The LGC Rollercoaster

Before we delve into the LGC rollercoaster ride of the last 24 months, we should explore and explain what LGCs are, why we have them as a mechanism of our National Electricity Market and how they are applied as a cost to consumers.

What is an LGC?

LGC = Large-scale Generation Certificate.

Think of an LGC as a proof-of-green-energy certificate.

When a large renewable energy generator — such as a wind farm or solar farm — produces electricity, it can create LGCs.

Roughly speaking:

1 LGC = 1 megawatt-hour (MWh) of renewable electricity generated.

So, if a wind or solar farm produces 1,000 MWh of eligible renewable electricity, it can generally create about 1,000 LGCs.

💰Why are LGCs valuable?

The Australian Government has a scheme called the Renewable Energy Target (RET).

Under this scheme, certain electricity retailers and other liable entities have an obligation to acquire LGCs.

This creates a market for the certificates.

So a renewable generator effectively has two products it can sell:

1. Electricity → sells the actual power
2. LGCs → sells the environmental benefit associated with producing renewable power

For example:

A solar farm produces electricity worth $60/MWh.

It also produces an LGC worth, say, $45.

The solar farm's total potential revenue becomes $105/MWh.

(The actual LGC price changes according to market conditions.)

🏭 Why would a company buy an LGC?

This is the important part.

Imagine a company uses 100,000 MWh of electricity a year.

It wants to demonstrate that it is supporting renewable energy.

Rather than physically receiving electricity from a particular wind or solar farm, it can purchase 100,000 LGCs.

The certificates provide evidence that an equivalent amount of renewable electricity has been generated.

⚡ The Really Important Distinction

An LGC isn't electricity.

Think of it this way:

The electricity generated by a wind or solar farm gets mixed into the national grid. You can't tell which electrons came from the wind or solar farm and which came from a gas or coal generator.

 The LGC is essentially the accounting mechanism that tracks the renewable attribute. 

🟢 An Easy Analogy

Imagine one of our VFF farmers grows 1 tonne of organic vegetables or grain.

Their produce yield is the actual product.

The farmer also receives a certificate saying:

"1 tonne of certified organic produce was produced."

The vegetables or grain and the certificate are related, but they're not the same thing.

LGCs work in a somewhat similar way:

 Renewable generator → produces electricity → earns LGCs → LGCs can be sold separately 

Why LGCs Matter for Australia's Energy Transition

LGCs were designed to provide an additional financial incentive for large-scale renewable generation.

They effectively say to a renewable generator:

"We'll give you revenue not only for the electricity you produce, but also for producing eligible renewable electricity."

That additional revenue can improve the economics or shorten investment recovery of building projects such as:

• ☀️ Large solar farms
• 🌬️ Wind farms
• 💧 Certain hydro projects
• Other eligible renewable generation

One Important Point

The LGC scheme is not the same thing as a carbon credit.

An LGC is specifically associated with eligible renewable electricity generation under Australia's Renewable Energy Target.

If you're looking at this from the perspective of Australian electricity markets, data centres and the massive new electricity demand being created by AI/data centres, LGCs become particularly interesting because they interact with renewable PPAs, GreenPower™, Scope 2 emissions, RECs, firming and the economics of new generation.

The LGC Market Rollercoaster Explained

LGC prices have fallen significantly since 2025 because there are more certificates available than the market needs. However, prices have recently increased sharply due to strong demand from new data centres and increased speculative trading.

1. The Data Centre "Boom" and Policy Expectations

• Growing Demand for Green Power: The Australian Government expects new data centres to be powered by new renewable energy rather than relying on existing coal-fired generation.
• The Timing Gap: Data centres are increasing their electricity use much faster than new wind and solar projects can be built. As a result, data centre operators are buying millions of LGCs to help meet their renewable energy requirements in the short term.
• Expected Buying Requirements: Industry groups are pushing for data centres to have formal requirements to purchase renewable energy. Expectations of these future requirements have encouraged companies to start buying LGCs now, creating a significant increase in demand.

