LGC’s – All You Need to Know
Are you familiar with LGCs, or would you not know one if it tap-danced across your desk? Regardless, it is about time you caught up to what’s going on in the world of Australia’s energy subsidies. LGCs are important for any commercial enterprise wishing to move to solar energy. If you have such plans, then knowledge of LGCs is absolutely essential. If not, then you may want to consider brushing up on your knowledge of LGCs, because chances are that, sooner rather than later, you will have to be making the switch. Seeing how Australia’s energy prices are rising faster than the nation’s annual temperature, residents and businesses are going to have to seriously consider going solar. So, what are LGCs? Who are they for? Why should you care? We will answer these questions and more in today’s article. After you’re done reading this, you will hopefully be equipped with sufficient knowledge about LGCs and how you can best use them to your advantage.
Understanding the Basics of LGC
01 – What is an LGC?
LGC stands for Large-scale Generation Certificate. It is a kind of currency that is used for buying and selling solar energy in Australia. The LGC scheme is part of the Australian government’s drive to make solar energy systems more accessible to the common user. For small scale users, the Australian government instituted the STC, or small-scale technology certificate. Where the STC covers residences, the LGC covers businesses. STCs are part of the Australian government’s Renewable Energy Target program for the country. The SRES, or Small-scale Renewable Energy Scheme, aims to increase Australia’s share of renewable energy and reduce dependence on fossil fuel. The current SRES is slated to expire in the 2030s. While the SRES is meant to increase residential use of solar and other renewable energy use, the LRET is aimed to achieve the same for businesses and large-scale solar power systems in Australia. LRET stands for Large-scale Renewable Energy Target.
02 – How do LGCs Work?
LGCs are generated by solar energy systems sized 100kW or upwards. A certificate is created per MWh (megawatt hour) of solar energy, and the total amount of certificates created is calculated per month using a formula by the Australian Government’s Clean Energy Regulator. If the presented figure is deemed acceptable to the Clean Energy Regulator, n LGC is created and awarded to the producer. This LGC is also added to the Renewable Energy Certificates (REC) registry. LGCs can be claimed on a yearly, quarterly or monthly basis by the producer.
03 – What Do You Do with an LGC?
LGC, as we stated earlier, are a kind of currency, which can be traded with other parties. For instance, they can be sold to an energy retailer, or on the wholesale market. Energy retailers are obliged to buy LGCs produced by a company under the Renewable Energy (Electricity) Act 2000. Retailers will buy LGCs at a fixed price set by the government, whereas on the wholesale market, the buyers and sellers can determine their own prices, which will vary depending on supply and demand. Also, in the open market, LGCs are sold in bulks of 5000 certificates. LGCs act as a supplementary source of revenue for businesses, and can drastically increase their return on investment. Retailers who buy these LGCs can use them to purchase energy from the government.
04 – How Large is Large-Scale?
Large-Scale refers to any solar panel system that is 100kW or larger. Meaning that it can generate 100kW of energy. LGCs can be claimed on excess power, meaning that whatever is left over after a business completes its operations using their solar energy can be sold as an LGC. To put the scale in perspective, keep in mind that a regular household uses around 5 kilowatts.
One of the biggest LGC projects in Australia is the solar farm in north-western Australia. Once completed, this solar farm is expected to generate upwards of 110 megawatts (110,000 kilowatts). This energy is sufficient to supply 30,000 Australian homes. The energy generated by this solar farm will be sold as LGCs by the Victorian Government, which will in turn be used to power Melbourne’s tram network. This will go a long way in meeting Victoria’s Renewable Energy Target.
05 – Why Not Stick to STCs?
If it hasn’t crossed your mind already, we’ll spell it out for you. Most solar PV systems are not 100kW in size. Many do not even need that much energy. We’re not only talking about residences, but also businesses. Most businesses will not need solar energy systems large enough to be covered by LGCs. This begs the question, are they covered by STCs? The answer is yes, and some people prefer it that way. STCs have their own advantages when trading and many people would just prefer to stick to them. For instance, an STC is generated upfront, as opposed to after a month with the LGC. The STC can act as a bonus, which is passed on to the customer as a discount. The STC itself is claimed by the solar energy provider. This means that a customer will see an upfront reduction in system cost. The payoff from an STC is immediate and tangible. While an LGC may take some time to provide any financial benefit. This is why many may simply prefer keeping their system sizes down, and sticking to the STCs. STCs help manage cash flow early on in the lifecycle of the solar PV system. But if a business does go large-scale, then LGCs are unavoidable.
