LGCs are Environmental Attribute Certificates (EAC). Here are some of the benefits:  

1. They are a tradable asset that can be sold as an additional revenue stream for the solar system asset owner. 
   a) LGCs can be bought, sold on the spot, forward and option contracts or warehoused for future use. 

2. They can be used to boast renewable energy or emission reduction goals. 
   a) Retiring (surrendering) LGCs registered from a behind-the-meter system show how much renewable energy the business used that year; or 
   b) LGCs can also be purchased & retired to increase the amount of renewable energy a business is using without additional physical assets (buy & retire). 

3. LGCs can be “stapled” with energy by an energy retailer to provide Greenpower. 

4. The primary demand comes from the 33 million LGCs purchased by Energy Retailers to meet their obligations under the Australian Renewable Energy Target each year through to 2030. 

Northmore Gordon can provide early registration of a solar system with the CER for LGCs; don’t wait till the system is commissioned, by that stage businesses are missing out on LGCs, so you can’t retrospectively register. 

Diversified Revenue: Boosting Cash Flow and Return on Investment 

Most commercial solar farms and early adopters of solar PV exploit the financial potential of LGCs to bolster their income.  The Renewable Energy Target and associated LGCs (and STCs) were designed to incentivise and drive investment in renewable energy.   

Commercial Solar farms sell both energy and LGCs to double their income stream and hence achieve a higher return on investment with both depreciating assets and income streams from LGCs and energy.  Many businesses with Behind-The-Meter (BTM) solar systems benefit from lower-cost energy and sell their LGCs to achieve a faster payback on the investment in the solar system. Given the price volatility of LGC investors make use of derivatives (options and forward contracts) to protect their investment. 

It is critical to recognise that the LGC represents the renewable component of the energy generated, and once you sell the LGC you can no longer claim that energy is renewable. This is important for businesses with decarbonisation goals. 

Corporate Sustainability Goals: Strengthening Brand Image and Stakeholder Relations 

Many businesses have signed up to various targets or programs taking action to address climate change.  Such targets include Renewable Energy 100% (RE100), Science Based Targets Initiative (SBTi), Climate Active Carbon Neutral, CDP, Greenpower, or simply voluntary targets for renewable energy or emissions reductions.   

LGCs are an internationally recognised Renewable Energy Certificate (REC) that can be used by all these programs to prove the use of renewable energy.   International businesses are using LGCs in Australia and locally sourced RECs in each country they have businesses to effectively buy renewable energy for all their sites. 

Companies with even greater aspirations are buying LGCs and RECs to enable them to state categorically that their products or equipment around the world is being run using only renewable energy. 

The rate of voluntary surrender against the programs is growing rapidly; in 2022 almost 8 million LGCs were voluntarily retired. 

Voluntary LGC surrender (~8M in 2022 vs 33M RET obligation) – Source CER 

Maximising Investment Value: Seizing the LGC Opportunity 

Northmore Gordon is accredited by the Clean Energy Regulator to register Solar PV or Wind and Hydro systems (power stations) allowing us to create LGCs for both behind-the-meter (BTM) systems for business, and grid-connected solar farms for investors.  NG has been trading certificates for more than a decade and can provide contracts to reduce volatility, shore up investment plans, or provide LGCs and other certificates to meet renewable energy targets or emissions reduction goals.  Going a step further NG has the know-how to provide businesses with complete Net Zero Roadmaps, Carbon Neutral accreditations, and carbon reduction pathways.   

Take advantage of the LGC-driven growth potential today and ensure a brighter and more sustainable return on investment. 

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The Clean Energy Regulator’s latest Quarterly Carbon Market Report predicts that the schemes will provide 57.1 million tonnes of emissions savings in 2021. That figure would represent an increase of more than 7% on the result delivered in 2020, when the schemes produced 53.1 million tonnes of emissions savings. The “conservative” estimate is based on the average emissions intensity of generation from all fuel sources.

However, the report notes that this emission intensity from all fuel sources is falling as the country continues to move towards more renewables. The March Quarter 2021 report also shows the continuing success of the Emissions Reduction Fund (ERF).

Key Takeaways from the quarterly report are:

• Auction 12, held on 12 and 13 April 2021, contracted 6.8 million tonnes of forward carbon abatement from 10 contracts at an average price of $15.99 per tonne, for a total commitment of $108 million.
• The Regulator expects the ERF to deliver Australian Carbon Credit Units representing 17 million tonnes this year, an increase of more than 6% on the record 16 million tonnes of 2020
• The Large-scale Renewable Energy Target (LRET) is on track to drive down emissions by 24.3 million tonnes – also an increase of 6%
• The third key pillar of the government programs – the Small-scale Renewable Energy Scheme (SRES) – is expected to provide the largest growth in emission reductions, with its 15.8 million tonnes of savings representing a 12% increase from 2020
• Rooftop solar was the strongest growth area under the SRES umbrella, with 792 megawatts (MW) worth installed in the first three months of 2021 – up 28% on the same period last year
• A total of between 3.5 and 4 gigawatts (GW) of rooftop solar capacity is now expected to be added across the country this year

The report also showed the Large-scale Renewable Energy Target of 33,000 gigawatt hours (GWh) was met by the end of January and that Australia has added a record 7.0 GW of renewable energy capacity in 2020. This is expected to result in an increasing oversupply in Large Scale Generation Certificates (LGCs) and may result in a softening of the LGC wholesale price over time.

No major large-scale renewable energy projects reached final close in the first quarter of the calendar year, but the Regulator expects between 2 and 3 GW of capacity will come online by the end of 2021 amid strong indications of healthy investment.

Voluntary private and state and territory demand for Australian Carbon Credit Units (ACCUs) and large-scale generation certificates (LGCs) reached record highs, rising 39% compared to the same quarter last year to 532,000 units and certificates.

Part of this was attributed to significant corporate commitments, with Coles Group becoming the latest major supermarket to commit to a target of net-zero emissions by 2050, joining Woolworths Group and ALDI.

The three major supermarket chains were responsible for a combined 1% of Australia’s reported emissions in 2019-20.

The Clean Energy Regulator is now assessing expressions of interest for the development of an Australian carbon exchange, with predictions that the implementation of such a program could slash business costs by as much as $100 million by 2030.

The exchange would make trading of Australian carbon credit units simpler and reduce transaction costs to support the rapidly increasing voluntary demand from the corporate sector. 

More information on the Clean Energy Regulator’s March Quarter 2021 Quarterly Carbon Market Report can be found in the highlights video below or here.

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