Large-scale Generation Certificates – Wholesale Energy Education Series

Large-scale Generation Certificates or LGCs are the most actively traded environmental certificates in Australia. LGCs are electronic certificates, created under the national Large-scale Renewable Energy Target or the LRET.

The LRET was designed to encourage investment in large scale renewable power projects, to achieve 33 000 gigawatt (GWh) hours of additional renewable generation by 2020. Each LGC represents one megawatt hour of electricity, generated from accredited renewable energy generation.To be eligible for accreditation, a renewable generators capacity must be greater than 100 kilowatt (kW), and the power generated by this station must be an eligible renewable energy source (such as wind, solar, hydro or land fill gas). These accredited generators can create LGCs from their electricity generation and register them through the renewable energy certificate registry.

A successfully registered LGC can then be sold at a mutually agreed price, or transferred to an entity with a liability under the RET, or to companies looking to voluntarily surrender certificates. Liable entities are electricity retailers and large industrial consumers who purchase wholesale electricity.

They are required to surrender LGCs each year to the Clean Energy Regulator to meet their obligations under the Renewable Energy Act of 2000.

The amount entities must surrender annually is a function of their wholesale electricity purchases, any exemptions from emissions intensive trade exposed entities, the Renewable Power Percentage set for the given compliance year, as well as any surplus or deficits carried forward from the previous year.

For a given year, entities must surrender their liable LGC amount by February of the following year, however if they do not surrender enough LGCs to meet their obligation, this creates a shortfall. Any shortfall larger than 10% cannot be carried forward to the next year and results in the application of a non-tax-deductible shortfall charge of $65 per certificate. Charges will be refunded if the liable entity subsequently surrenders the amount owing during the refund period, which ends three (3) years after the shortfall charge was paid.