What LGCs Mean for Businesses
Businesses with large, >100kW systems can make the most of LGCs. Many commercial solar energy systems either already qualify for LGCs because of their system size, or will do so in the near future. Whether a business decides to incorporate an LGC into its outlook will depend largely on its financial goals.
Whether you’re planning on installing a small solar system just to reduce your bills, or setting up a solar farm, there is a rebate for you in Australia. STCs and LGCs will factor into the equation based on the size of your energy system. But make no mistake, for large systems (>100kW), LGCs represent the best way to gain a speedy return on investments.
What is the Renewable Energy Target?
With the basics out of the way, let’s dive a bit deeper into LGCs and their workings. Yes, we were serious about you not needing another resource after this one to understand LGCs, so it’s time to pull those socks up and read on!
We mentioned the Renewable Energy Target earlier on in passing. Let’s take a look at it and see how it affects businesses in Australia and how LGCs are directly linked to it.
As you know, the Australian government aims to reduce dependence on fossil fuel-based energy and increase the footprint of renewable energy in the country. This has had the effect of booming the most viable source of renewable energy in Australia i.e., solar energy. To meet the Large-Scale Renewable Energy Target, the federal government has stipulated that power companies are required to surrender a fixed number of LGCs every year or face penalties. This can be done either by creating LGCs themselves (by setting up and operating >100kW solar energy systems) or by purchasing them (LGCs) from existing customers who operate their own renewable energy resources. LGCs are going to remain in play until 2030, and are a viable source of alternative revenue for large solar energy production systems.
Who Generates LGCs?
Only 3 types of entities generate LGCs. The first is a utilities company that decides to make its own power and generate LGCs, as they find it more affordable to generate their own in lieu of purchasing from third party generators. The second is a third-party producer who creates LGCs in order to sell them to power utility companies. Third-party project developers can generate revenue not only from LGCs, but also per kilowatt-hour if they have a power purchase agreement.
The third and final type of LGC generator is the rarest. A company which has decided to go 100% solar, installs a >100kW solar energy system and has power demand to match its installation. This company could theoretically sell excess energy in the form of LGCs. IKEA Australia is one such company. It has launched its first 100% solar-powered store and has announced plans to support the South Australian power grid. In the future, there is a possibility that IKEA Australia will transform itself into a clean energy provider and supply the Australian power grid with clean and green energy.
What You Need to Get Accredited as an LGC Generator
In order to begin generating LGCs, a solar energy system must be accredited to do so. There are a few criteria that determine the eligibility of a system for accreditation. The first is that a system must not be based on fossil fuel. All energy produced by the system must be from on a recognised renewable source (wind, hydro or solar). The second criterion is the size of the system. As stated before, the size of the system must be >100kW.
The steps to acquire accreditation are as follows:
- Become a registered entity in the online REC (Renewable Energy Certificate) Registry. The REC is a registry of all individuals and entities who can create, transfer and surrender large-scale and small-scale technology certificates. It also tracks the ownership and status of all registered certificates and maintains public registries, “as required by the Renewable Energy (Electricity) Act 2000.”
- Apply to become accredited.
- Pay the necessary application fees and dues.
- Wait for your application to be assessed.
- Receive the outcome of your application.
- Open up a bottle of champaign when it gets approved.
Once your company is accredited, you can begin producing LGCs!
How to Create LGCs
A power station is authorised to submit LGCs for certification after it has been accredited. The Clean Energy Regulator assesses the LGCs on a monthly, quarterly or yearly basis. The minimum timespan for an LGC generation is one month. Each LGC is created in the online REC (Renewable Energy Certificate) Registry. The Clean Energy Regulator’s website contains detailed instructions on how to generate LGCs. Below are the five main steps simplified for your convenience.
1 – Review your information before submitting your claim.
There are a number of steps that need to be carried out and some “Pre-creation checks” that need to be carried out. Be sure to review them before you apply for an LGC. Once again, the main points have been simplified below, for your convenience.
First, let’s take a look at when LGCs can be created.
- Nominated persons of accredited institutions can apply for LGCs.
- LGCs cannot be generated before the electricity has been generated.
