ALERT: Looking ahead to ERF III – Powering up…or Down?

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On Friday, Environment Minister Greg Hunt announced that the third Emissions Reduction Fund (ERF) auction will be held on April 27-28, with the Clean Energy Regulator also announcing that auction four will be held in the final quarter of the 2016 calendar year, in line with the current ‘semi-annual’ auction schedule.

The announcement indicates that the Regulator is satisfied ACCU supply volumes are strong enough to create a competitive market for auctions three and four. This is underpinned by a considerable overhang of projects that failed to bid, or lost, at auctions one and two, with 265 projects eligible to participate at the third auction. This is almost equal to the total number of contracts already secured (275).

Transparency over the forward auction schedule is a welcome sight for the market, albeit 12 months into the scheme, with the Regulator electing to set a more transparent timeline after providing eight to twelve weeks’ notice ahead of the first and second auctions.

The announcement of the 2016 auction schedule will be seen as a positive step by many proponents – particularly those with existing projects – for which the formal timeline will provide increased certainty. However, this late in the game, increased transparency is unlikely to have any meaningful impact, with many industrial firms still viewing upfront costs, operating uncertainty, administrative barriers, low pricing transparency and ongoing government funding as major barriers to participation.

So what does all of this mean for the Emissions Reduction Fund over 2016?

Below, we take a closer look at what’s in store for ACCU supply and market dynamics over auctions three and four.

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