katrina HermannManager, VRET Implementation Renewable Energy Division
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Why embed community engagement into VRET criteria?
• Best practice community engagement and benefit sharing are
fundamental to generating community support;
• it puts local communities at the centre of decisions that impact
them and builds trust;
• the Government wants to be assured that successful projects
work with neighbours and the community, and understand local
priorities;
• it mitigates significant opposition
to a project; and
• it minimises potential delays
caused by a loss of ‘social
acceptance.’
Community Engagement and Benefit Sharing
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Community engagement is both an
eligibility AND evaluation criteria
• The eligibility requirement ensures
projects achieve a level of
engagement necessary to mitigate an
unacceptable level of ‘social’ risk
• The evaluation criteria provides a
mechanism to reward projects that
perform beyond the eligibility
requirement
Eligibility criteria
The proponent must first meet a
minimum level of engagement associated
with the ‘Involve’ spectrum - as outlined
in Table 1 (page 9) of the Guide
VRET Eligibility and Evaluation Criteria
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Evaluation criteria (EV4)
1. Assesses the project’s approach to community engagement during
planning, construction and operation, over and above the eligibility
criteria.
2. Assesses how the project’s ‘financial’ benefits will be shared with
local and regional communities, over and above the eligibility criteria.
Note: ‘financial’ includes in-kind contributions
Four separate documents must be submitted (EL13)
1. Social Risk Analysis
2. Community Engagement Strategy
3. Benefit Sharing Program
4. Reporting, Monitoring and Evaluation Plan
5. (optional) Letters of support, including community support
VRET Evaluation Criteria (EV4)
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Required Documentation (Part C of Guide)
1. Social Risk Analysis
• Context narrative – key aspects of local demographics, culture
and history
• Social impact site map – generator location/s and associated
infrastructure in relation to local residents and the community
• Social risk matrix – key social risks and mitigation strategies
• Stakeholder mapping spreadsheet – identifies relevant
stakeholders etc. Designed to help developers with their own
planning. Remove private information for Government version.
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2. Community Engagement Strategy – includes:
Required Documentation
• possible engagement
activities by project phase
• tailoring to the local context
• starting engagement early in
the development process
• community participation in
decision-making and design
(fair process)
• face-to-face interactions
• complaint management
system.
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3. Benefit Sharing Program
• Requires a fair process that is tailored to the local context and scale
• The Guide does not specify an approach – it’s up to the developer to
design it with their local community
Key Issue: neighbourhood agreements should not
void people’s rights to object or raise concerns
Required Documentation
• Done correctly it can help build
support
• Aims to provide flexibility e.g.
community funds, local procurement,
neighbourhood payments, beyond
compliance activities and employee
volunteerism
Coonooer Bridge Wind Farm, Victoria
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4. Reporting, Monitoring and
Evaluation Plan
• refer to Part C, Section 4
5. Optional letters of support,
including community support
Required Documentation
World’s largest turbine (credit: LM Power)
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Victorian Government does not expect:
• the developer to do everything the community asks for; or
• adopt an approach that is not balanced against other priorities, i.e.
value for money
Practical approach
• Despite the requirement to submit formal documents:
– they are designed to capture the activities many developers already do; and
– they assist Government to assess different bids more transparently.
• the key is to demonstrate understanding, consideration and response
to neighbours’ and host community’s priorities; and
• demonstrate that these priorities have been considered across the
project life cycle.
Closing Remarks
Manufacturing
Priorities and VIPP
Victorian Renewable Energy Target
RFP Industry Information Session
28 November 2017
• 3rd largest industry in Australia - all major
Australian construction companies have
operations in Victoria
• 3rd largest employer
• Largest industry for R&D spending
• Continue to grow into the future:
– State Government investments of over
$38 billion in new infrastructure projects
– Stream of private capital investments -
$678 million in 2017
(20% increase from 2016)
Victoria’s Manufacturing Industry - overview
283,000 jobsor 9% of Victoria’s
workforce
$25.9 billion
value to the State or
7.5% of GSP
• Create new jobs and stimulate industry investment in high growth,
high value industries
Victoria’s priority industries and sectors
Ensuring local SMEs are given a full and fair
opportunity to compete for government
contracts, while still achieving value for money:
– Creating local opportunities and building supply-chain
capabilities
– Over 72 VIPP Strategic Projects confirmed since
December 2014 – include minimum local content
requirements
– Reforms introduced over last 2 years to strengthen
VIPP Policy (DEDJTR) –
www.economicdevelopment.vic.gov.au/victorian-industry-
participation-policy
Industry Capability Network (ICN) –
www.icn.org.au/content/victoria/vipp
Victorian Industry Participation Policy
Local content for VRET projects
Minimum local content requirements set by
government:
64% for renewable energy facilities, including 90% steel products
from locally milled steel
90% during operations phase
First auction delivering renewable energy and local
industry opportunities:
– up to $1.3 billion of investment
– create 1,250 construction jobs
– stimulate manufacturing supply chain opportunities and jobs
– create ongoing jobs.
Local Industry Development Plan (LIDP) –
reflecting the supply chain
Local Content commitments – VRET – current round
• Minimum local content requirements
• Local steel
• Jobs, including apprentices and trainees
Identifying local products and capabilities
• Industry consultation process
• Alerting local industry
• Liaising with international suppliers to engage locally
Assessing local products & capabilities with overseas
equivalent
Product or service selection policy or procedure
Monitoring and reporting
Statement of compliance / Statutory Declaration
Engaging with Victoria’s supply chain –
Industry Capability Network
To register:
https://gateway.icn.org.a
u/
• Identifies local capability, products and
services
• Evaluates ANZ value-added activity
commitments made in LIDPs
• Monitors and reports on outcomes for
Victorian industry involvement
• Links principal contractors and local
suppliers:• Liaising with bidders to identify local goods &
services
• Local supplier advertising on ICN Gateway
• Assisting bidders to complete their LIDP.
• Future Industries
Manufacturing Program
• Sector Growth Program
• New Energy Jobs Fund
Supporting industry growth – key funding
initiatives
• Local Industries Fund
for Transition
Metropolitan
• Annick Pascal - CBD
• David Hunter - West
• Natasha Twigg - North
• Bev Lyttle - East
• Matthew McKean – South East
Regional
• Kushiel Prasad - Geelong
• Nigel Harper - Warrnambool
• Ray Hortle - Hume
• Tim McAuliffe - Gippsland
• Carly Grigg - Loddon Mallee
• Scott White - Grampians
DEDJTR contacts:
Questions and Discussion
Thank you.
Athena Andriotis
A/Executive Director, Advanced Manufacturing
Department of Economic Development, Jobs, Transport & Resources
athena.andriotis@ecodev.vic.gov.au
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