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1 November 2026

NSW LTESA tenders explained: how long-term energy service agreements work

A plain-English guide to NSW long-term energy service agreements: the generation, hybrid, long-duration storage and firming products, how ASL runs the tenders, and what is coming next.

By Leigh Heaney, Watson Advisory

Long-term energy service agreements (LTESAs) are how NSW underwrites new generation, long-duration storage and firming under its Electricity Infrastructure Roadmap. This guide explains the different LTESA products, how the tenders run, what bidders are scored on, and what is coming next.

Who this guide is for

  • Developers of wind, solar, hybrid, battery, pumped hydro and firming projects in NSW.
  • Investors and lenders assessing what an LTESA adds to a project’s bankability.
  • Developers who used to bid into the federal Capacity Investment Scheme and now need a NSW pathway.

What an LTESA is

The NSW Electricity Infrastructure Roadmap is the state’s 20-year plan to replace retiring coal power. It is given effect by the Electricity Infrastructure Investment Act 2020 (NSW) and aims to support the private sector to build at least 12 GW of new renewable generation and 2 GW of long-duration storage. The NSW Government says it now has enough projects signed up to reach more than 75% of the 12 GW generation objective, and has contracted enough long-duration storage to meet its 2030 and 2034 minimum objectives.

An LTESA is an option contract. It gives a project the right, but not the obligation, to access a competitively set minimum price or revenue level over a long term. Operators can exercise the option in years when they want protection and leave it unexercised in years when the market looks better.

Three bodies are involved:

  • AusEnergy Services Limited (ASL), formerly AEMO Services, is the independent NSW Consumer Trustee. It runs the tenders and recommends successful projects.
  • The Scheme Financial Vehicle (SFV) is the contract counterparty. ASL describes it as Aa3-rated by Moody’s, with a statutory right to recover its costs from NSW electricity customers through distribution network businesses.
  • EnergyCo runs renewable energy zone (REZ) access schemes, which can affect where and how an LTESA project connects.

The LTESA products

Generation LTESA. A series of options, over a term of up to 20 years, to enter one-year swaps at a fixed price you bid. There is no upfront premium. When exercised, the swap settles monthly against sent-out generation: if the spot price is below your fixed price the SFV pays you the difference, and if it is above, you pay the SFV. In years you do not exercise, a repayment applies if your dispatch-weighted price exceeds a repayment threshold price (also bid): 50% of revenue above the threshold goes to the SFV, capped at the net payments you have received to date. That repayment share was 75% in Tender Round 4. An annual payment cap limits what the SFV pays.

Hybrid Generation LTESA. New in Tender Round 8. It covers generation co-located with storage behind a single connection point, where the storage can deliver at least four hours at its export capacity and the generation export capacity is at least as large as the storage. On exercise, the operator receives 50% of the difference between the strike price and the floating price, so risk and upside are shared.

Long-duration storage (LDS) LTESA. Options to receive a capped annuity that tops up the project’s net operational revenue when it falls below a net revenue threshold. You bid the threshold and the annuity cap, both of which escalate at the lesser of CPI and 3% under the default terms. Terms run up to 40 years for pumped hydro and 14 years for batteries, with annuity payments made quarterly. The projects awarded in the last two LDS rounds can each dispatch continuously for at least eight hours.

Firming LTESAs. When the NSW Energy Minister directs a firming tender, ASL awards LTESAs for dispatchable capacity that can respond during tight supply periods. Tender Round 7 awarded LTESAs to a 500 MW / 2,000 MWh battery (AGL’s Tomago Battery) and a 32 MW virtual power plant (Enel X), both required to reach commercial operations by November 2027. ASL is now consulting on the design of the Firming LTESA for its next firming tender, so check its Tender Round 7 and consultation pages for product terms.

