Reverse Auctions – Lower Costs, Lower Emissions
Australia so far has not adopted the competitive tender process – now popular in Europe, China, the US, and Latin America – although the ACT Government has just begun the process of allocating bids for 40MW of solar PV under tender.
Reverse auctions, already occurring in South Africa, India, China, Brazil, California and other states in North America and South America, seem to lead to lower prices and ensure that emerging low-emission technologies are actually used and not just talked about.
Government Needs To Drive Down Prices
The Grattan Institute’s Tony Wood says the Government needs to drive down the cost of low-emissions technologies but:
“Right now, investors are reluctant to back low-emissions technologies because they are expensive and high risk..and they are racked by policy uncertainty.”
How Do Reverse Auctions Work?
A series of six-monthly auctions over 10 years has been suggested, for example, 300MW of capacity could be sold at each auction, splitting the capacity between wind, solar PV, concentrated solar power (CSP, or solar thermal).
“The proposed mechanism is designed to provide a hedge against the carbon price risk and the electricity price risk, with the capacity in each stream being sold to the lowest credible bidder.”
Reverse auctions are seen as a cheaper and more responsive mechanism than fixed feed-in tariffs.
Federal policymakers are interested in the proposed ACT reverse auction proposal which is likely to provide the first instance of solar PV ‘price discovery’ in Australia.
In California, reverse auctions are just one of the mechanisms used to source 33 per cent of its energy from renewable sources by 2020. In India, the auctions are used to help meet its target of 20GW of solar by 2022.