Key takeaway: Renewable capacity is partitioned into three PPA bidding tiers that reflect contract structures, with new-build capacity factors sourced from AEMO REZ generation traces at substate level.
Renewable generation is modelled using technology-specific capacity factor profiles and bidding behaviour.
Capacity factor profiles for existing plants
Intermittent renewable generation is modelled using capacity factors derived from historical availability data provided by the Australian Energy Market Operator (AEMO).
A capacity factor is defined as the ratio of actual energy generated to the total available (installed) capacity of a generator over a given period.
The model uses 5-minute interval availability data from a median weather year to construct representative capacity factor profiles for each renewable technology type. These capacity factors are then applied to the projected installed capacity for each 5-minute interval across the forecast horizon, producing granular, technology specific forecasts of renewable energy generation.
AEMO REZ profiles for new builds
For new renewable builds in the Capacity Expansion Model (CEM), capacity factors are sourced from AEMO Renewable Energy Zone (REZ) generation traces. These traces provide technology-specific capacity factor profiles for Solar PV, Onshore Wind, and Offshore Wind across each REZ in the NEM.
The key features of this approach are:
- Substate-level aggregation: REZ profiles are aggregated to the substate level. For example, all REZs within Northern New South Wales (N1, N2) are averaged to produce a single NNSW capacity factor profile. Each of the 9 NEM substates (NNSW, CNSW, SNSW, NQ, CQ, SQ, VIC, SA, TAS) receives its own profile.
- Weather year consistency: All simulation years are mapped to a single median weather year to ensure consistent capacity factors across the forecast horizon.
- Wind hub height: Wind REZ traces use the medium hub height (WM) profiles only, providing a single consistent wind resource assumption across all substates.
- Offshore wind coverage: Offshore wind REZ profiles are only available for specific substates: Central NSW (Hunter Coast), Victoria, South Australia, and Tasmania.
- Fallback for missing data: Where no historical or REZ data exists for a substate/technology combination, profiles from neighbouring regions are used. Missing data points within a trace are filled with zeros and logged as warnings, rather than assuming full availability.
For future new entrant technologies where neither historical nor REZ data is available, the capacity factor profiles of the most analogous existing technology are adopted. Adjustments are then applied to account for the expected performance characteristics of the new entrant. For example, offshore wind is modelled using the profile of onshore wind, with a calibrated uplift to reflect the generally higher capacity factor expected from offshore installations, and therefore will generate more energy per MW of installed capacity.
PPA bidding tiers for renewable generation
Renewable generators in the NEM increasingly operate under various forms of power purchase agreements (PPAs), which influence their bidding behaviour. The model partitions renewable capacity into three distinct bidding tiers to reflect this:
| Tier | Proportion (existing) | Proportion (new builds) | Contract Type | Bidding Behaviour |
|---|---|---|---|---|
| 1 | 20% | 0% | No-floor CfD | Bids at the market floor (-$1,000/MWh), as the generator receives a top-up regardless of the spot price |
| 2 | 25% | 5% | Floored CfD | Bids at the negative of the strike price, reflecting the floor below which the generator is not compensated |
| 3 | 55% | 95% | LGC-rational | Bids at the negative of (LGC value / MLF), reflecting merchant economics where generation is rational as long as the spot price plus LGC revenue is positive |
The distinction between existing and new-build proportions reflects the shift away from uncapped negative-price exposure in newer contracts. New builds from 2026 onwards are predominantly LGC-rational, with very few retaining legacy no-floor CfD structures.
Strike prices are set at $60/MWh for wind and $45/MWh for solar (real 2024 AUD), with a $15/MWh spread applied between substates to reflect contract variation. Tier 2 capacity is split into three sub-bands at -spread, base, and +spread from the strike price. Strike prices erode at 2.5% per year in nominal terms to reflect the declining value of new PPA contracts over time.
This tiered approach captures the diversity of offtake arrangements in the NEM, from fully contracted generators that bid aggressively negative to ensure dispatch, through to LGC-rational generators that curtail when the combined spot and LGC revenue turns negative.