Australia: LGCs rise above AUD 70 for the first time since 2015

In mid-September 2022 the spot price of LGCs (Large-scale Generation Certificates) in Australia exceeded AUD 70, for the first time since November 2015. This was reported by the Clean Energy Regulator (CER) in its quarterly carbon market report. By the end of the quarter the price had eased to AUD 64.25.

Why LGCs matter for biomass and biogas

At national level Australia does not apply fixed tariffs for energy from biogas or biomass. The source of support for large renewable installations is the certificate market: a generator at a renewable power station creates LGCs, and energy retailers must surrender a set number of them every year. The LGC price is therefore a supplement to the price of energy. Power plants running on biomass, landfill gas and biogas compete for this revenue with wind and photovoltaics, so changes in the certificate price affect them in the same way as the whole sector.

Figures from the CER report

The CER report for the third quarter of 2022 shows that: - the LGC spot price exceeded AUD 70 in mid-September; - by 30 September it had fallen to AUD 64.25; - in mid-October it stood at about AUD 65; - voluntary surrenders of LGCs reached a record 4.7 million in the quarter and 6.2 million since the start of the year (46% more than a year earlier); - over the three quarters the regulator approved 1.2 GW of new capacity, and about 2.7 GW was expected for the whole year.

Voluntary surrenders are certificates bought voluntarily by companies wishing to declare their use of renewable energy. Their record level increases demand beyond the statutory obligation.

What this means for generators

Voluntary surrenders differ from mandatory ones: companies buy and surrender LGCs voluntarily in order to demonstrate their use of renewable energy. The record in this category shows that the price is determined not only by the statutory obligation of energy companies, but also by corporate demand.

A price of AUD 65–70 per certificate is a significant supplement to the energy price for a generator. Because LGCs are a market and not a fixed rate, such a price can change quickly: the sharp falls in the following years, described in the update to this entry, showed this. Only eligible sources enter the LGC market. As the CER states, waste coal mine gas no longer qualifies for creating LGCs (from 2021), so the range of sources in the scheme can be narrowed by regulatory decisions. A broader picture of Australia's bioenergy potential is given by the ARENA Bioenergy Roadmap.