2. Increased Market Speculation

• Buying While Prices Were Low: Before mid-2026, LGC prices had fallen to around $2–$4 per MWh because there were more certificates available than the market needed. Traders saw these low prices as an opportunity to buy cheaply, expecting prices to rise again.
• Rapid Price Increases: Traders and other market participants began buying large volumes of LGCs and forward contracts. This reduced the supply/availability of certificates available for immediate sale and contributed to spot prices more than doubling within a few weeks in mid-2026.

3. A Sharp Drop in New Renewable Project Registrations

• A 75% Drop in Registrations: The very low LGC prices in previous years reduced the financial incentive for businesses to invest in new renewable energy projects.
• Concerns About Future Supply: This contributed to a 75% fall in new renewable power station registrations moving into 2026. With fewer new projects coming through, the market is beginning to expect tighter LGC supply later this decade, which is putting upward pressure on prices.

4. Overlapping State and Federal Policy and Requirements

• Corporate Reporting Requirements: New climate reporting and net-zero requirements are increasing the need for large companies to purchase and retire LGCs to demonstrate their renewable energy and emissions commitments.
• State Renewable Energy Schemes: Renewable energy programs in states such as Victoria and New South Wales are also increasing demand for renewable certificates. Together, these state and federal requirements are adding further pressure to LGC supply and prices.

Beyond 2030

The RET scheme is scheduled to end in 2030. What happens beyond this point? What is the plan and how will it work?

With the cessation of the LRET program in our NEM in 2030, the market is already gearing up for change. With that, we will be seeing the introduction of the REGO/GO Scheme — and how will it work?

The REGO/GO scheme is important because it is effectively the next-generation system for proving where renewable electricity comes from in Australia, particularly as the current LGC/RET system winds down.

1. What is the GO Scheme?

GO = Guarantee of Origin.

It is an Australian Government scheme administered by the Clean Energy Regulator (CER) that provides a trusted, government-backed way of tracking where renewable electricity came from, when it was produced and how it was produced.

The GO Scheme has two main parts:

• REGO – Renewable Electricity Guarantee of Origin certifies renewable electricity.
• PGO – Product Guarantee of Origin tracks the origin and emissions associated with products such as hydrogen and, over time, other low-emissions products.

For the electricity market, REGO is the part that matters most.

2. What Exactly is a REGO?

In very simple terms:

 A REGO is a digital certificate that proves that 1 MWh of renewable electricity was generated or dispatched. 

The certificate records information such as:

• Where the electricity was generated
• When it was generated
• What type of renewable energy produced it
• The facility that produced it
• Whether the certificate has subsequently been transferred or retired

So, conceptually:

1 MWh of renewable electricity → 1 REGO

This is similar to the way an LGC represents renewable generation, but the REGO system provides much more detailed information about the origin and timing of the renewable electricity.

3. Why is Australia Introducing REGOs?

The existing LGC system was designed primarily around the Renewable Energy Target (RET).

As mentioned above, the RET finishes on 31 December 2030.

The REGO system is designed to continue beyond 2030, providing an ongoing mechanism for businesses to prove that they are using renewable electricity.

This is particularly important as companies increasingly make claims such as:

"Our operations are powered by renewable electricity."

The REGO provides a government-backed certificate to substantiate that claim.

4. How is it Different from an LGC?

This is probably the most important distinction for your work.

LGC vs REGO

The two systems will operate alongside each other until 2030, but the same electricity cannot create both an LGC and a REGO.

5. How Will This Work in the Australian Electricity Market?

Think of it as a tracking system sitting alongside the physical electricity system.

For example, a solar farm generates 100 MWh. The electricity goes into the grid just like any other electricity.

However, the REGO system records:

 Solar farm → 100 MWh renewable electricity → 100 REGOs 

Those REGOs can then be:

 Created → transferred/traded → purchased → retired 

Once a company retires the REGOs, it can use them as evidence that it has consumed or supported an equivalent amount of renewable electricity.

