Electricity Outlook

Could LGCs boost carbon offset liquidity, and support renewable energy investment?

Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

The Large-scale Renewable Energy Target (LRET) requires liable entities to meet their compliance obligations by acquiring a proportion of their electricity from renewable energy sources. This occurs in the form of large-scale generation certificates (LGCs), which are created by accredited large-scale renewable energy projects and sold to liable entities to surrender against their LRET obligations.

The last two years have been a rollercoaster ride for LGC spot prices, with large project delays, persistent curtailments, below average wind output, and concern about reduced electricity demand due to COVID-19, causing large swings in spot prices.

Over the medium-term, the projected LGC surplus is likely to weigh more heavily on the market, with spot prices likely to decline as more renewable energy is commissioned beyond the LRET’s legislated demand. As this occurs, we expect the LGC floor price to ultimately be set by the carbon equivalent value of an LGC to the price of Australian Carbon Credit Unit (ACCU) offsets. This could see ACCU and LGC prices converge in the 2020s, with large-emitting entities able to secure more easily obtainable LGCs to meet their carbon offset obligations (for electricity use and voluntary emissions reductions), while the long-run price of ACCUs could also support continued investment in renewable energy generation.

In this article, we take a closer look at current and future dynamics in the LGC market, and the longer-term interaction between LGCs and carbon offset prices.

Restricted Access

Whoops! Access to this post requires a different subscription level.

Tour the EnergyIQ platform

See what you are missing.

Click below to take a tour of our full Energy IQ platform for the Australian carbon and power markets.

Sign up for regular insights

LATEST UPDATES

  • Carbon Markets

    ALERT: Australian CO2 spot price breaks through $19/t to new record high

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    The price of Australian carbon credit units (ACCUs) continues to break new ground, reaching $19/t […]

    Research Insights | June 10th, 2021
  • Carbon Markets

    RECORDING: Are Australian carbon offset prices already on a net-zero pathway?

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    In this market update, our Executive Director, Hugh Grossman, discusses recent dynamics in the Australian […]

    Research Insights, Webinars | June 9th, 2021
  • Carbon Markets

    PRICE REPORT: ACCU contracting heats up as local offset prices rise

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    In Short: The spot price of Australian Carbon Credit Units (ACCUs) grew 0.8% to $18.60/t […]

    Research Insights | June 7th, 2021
  • Electricity

    ‘Tsunami’ of renewables to keep electricity prices low, but headwinds grow for gas

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    In our latest Australian Electricity Outlook (AEO) for the National Electricity Market (NEM), published on […]

    Research Insights | April 30th, 2021
  • Electricity Outlook

    OUTLOOK: NEM wholesale electricity and LGC price forecast 2021-40

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    Dear Subscriber, Our latest Australian Electricity Outlook (AEO) for the National Electricity Market (NEM) has […]

    Research Insights | April 29th, 2021
  • Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone