Bidding process – The White – ERF Paper

Lets talk more about the bidding process, assuming you managed to read the Energy Reduction Fund White Paper released 24 April 2014. We talked about profiling you risk in our post ‘The White – ERF Paper’ on 2 May 2014. It has been attracting worldwide interest. What we don’t know is why it is so. We can only speculate many are expecting a ‘big bang’ or ‘flip flop’ for the policy. Regardless, it is better than doing nothing, so lets assume we can get past the regulatory uncertainty and look at things assuming you business can access the funds, has eligible projects, and has in place safeguard mechanisms.

First question you need to ask is are you strategic or tactical in your approach – or a hybrid. We might suggest hybrid is a good hedge. Why because you can be reactive to changes without being too hung up on risk factors. Also, providing funding could be as easy as the 2014/2015 Federal Budget being approved, without the specialist legislation. Yep, the good ole executive bypass is possible. But that is the government’s risk.

To bid in you need to create a program with a project size that has a prospect of being awarded funding. We note that some say, and repeated by Energetics (a consulting firm that is known to influence policy on Climate), claim 2,000 t CO2 equivalent abatement will get you a jersey. However, remember this is a reverse auction – the lowest price wins! There is no guarantee the best project will win. You could be forgiven for getting a little suspicious over who and what will be rewarded.

That said, the usual suspects for the preparation to be included in the bidding, may actually preclude you too! Namely, the requirement of ‘additionality’ for the projects. Back in 2012, August 14 – CO2Land org looked a little harder at additionality and its association with the word ‘real’ (concluding real was used as a synonym) and found:

  • Specifically ISO 14064-2 (project accounting) does not include ‘Real’ because during development of ISO 14064-2 ‘Real’ was regarded as a programmatic rule/criteria, which is outside the scope of ISO 14064-2.
  • ISO 14064-2 is a standard rather than a program
  • ISO 14064-2 (Clause 5.4) specifies the following requirement in regards to additionality: “The project proponent shall select or establish, justify and apply criteria and procedures for demonstrating that the project results in GHG emissions reductions or removal enhancements that are additional to what would occur in the baseline scenario.”
  • Additionality is incorporated into ISO 14064-2 is based on the core principles of ISO standards in general, i.e. that ISO standards not be a barrier to trade (WTO-TBT – anyone following development of ISO 14067 (product) will know this is a major issue). As such, ISO standards must be policy-neutral (extended to include program-neutrality). This is of course very important for market confidence.
  • ISO 14064 deals with the concept of additionality by requiring that the GHG project has resulted in GHG emission reductions or removal enhancements in addition to what would have happened in the absence of that project. It does not use the term “additionality”…Thus the project proponent may apply additionality criteria and procedures, or define and use boundaries consistent with relevant legislation, policy, GHG programmes and good practice.”
  • Although the concept/requirement of additionality is within the requirements of ISO 14064-2, the simple reason why the ‘term’ additionality is not present within the requirements of ISO 14064-2 is because of certain sensitivities/perceptions/politics of certain parties involved in the development of the standard –

And, the following references helpful in gaining a more complete understanding:

Oh dear, I wonder if they understand the standard says the concept should be policy- neutral. Why to give confidence to the market, elementary is it not?

But, here comes the good news. If you are aware, adopt a pragmatic approach, and are proactive in that you go low first up and go early you might just get there for your funding. All you got to do is keeping improving on your targets into the future.

What projects might have the better chance of winning a place. Energy Efficiency projects are probably the best suited for the auction process and the pre-qualification needs.

The conclusion: If you have done nothing meaningful before about your energy use. You can now be rewarded? Good policy, hey!

To ponder, Mark Jackson – a professional, asked in the Australasian Renewable Energy and Carbon Professionals Group on LinkedIn: “Is anyone else getting a sense that renewables are not getting a fair airing…budget etc”.

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