- LGCs cannot be generated for timespans below a month.
- All LGCs must be created on the 31st of December after the energy has been generated.
Secondly, let’s look at the pre-creation checks
- An individual must be nominated by an accredited institution before creating an LGC.
- You must have read the LGC General Formula.
- You must have the appropriate permissions and be using the REC Registry.
- Be prepared to respond to the standard validation questions, if you are making an LCG claim for the first time. Record your responses and submit them along with your claims in the REC Registry.
- Prepare the appropriate documentation to support your claims. Appropriate documentation must be uploaded to the REC directory to support the creation of LGCs. It includes the following:
- Metered data from electricity meters. This data must accurately access the amount of electricity generated by the solar panel systems. Also, you will need data to show that all the electricity you have generate comes from solar energy.
- Power station name
- Year of generation
- Month of generation
- Fuel sources
- Number of LGCs you wish to create
2 – Add Power Station Generation Data
After you’re done with the pre-creation checks, you will need to add in data about your power generation capacity. A detailed guide is available on the Clean Energy Regulator’s website. In order to add your data, you will need to follow the given steps:
- Login to your REC Registry with your username and password.
- Navigate to “Renewable Energy Systems” and click on “Power Stations.”
- Locate your power station in the table and then click on “Upgrade generation data.”
- Select the year you want to create LGCs for from the “Power generation summary” section. In the same table, select your month as well. This will take you to the LGC generation page.
- Next, you will enter your generation details. These details will include the total energy produced by your power station in MWh (TLEG), the amount of energy generated by ineligible energy sources like fossil fuels (FSL – also in MWh) and auxiliary losses in electricity supply to the grid, as well as power used to maintain the power grid – including any power imported from the grid – (Imported AUX – calculated in MWh). Please note that the Clean Energy Regulator demands that all values be correct to at least four decimal points.
- Once you add this information, your eligible LGCs will be automatically calculated. Any unclaimed LGCs from previous months will also be carried forward. Carry-over does not apply across years. Also, any generation below your power station’s baseline will not be calculated, if your baseline is zero.
- Finally, you must upload documentation that supports your claim to the LGCs you have generated. This documentation includes meter readings, wood waste assessment sheets and the standard validation questions mentioned before.
- Please save your data before proceeding to create your LGCs
3 – Create Your LGCs!
Finally, we’re down to creating our LGCs! As before, you can find detailed instructions on the Clean Energy Regulator’s website, but we’ll simplify them for you here, anyway.
Now that you’ve done your pre-creation checks and registered your power station, it is time to create your LGCs. You can do so by following the steps below:
There are two ways you can create your LGCs. One is immediately after entering your power generation data, and the other is to bulk create. For the former, just press ‘Create LGCs’ after you’re done with entering your power data. If you want to do the latter, then press ‘Renewable Energy Systems’ from the left-hand menu and then select ‘Create LGCs’. Then select the power station’s months and years that you wish to create LGCs for.
4 – Await a Decision by the Clean Energy Regulator
Once you’ve created your LGCs, all you have to do is wait for a decision from the Clean Energy Regulator. While you do, here are a few good articles to give you anxiety on why an LGC claim may get rejected. It is always a good idea to understand the process of validation beforehand to maximise your chances. But, if you’ve followed the above-mentioned steps, it stands to reason that your LGCs will more likely than not, get approved.
5 – Pay Your LGC Creation Fee
Once your LGC has been approved by the CER, open your registry login and navigate to the fees and invoices page. From there, you can navigate to the payment page and pay the fee through your credit card. After this, you will be legally licensed to transfer or surrender your created LGCs.
Potential Hurdles to LGC Integration
One of the biggest complexities to keep in mind is that numerous complications arise while trying to connect a massive >100kW system to the grid. In Australia, disconnecting from the grid is not an option. Though one can choose not to use any grid electricity, a connection is required by law. For residential systems this is not really an issue, but it can become a problem for large systems that are going to be using LGCs. And while creating LGCs tends to be financially advantageous because of economies of scale, the challenge of connecting it to the national grid is daunting at best. Furthermore, before one makes any connections, a few things will have to be taken into consideration. Namely, can the area in question handle additional inflows of electricity? Is the wiring already overloaded above acceptable voltage levels? These factors are not immediately discernible and can affect the cost of connecting a >100kW power station to the grid.