The carbon price is a vital step in creating a low-emissions future for Australia, but it needs further support. Investors are still struggling to overcome the risks surrounding low-emissions technologies and to get projects running at large scale and low cost. Grattan’s report seeks to enable them to cross the bridge to commercial viability.
It proposes that government enter into long-term contracts with project developers to provide electricity at a price that makes the most efficient technologies viable.
Government awards the contracts through a series of six-monthly auctions, held over 10 years. Developers bid to provide low-emissions electricity and the lowest bids succeed. The goal is to get projects started at the lowest possible price. Once projects are running, the experience developers gain will enable them to produce electricity at low-cost and support can be withdrawn. It is a practical solution to an extremely difficult problem.