Isn't that just Nick Clegg chickening out of the decision making process?
Imagine we're in a situation where Labour, the SNP, Plaid and the Greens would (in total) fall just short of a majority. On the other side, the Tories with UKIP and the DUP fall way short of a majority. The Lib Dems hold the balance of power, with enough seats to give either side a majority. They side with the largest party. What Nick is basically saying to voters on both sides is "don't hate us for propping up Labour/The Tories, we had no choice!".
So to get in to government, Labour basically need to be in a situation where they don't need the Lib Dems. They can't count on them. The 'progressive alliance' needs to have enough MPs between them that Lib Dem support is optional. Then Labour have a choice; a minority government supported by like-minded MPs from other parties, or a Labour/Lib Dem minority coalition with the same support arrangement. The only advantage of the latter is a more stable majority.