Navigating Australia’s LGC Market

A Comprehensive Guide for Corporate Buyers

Australia has long experience in renewable energy certificate markets, having launched the voluntary GreenPower Program as early as 1997. Separate from this, Large-scale Generation Certificates (LGCs) are part of the Renewable Energy Target (RET) scheme.

Have you ever wondered how to strategically navigate the complexities of Australia’s renewable electricity and LGC market? Understanding this can be pivotal for your business, especially if you are looking to manage energy costs and meet regulatory requirements. Here’s how you can benefit from the LGC market and make informed decisions that align with your corporate sustainability goals.

What Are LGCs and Why Should You Care?

LGCs, or Large-scale Generation Certificates, are a type of Energy Attribute Certificate (EAC) central to Australia’s Renewable Energy Target (RET) scheme. This scheme is designed to increase the proportion of electricity generated from renewable sources, such as wind, solar, and hydro.

• Generation and Certification: When a renewable energy power station generates one megawatt-hour (MWh) of electricity, it creates one LGC. These certificates are validated by the Clean Energy Regulator (CER).
• Compliance Mechanism: Utilities and electricity retailers are required to purchase and surrender a set number of LGCs annually to comply with the RET scheme. Failure to comply can incur significant fines.
• Market Dynamics: There is both a mandatory market, driven by legislation, and a voluntary market where corporations purchase LGCs to meet sustainability goals and demonstrate their commitment to renewable energy.

The Benefits of Engaging in the LGC Market

• Cost Management: By engaging in forward markets, companies can manage costs more effectively and insulate themselves from spot market volatility.
• Sustainability Goals: Procuring renewable electricity supports corporate sustainability initiatives. LGCs meet the Greenhouse Gas Protocol quality criteria and are recognized by organizations promoting corporate decarbonization, including CDP, SBTi, and RE100.

Current Market Dynamics

The LGC market is shaped by both legislated and voluntary demand:

• Legislated Demand: Electricity retailers must purchase and surrender 33 million LGCs annually. Shortfalls incur fines, but retailers have three years to make up the difference and receive a refund.
• Voluntary Demand: Expected to add around 10 million LGCs this year, voluntary demand highlights corporate commitment beyond compliance.

This commitment is evident in reporting to global standards such as SBTi, CDP, and RE100. For example:

• 61 Australian companies have validated science-based targets with SBTi, and another 50 have committed.
• 17 Australia-headquartered companies have signed up to RE100, some with goals as early as 2024/2025.
• A number of Australian corporates scored “A” on the CDP Climate Change 2023 disclosure, demonstrating leadership in transparency and performance.

Practical Steps for Corporate Buyers

• Plan Ahead: Fixing prices in the forward market can mitigate cost risks and provide budget certainty.
• Monitor Market Trends: Stay informed on policy and supply-demand updates from the Clean Energy Regulator.
• Partner with Experts: Working with experienced market participants like STRIVE by STX helps you navigate complexity, optimize procurement, and secure competitive prices.

The Bottom Line

Strategically engaging with the LGC market can deliver cost savings, regulatory compliance, and sustainability impact. By planning ahead, monitoring trends, and leveraging expertise, your company can capture opportunities in Australia’s evolving energy landscape.

Are you ready to take advantage of the LGC market? Contact us today to explore how we can help you optimize your procurement strategy and achieve your sustainability targets.

Interested or have any questions?