The Role of Renewable Energy Certificates in a Net Zero Future

The landscape around large-scale renewable energy generation is ever-changing, with funding, offsets, and rebates created by an installation developing at a rapid pace. This is further compounded by the procurement process around renewable energy and the carbon accounting implications around this, leaving many to ask what certificates should be created or used and where they sit within the journey to a decarbonised economy. 

Currently, there are three main certificate programs available for renewable energy generation within Australia. The most well-known for large renewable generators are Large-scale Generation Certificates (LGCs), available for a diverse range of renewable energy sources. Provided an organisation is willing to release the renewable energy attributes of their generation to another party, LGCs provide an annual revenue stream for the years to 2030. However, the concept of selling a carbon attribute cannot be taken lightly – if an organisation chooses to monetise their LGCs, the environmental benefit is not eligible to be recognised under key climate programs.

Despite a falling forward-price projection for LGCs, growing demand for green energy amidst a heightened focus on the reduction of Scope 2 emissions has caused a significant rally in their value – over 200% to their expected value in some cases. While this highlights the appeal for businesses to harness the additional revenue stream, it concurrently underlines the risk present to those new or unfamiliar with the industry. 

The most topical news over the past two years within Victoria’s market has been the ability to create Victorian Energy Efficiency Certificates (VEECs) for behind-the-meter renewable generation. Differing from LGCs, these are classed as ‘white certificates’, holding no value under a carbon accounting lens. This presents an incredibly attractive case for organisations to harness their asset’s renewable energy benefit, while leveraging the monetary return in tandem. The financial outcome when compared to LGCs is far greater, often realising the equivalent to 10 years worth of LGCs within 2 years. Whilst these certificates have a fantastic business case, the creation method holds a level of complexity above LGCs, requiring specialist personnel and accreditation. 

Many businesses within NSW are familiar with the Energy Savings Certificate (ESC) program, though many don’t realise these can be used and created for behind-the-meter renewables, similar to VEECs. The notable exception here is the exclusion of rooftop solar. However, for sites with wind, biomass, or other approved forms of generation behind-the-meter, the potential monetary value whilst retaining the renewable attributes is significant. This is a complex process, however the business case for onsite renewable generation is greatly improved under these methods. 

There is excitement around energy storage being on the horizon for recognition under the NSW Peak Demand Reduction Scheme (PDRS) and the recently announced federal Guarantee of Origin (GO) program. With renewable storage being a glaring gap within the industry, both programs harbour the ability to improve the business case. At odds with each other, the REGO promises timestamped certificates, however at this time does not have any clear commercial advantage for investors. Whereas the PDRS program appears set to considerably improve storage investment opportunities via a parallel rebate to new projects. When the PDRS will be available for storage at a commercial or residential level remains the million-dollar question.

However you look at it, certificate programs around the country greatly vary in financial and environmental value, as does their compliance legislation. This landscape is set to get bigger, brighter, and more complex in the coming months and years.