Eligibility

Eligibility differs by product and round. For Tender Round 8 (generation), the key project tests were:

  • Generation from a renewable energy source, with at least 30 MW of generation capacity.
  • Registered, or intending to register, with AEMO for central dispatch in the NSW region.
  • Secretary’s Environmental Assessment Requirements (SEARs) received or, where SEARs do not apply, a development application lodged.
  • A connection agreement, or a network service provider’s response to a connection enquiry.
  • A Community Engagement Plan, which becomes contractually binding if you win.
  • No existing state or Commonwealth capital support, periodic payments or revenue underwriting. Projects with an earlier LTESA had to terminate it before bids closed, and bidders had to commit not to sign a Capacity Investment Scheme agreement for the project if awarded an LTESA.
  • No generation from native forest wood waste.

Location matters too. Projects connecting to REZ network infrastructure where access rights have been allocated need the relevant access right. Where an access scheme is declared later (the New England REZ scheme was declared on 23 October 2026, and EnergyCo is developing one for the Hunter-Central Coast REZ), an LTESA award is conditional on the project being able to connect under that scheme. (Watson Advisory can help you engage with EnergyCo on REZ access: admin@watsonadvisory.com.au)

How bids are scored

Tender Round 8 used four merit criteria:

  • MC1, financial value and system benefits (49%): the project’s ability to lower wholesale costs, its forecast net LTESA cost and its system security benefits.
  • MC2, deliverability and timeline (17%): development plan, connection progress, planning status and land tenure.
  • MC3, organisational, resource and financing capability (17%): track record, delivery model, development funding and financing strategy.
  • MC4, social value (17%): binding social licence commitments on local supply chains, jobs and training, First Nations participation and community benefits, supported by a local needs analysis.

ASL is clear that LTESAs are not awarded on lowest price alone. It also applies strategic considerations when shortlisting, such as the development pathway in its Infrastructure Investment Objectives (IIO) Report, credible delivery by 2030, and network location.

Step-by-step: how an LTESA tender runs

  1. Read the IIO Report and tender plan. ASL’s IIO Report sets the 20-year development pathway and a 10-year tender plan. It tells you which product is coming and roughly when.
  2. Prepare eligibility evidence early. SEARs or a lodged development application, a connection enquiry response, land arrangements and a Community Engagement Plan all take time.
  3. Register through ASL’s online portal. Registration, bid forms and Q&A open together, and registration closes about two weeks before bids close.
  4. Price the bid variables. For a Generation LTESA these include the fixed price and repayment threshold price (both in nominal dollars), the contracted percentage and any excluded option periods. For an LDS LTESA, the net revenue threshold and annuity cap. Bids should be competitive and enough to reach financial close.
  5. Prepare the social value schedule. The MC4 returnable schedule (the Industry and Aboriginal Participation Plan) is mandatory and becomes part of the contract.
  6. Execute the Tender Process Deed and submit. Submit project documents in a form capable of acceptance. ASL views departures from the pro forma documents unfavourably unless critical to the project.
  7. Lodge the Security for Process Bond. In Tender Round 8 this was $4,000 per MW, capped at $1.2 million, due within eight business days of bid submission. Bids must remain valid for at least nine months.
  8. Respond to due diligence. ASL may check with network service providers, AEMO, councils and planning authorities, and run know-your-customer, foreign investment and labour practice checks. (We can help you prepare for ASL’s due diligence checks: admin@watsonadvisory.com.au)
  9. Sign and deliver. Successful projects sign the LTESA and related agreements with the SFV. The bond protects against a winner walking away before signing.

Timelines and current tenders

ASL runs tenders twice a year under its 10-year tender plan. The most recent rounds were:

  • Tender Round 8 (generation): about 2.5 GW (7,000 GWh a year), the largest generation LTESA tender under the Roadmap and the first to offer the Hybrid Generation LTESA. Opened 20 May 2026; bids closed 6 July 2026; ASL expects to announce successful bids in the fourth quarter of 2026.
  • Tender Round 9 (long-duration storage): up to 12 GWh. Ran alongside Round 8 with the same closing date; results expected in the fourth quarter of 2026. Neither round’s results had been announced as at 1 November 2026.
  • Tender Round 7 (firming): 532 MW / 2,128 MWh awarded in May 2026.
  • Tender Round 6 (long-duration storage): six batteries totalling about 12 GWh, each able to dispatch for more than eight hours, announced February 2026.

Looking ahead, ASL’s 2025 IIO Report planned three more 7,000 GWh generation tenders across 2026 and 2027 after the Round 8 tender, then annual tenders of 4,600 GWh a year from 2028 to 2035. ASL now lists Tender Round 10, for an indicative 2.5 GW of generation, as upcoming and expected to open for bids in November or December 2026. On firming, ASL’s 2026 Firming IIO Report (published 13 October 2026) sets a 1,500 MW pathway for firming to be operating by the end of May 2033, ahead of the expected retirement of Bayswater and Vales Point. ASL is consulting on the tender and Firming LTESA design from 13 October to 4 November 2026, and expects the tender to open in early 2027. (Watson Advisory can help you prepare for the firming tender: admin@watsonadvisory.com.au) Projects will need to show sustained energy delivery over periods of at least eight hours.

As a guide to timing, Round 8 gave bidders about seven weeks from opening to bid close, with results due around six months after opening. The work that wins a round, such as planning, connection and community engagement, has to be well advanced before the round opens.

Common mistakes

  • Treating the LTESA as a PPA. It is an option. Your financial model needs to show when you would exercise it, and the repayment exposure in years you do not.
  • Ignoring the minimum generation test. In swap periods, a Generation LTESA operator pays a shortfall sum if output falls below 75% of its forecast P90 annual generation. Overstating your yield forecast has a cost.
  • Early delivery dates without a credible path. ASL says a pre-2030 date without a credible pathway is not expected to score as well as a credible later date.
  • Underestimating social value. MC4 is worth 17% and commitments are enforced through the contract. Commitments should respond to an actual local needs analysis.
  • Not planning for the bond. The Security for Process Bond must be unconditional and lodged within eight business days. Line up your bank or guarantor before the round closes.
  • Overlooking REZ access. In a REZ with an access scheme, you cannot connect without an access right, and an LTESA does not give you one.

FAQ

Who pays for LTESAs?

NSW electricity customers, through network charges. The SFV recovers its costs via distribution network service providers. That is why ASL assesses bids on their long-term financial value to customers.

Can I hold an LTESA and a Capacity Investment Scheme agreement?

Not for the same project. Tender Round 8 bidders had to commit not to sign a CISA if awarded an LTESA, and projects already receiving government revenue underwriting were ineligible. NSW’s generation allocation under the federal scheme has been filled, so NSW generation projects now go through Roadmap tenders.

Can a hybrid project bid?

Yes. Hybrids can bid for a Generation LTESA, and those with at least four hours of storage that meet the sizing and connection rules can bid for the Hybrid Generation LTESA. Only the generation capacity counts towards the tender target.

Do I have to exercise the option every year?

No. Generation LTESA options can be exercised in full, in part or not at all for each one-year swap period, unless you committed to excluded periods in your bid. LDS LTESA options also run in one-year annuity periods.

I lost a previous round. Is it worth bidding again?

Often, yes. NSW says the regular tender cycle is designed so unsuccessful projects can come back, with consistent processes and retained information. Ask for feedback and fix the weakest criterion first. (We can help you seek and act on ASL feedback: admin@watsonadvisory.com.au)

How Watson Advisory can help

We help developers decide which NSW round fits their project, build deliverability and social value cases that stand up to assessment, and manage engagement with communities, councils and government agencies. As a firm on the NSW Lobbyist Register, we work within NSW lobbying rules and tender probity requirements. Contact us at admin@watsonadvisory.com.au.

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About the author: Leigh Heaney is a Partner at Watson Advisory, specialising in government relations and public affairs. Leigh spent more than a decade as chief of staff to a senior federal frontbencher in both the House of Representatives and the Senate. Before joining Watson Advisory, Leigh was Government Relations director at Australia’s renewable energy peak body, working on the Capacity Investment Scheme and the production tax credits in the Future Made in Australia package.

This guide is general information only, current as at 22 October 2026. It is not legal, financial or tax advice. Program guidelines, eligibility and funding rounds change often, so check the official guidelines before applying, or contact Watson Advisory for advice on your circumstances.

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