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

This is a subscriber report. Please login to access this content.

Become a Carbon Insider today

Unlock our latest analysis, briefings and price information with our new Carbon Insider service.

Click below to see our plans.

Sign up for regular insights

LATEST UPDATES

  • Carbon Markets

    How do international policy developments impact the Australian carbon market?

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

    While Australia’s climate policy malaise continues, international climate activity continues to build, with the EU […]

    Research Insights | July 23rd, 2021
  • Carbon Markets

    ALERT: Australian CO2 spot price hits $21.50, forward activity picks up

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

    The spot price for Australian carbon credit units (ACCUs) continues to break new ground, reaching […]

    Research Insights | July 21st, 2021
  • Carbon Markets

    13th ERF Auction date announced, but expectations remain muted

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

    The Clean Energy Regulator has announced that the 13th Emissions Reduction Fund (ERF) Auction will […]

    Research Insights | July 19th, 2021
  • Carbon Markets

    PRICE REPORT: Australian Carbon Offset Market Report: July 5 – 16, 2021

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

    Dear Subscriber, Our latest Australian Carbon Offset Market Report has now been published. The Australian […]

    Research Insights | July 19th, 2021
  • Carbon Markets

    RECORDING: Could the Australian carbon offset price eventually “do a Europe”?

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

    One of the key drivers of record EUA prices is the increasing role of investors, […]

    Research Insights, Webinars | July 13th, 2021
  • Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone