Labor hints at reverse auctions to meet 50% renewable energy target

The Australian Labor Party has suggested it will use mechanisms such as “reverse auctions” to help meet its 50 per cent renewable energy target by 2030 if it wins power in the federal election later this year.

Climate change spokesman Mark Butler told the Sydney Environment Institute that the ALP has yet to decide on the mechanisms it will need to reach its target, and will commission advice if it is elected. But he said simply extending or expanding the current RET may not be the chosen path.

“That mechanism may not well be a simple extension of the current renewable energy target,” Butler said in speech notes provided to RenewEconomy.

“Overseas experience over the last several years reveals a strong shift to different mechanisms, a shift that we are very keen to explore.”

Butler did not spell out what those mechanisms were, but the big shift in international markets has been the use of reverse auctions, which incidentally have been successfully used by the ACT government in mandating large scale renewable energy projects to help meet its own target of 90 per cent renewable energy by 2020.

Auctions in both the ACT and overseas have encouraged project developers to bid the lowest possible price. In return, they get a guaranteed income for a fixed term, say 15 or 20 years.

Butler says that while the ALP policy is unformed, at least it has ambition. “The Turnbull Government has no plan at all for renewable energy beyond 2020,” he said.

“When we asked Malcolm Turnbull in Question Time whether his Government will join with Labor to make the 50 per cent renewables target a bipartisan commitment ….  he described our policy as “reckless” and announced that his Government will focus on other abatement opportunities, to use his words such as ‘clean coal’. ”

Investment in large scale renewable energy in Australia has been at a standstill for at least three years, despite it being nearly a year since the Coalition and the ALP agreed to cut the RET to 33,000GWh by 2020 from the previous target of 41,000GWh.

The reasons for the continued stall in investment is the short profile of the current RET mechanism, the refusal by utilities to make long term purchasing contracts, and the subsequent difficult in obtaining finance.

The only projects to be built have been those supported by the Clean Energy Finance Corp and The Australian Renewable Energy Agency, and those mandated by the ACT scheme.

Reverse auctions are proving effective in Europe, Africa, Asia and the Americas. The most recent auctions found solar bid at 5c/kWh in Mexico, and wind energy at less than 3c/kWh in Morocco.

Auctions are also being used in India, where the price of solar is now matching the price of coal fired generation, and in the US, particularly for state and city mandates, such as Austin, Texas, where record low prices for solar have also been set.

Butler also said the ALP would focus on policies to ensure an “orderly exit” of coal fired generators, and for more ambitious energy productivity and energy efficiency policies. Again, those policies have yet to be decided.

“We all have a very long election campaign ahead of us,” Butler said.

“Labor intends climate change and renewable energy to be right at the centre of this campaign.  It takes two to tango in these things, and I’m pretty confident Malcolm Turnbull doesn’t really want to turn up for this debate at this stage, but even if he doesn’t show up we intend to speak very loudly and very clearly about our ambitions.

Because the next Parliament simply must do better than the last three have done in this area.  And although this is primarily a challenge for the Parliament, the broader community, including the business sector have a critical role to play in raising their voice in a clear and resounding demand for Australia to get back on the path to a clean energy future.”