The new kit on the block - rethinking contracts for Hybrid Projects

13 February 2026

By Thimo Mueller, General Manager Commercial, ASL

Australia’s energy transition is well underway. As coal exits the system and renewables surge, the market is evolving, and so must the tools we use to support it. That’s why ASL, in our role as the NSW Consumer Trustee, has released a consultation on a new product to support hybrid generation projects.

This isn’t just a tweak to an existing contract. It’s a recognition that solar-hybrid projects - combining solar generation with battery storage - are no longer niche. They are fast becoming a key part of the state’s energy future. And they need a fit-for-purpose investment support to match.

Why a new product?

In Q2 2026, ASL will recommence tenders for generation Long-Term Energy Service Agreements (LTESA), with future tenders to support generation projects in NSW transitioning from the Capacity Investment Scheme back to the NSW Electricity Infrastructure Roadmap.

Across three tenders, the original Generation LTESA worked well, including for some early hybrid projects. But it was designed primarily to underwrite standalone generation. As the market shifts and technology costs change, we’re seeing more developers pursue integrated solar and storage assets — not as bolt-ons, but as integrated systems. These projects offer flexibility, help manage curtailment risk, and can increase the value of the solar energy, delivering it when it’s most needed.

Yet financing these integrated assets remains a challenge. Investors and lenders can struggle to underwrite both components — solar and battery — under a single, coherent revenue model. The Hybrid LTESA is designed to change that. By providing a tailored contract that reflects the operational and financial realities of hybrid projects, we aim to help more of them reach financial close, faster.

Two options, one goal

The consultation outlines two distinct product designs. Option 1 is a fixed shape–fixed volume product. It reflects many of the principles outlined the National Electricity Market (NEM) Review Panel’s recommendations – a financial product that is decoupled from the physical dispatch of the project and aligns with emerging market instruments like ASX peak period contracts, incentivising proponents to generate at times of high demand but allowing them the freedom to operate flexibly.

Option 2 is a generation-following model with a price risk share. It’s more tightly linked to the physical performance of the asset, offering downside protection while preserving incentives to respond to market signals. This structure may appeal to lenders seeking a clearer connection between contract payments and asset output.

Both options are designed to stimulate investment, but they do so in different ways. We’re consulting now to understand which model — or combination — best meets the needs of developers, investors, and consumers. Option 1 tests the real-world appetite for the potential future products we could say, and Option 2 is an evolution of the existing generation LTESA designed specifically for firmed hybrid generation.

Consumer value at the core

Ultimately, this is about delivering value for NSW electricity consumers. By enabling more solar-hybrid projects to proceed, we can bring new supply into the system at the times it’s needed most — especially during peak demand periods when prices are highest. That helps put downward pressure on wholesale prices and improves reliability.

The Hybrid LTESA also preserves operational flexibility. Unlike traditional contracts for difference (CFDs), which can crowd out market participation, our option-based structure allows proponents to enter other wholesale market contracts. It supports liquidity, encourages innovation, and avoids locking in rigid behaviours that could distort the market.

What are we trying to achieve?

ASL is committed to designing investment products that are commercially viable, bankable, and aligned with the long-term interests of NSW consumers. We see greater value in enabling up to 16 GW of new generation by 2030 — well above the 12 GW minimum target. Solar-hybrids, with their faster development timelines and dispatchable characteristics, can help us get there sooner.

This isn’t about putting all our eggs in one basket — new wind infrastructure remains an essential and highly valuable part of our infrastructure objectives — but instead is about ensuring the investment framework is responsive to the types of projects the market is building.

We invite stakeholders to engage with the consultation and help shape the future of energy investment in New South Wales.

Submissions closed on 16 February 2026.