Why the coal lobby's reverse auction push might be an attempt to 'blow up' the debate

The latest push by pro-coal lobbyists and some Coalition MPs – for the clean energy target proposal to be dropped in favour of a reverse auction that could be used to fund a new coal power station – has left analysts wondering if they are actually trying to “blow up” the debate.

The idea was raised, after the Minerals Council of Australia – the coal lobby – suggested it to Coalition backbenchers, as part of a campaign against chief scientist Alan Finkel’s clean energy target.

The idea, as outlined by Craig Kelly, head of the Coalition’s backbench energy and environment committee, is that the reverse auction would set an emissions cut-off that would allow so-called “high-efficiency low-emissions” coal power plants to compete but which would allow renewables to win if they provided the cheapest power, with the required level of reliability.

Given that renewable energy is the cheapest, how could such an auction be engineered to let coal win?

Rigging a reverse auction for ‘baseload’ energy is not enough

A totally open reverse auction that sought the cheapest form of generation would never see a coal power plant winning any funding.

A reverse auction for electricity generation usually works by the government offering to buy the electricity from the new power plant for some period of time. The bidders then offer to build and supply electricity at the lowest price they can, and the cheapest bids win.

A so-called “high-efficiency low-emissions” (HELE) coal power plant would not be able to bid to sell its electricity as cheaply as wind, solar or gas. Estimates vary but, according to Bloomberg New Energy Finance, the cost of energy from a new coal power plant would be $134 to $203 per megawatt hour. Other groups have estimated it lies somewhere between $100 and $250/MWh.

That’s more expensive than wind, solar or highly efficient combined-cycle gas.

Reverse auctions were used successfully in the ACT to help it successfully implement a 100% renewable energy target. But one of the useful things about the system, as it worked there, was that a reverse auction can be designed to impose any restrictions you like on the sorts of projects that can bid. In the ACT, they required a number of extra conditions, including ones related to economic development and community engagement.

That makes it potentially the perfect mechanism if you want to impose conditions that will ensure coal can win.

Simon Corbell, who was the deputy chief minister and minister for the environment and climate change in the ACT, and oversaw the implementation of the reverse auction system there said: “A reverse auction is designed to achieve real price discovery for energy generation but it also allows you to build in other criteria that have regard to factors other than price.”

“A reverse auction should work to deliver the best possible price as well as the other outcomes. That’s the way it should be administered – but you certainly could engineer a reverse auction process to support an otherwise expensive technology like coal,” Corbell said.   

Read more https://www.theguardian.com/australia-news/2017/jun/22/why-the-coal-lobbys-reverse-auction-push-might-be-an-attempt-to-blow-up-the-debate

Courtesy of Guardian News & Media Ltd