Cheap, large-scale industrial projects may win as much as half the contracted carbon offset volume in Australia’s upcoming Emissions Reduction Fund (ERF) auction, pushing the average price down below previous levels, analysts Reputex said.

Around a quarter of new projects that have registered with the Clean Energy Regulator since the last auction in November are from industrial sectors such as industrial electricity and fuel use, Reputex said in a research update Wednesday.

The auction will be held on Apr. 27-28.

“Rather than being overshadowed by forestry projects as we have seen in the past, we anticipate industrial projects will be much more successful this time around – potentially contracting closer to half of all ACCUs, up from only one-fifth at the last auction,” managing director Hugh Grossman said.

Reputex said the industrial projects likely would be bidding lower than land-based projects, which have dominated the first two auctions, meaning the average price should drop further.

In the first auction, the regulator bought ACCUs at an average price of A$13.95, which then fell to A$12.25 in the second round.

But as many as 85% of successful bidders secured contracts at prices above the average in the first two auctions, Reputex said, indicating that some project developers may still be able to secure better deals.

“The average price of ACCU contracts that is disclosed by the regulator is a poor measure of the real value of emissions reductions. The average can be pulled down by one or two larger projects, but in reality firms enter into a wider range of contract prices, and many contract well above the average price that is disclosed by the regulator,” Grossman said.

“So despite potential for a lower average price compared with previous auctions, we continue to project a large number of bidders have potential to secure contracts well above that price.”

By Stian Reklev – stian@carbon-pulse.com

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