Why use Large-scale generation certificates (LGCs)?

Why use Large-scale generation certificates (LGCs)?

To drive the transition to low-carbon business practices, the Australian Government introduced a range of environmental certificate schemes to reduce emissions in the electricity sector while promoting renewable energy generation.

The design of the National Electricity Market means that all electricity, regardless of source, is pooled into the grid and then transported to residential and commercial electricity consumers. This means that unless you generate renewable energy on site (e.g. rooftop solar), you can’t guarantee that your business is using renewable energy from a particular source as in reality the grid supply is a mix of generation from many different sources including coal, gas, wind and solar.

In Australia, large business energy customers can access retail supply arrangements where the volume of grid supplied electricity is matched with up to 100 per cent renewable electricity through the purchase and surrender of Large-scale generation certificates (LGCs).

LGCs are the most transparent way to certifiably demonstrate a commitment to renewable generation and in some cases, can be sourced from a specific renewable generator (or generators).

While Australia’s environmental certificate schemes may seem challenging to navigate, they’re vital to achieving your emissions goals, and can offer great value and simplicity.

What are Large-scale generation certificates (LGCs)?

Large-scale generation certificates (LGCs) are an instrument that is created and sold to incentivise the development of renewable energy power stations in Australia.

Accredited power stations are entitled to generate LGCs based on the amount of eligible electricity they produce from renewable energy sources, which can be used by the owner or an electricity retailer to meet their renewable energy target obligations.

While a renewable power station may be typically thought of as a large grid-scale wind or solar farm, an accredited renewable power station under the LGC scheme could also be a factory with solar panels on its roof1, provided it has a minimum capacity threshold of 100kW1. For a full list of eligible energy sources, visit the Clean Energy Regulator website.

LGCs have financial value and can be sold or traded. They can also be surrendered voluntarily to help companies meet their renewable energy and emissions reduction targets.

Why do we have LGCs?

LGCs were created by the Australian Government as part of its Renewable Energy Target (RET), a scheme designed to reduce greenhouse gas emissions in the electricity sector and encourage the generation of power from sustainable and renewable resources.

In recent years, LGCs are increasingly used by businesses to offset carbon emissions from the consumption of energy for commercial and industrial purposes.2

How do LGCs work?

The Australian Government’s RET scheme incentivises investment in renewable energy power stations, such as wind and solar farms, and hydro-electric power stations, by legislating demand for Large-scale generation certificates (LGCs).

One LGC can be created for each megawatt hour (MWh) of eligible renewable electricity generated.

LGCs can be sold to liable entities (mainly electricity retailers) who buy and surrender the LGCs to the Clean Energy Regulator to comply with their mandatory scheme obligations. In return, the LGCs provide the power station with a source of revenue in addition to the sale of the electricity generated.

Shell Energy Structured Products Sales Manager Jeremy Halstead said customers could achieve renewable energy and carbon emission targets in a simple, straightforward way with LGC voluntary surrender.

“Importantly, it’s auditable and aligns with key voluntary reporting schemes such as Corporate Emissions Reduction Transparency (CERT) and RE100, a global initiative for companies committed to sourcing 100 per cent of their electricity from renewable energy generation,” Mr Halstead said.

“If they’re sourced from a specific renewable generator, customers can state this publicly, along with any associated community benefits the renewable generator provides.”

How can my business get LGCs?

Shell Energy customers can access LGCs at fixed prices and terms, matching a set percentage of supply, with Shell Energy handling the administration and costs set out in monthly invoicing.

“Purchasing renewable energy doesn’t require complex terms or lengthy tender exercises,” Mr Halstead said.

Whether your business is an accredited power station under the Large-scale Renewable Energy Target (LRET), or a liable entity required to buy and surrender LGCs on an annual basis or looking to voluntarily reduce carbon emissions, Shell Energy can cut through the complexity for you.

For more information reach out to your Shell Energy Account Manager or our Structured Products Team at [email protected].

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