The large-scale feed-in tariff reverse auction scheme in the Australian Capital Territory 2012, to 2016

Abstract

Feed-in tariffs offer renewable energy developers investor certainty but often at the cost of overly generous subsidisation. Reverse feed-in tariff auctions can overcome this problem but can be adversely affected by non-delivery risks, high auction costs and locational concentration. Between 2012 and 2016, the Australian Capital Territory Government in Australia conducted reverse auctions for the feed-in tariff rights to 640 MW of large-scale solar or wind generating capacity, the first such reverse auction program undertaken in the country. The auctions were used to meet a 100% by 2020 renewable electricity target. The auctions came to be assessed on a number of criteria, including local engagement and economic returns, rather than being narrowly focused on delivery risk and feed-in tariff price. Although the auction’s successful projects were relatively concentrated, the auctions were successful in delivering significant local economic benefits as well as decreasing average feed-in tariff prices that declined by 23% for wind and 58% for solar over the period of the auctions driven, in part, by lower internal rates of return and lower interest rates. The delivery of projects and project commitments, and potential locational concentration, are key challenges that other reverse auction users may face.