4.7 Article

The large-scale solar feed-in tariff reverse auction in the Australian Capital Territory, Australia

Journal

ENERGY POLICY
Volume 72, Issue -, Pages 14-22

Publisher

ELSEVIER SCI LTD
DOI: 10.1016/j.enpol.2014.04.007

Keywords

Feed-in-tariff; Solar; Reverse-auction

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Feed-in tariffs (FiTs) offer renewable energy developers significant investor certainty but sometimes at the cost of being misaligned with generation costs. Reverse FiT auctions, where the FiT rights for a predetermined capacity are auctioned, can overcome this problem but can be plagued by non-delivery risks, particularly of competitively priced proposals. In 2012 and 2013 the Australian Capital Territory (ACT) Government in Australia conducted a FiT reverse auction for 40 MW of large-scale solar generating capacity, the first such auction undertaken in the country. The auction was highly competitive in relation to price and demonstrating low delivery risks. Proposal capital costs, particularly engineering, procurement and construction costs, as well as internal rates of return, were lower than expected. The auction process revealed limited land availability for large-scale solar developments in the ACT as well as a significant perceived sovereign risk issue. The auction process was designed to mitigate non-delivery risk by requiring proposals to be pre-qualified on the basis of delivery risk, before considering FiT pricing. The scheme is likely to be used by the ACT. Government to support further large-scale renewable energy development as part of its greenhouse gas reduction strategy which is underpinned by a 90-per cent-by-2020 renewable energy target. Crown Copyright (C) 2014 Published by Elsevier Ltd. All rights reserved.

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