6. Where This Becomes Particularly Interesting for Data Centres

This is where I think the REGO system becomes very relevant to the data-centre boom that we have been analysing.

Let’s consider the following example:

Imagine a new data centre consumes 500,000 MWh of electricity per year. It wants to demonstrate that its electricity consumption is renewable.

It could potentially purchase and retire 500,000 REGOs. The certificates provide evidence of the renewable electricity associated with that claim.

In this example, there is an important distinction that we must consider and note.

Buying a REGO doesn't mean the data centre is physically receiving electricity directly from that particular solar or wind farm. The electricity still comes through the interconnected grid.

Similar to LGCs, the REGO is effectively the accounting and verification mechanism for the renewable attribute.

7. The Really Important Development — Time Matching

There is an important and distinct difference when we consider the two schemes. Although they will run concurrently until 2030, this is one of the areas where REGO could become much more significant than the traditional LGC market.

LGCs have historically been relatively simple:

Renewable electricity generated = certificates created.

REGO can provide time-stamped information, with certificates normally recording the hour in which the electricity was generated or dispatched, unless a longer certificate interval is chosen.

That opens the door to much more sophisticated and pointed renewable-energy claims.

For example, a data centre could eventually seek to demonstrate:

 "When our data centre consumed electricity, renewable electricity was being generated at the same time." 

That's considerably more meaningful from an electricity-system perspective than simply buying enough annual certificates to match annual consumption.

8. Batteries Can Play a Part Here

This is another major difference.

Under REGO, my understanding is that eligible energy storage systems can create certificates for renewable electricity that is stored and subsequently dispatched, subject to the scheme's rules and current regulations. Batteries and pumped hydro are examples of eligible storage technologies.

My interpretation of the scheme is that it creates an interesting chain when making claims that looks more like this:

☀️ Solar → 🔋 Battery → 🖥️ Data Centre

Rather than simply saying:

"We bought renewable certificates."

The system can increasingly track how renewable electricity was generated, stored and subsequently dispatched.

That becomes particularly valuable as Australia moves toward a system with large amounts of intermittent wind and solar.

9. What Does This Mean for LGCs?

I would not think of REGO as simply "LGC 2.0." They seem to serve different purposes.

The easiest way to think about it is:

10. Why This Could Become Very Important for Data Centres

Back to the topic of data centres and their impact on the renewables market, the combination of rapid data-centre electricity demand, plus corporate emissions reporting, plus renewable procurement, plus batteries, plus increasingly sophisticated renewable-energy claims could create a significant market for REGOs.

It potentially shifts the market from simply asking, "How many renewable certificates do I need?" to asking:

 "Can I prove that the electricity powering my data centre operation was renewable, where it came from and when it was generated?" 

That is a much more sophisticated market.

I recognise that this is where REGOs, PPAs, batteries, firming and data-centre electricity demand start to intersect.

Conclusion – What Does the LGC Rollercoaster Tell Us?

The LGC market has shown how quickly supply, demand, government policy and data-centre growth can influence the cost of renewable energy. Prices fell when certificates were in oversupply, investment in new renewable projects slowed, and prices then rose sharply as demand from data centres, businesses and traders increased.

Looking beyond 2030, the market is likely to become more complex as LGCs transition towards REGOs, supported by growing data-centre demand, renewable energy contracts, batteries and firming.

The Key Points

• LGC prices ultimately have a cost impact on electricity consumers.
•  Data centres could become a major new source of renewable energy demand and drive investment.  They may also be our ticket to achieving our Renewable Energy Target as a nation.
•  Falling investment in new generation could create future supply pressures. 
•  REGOs will place greater emphasis on proving where and when renewable electricity is produced. 
•  Batteries, firming and new renewable generation will be critical to meeting growing demand. 
•  Ultimately, the cost of the energy transition has to be paid for — and understanding who pays, and how much, will become increasingly important. 

 The LGC rollercoaster demonstrates that Australia's renewable energy transition is no longer simply about building wind and solar — it is about managing the cost, supply and reliability of the entire electricity system. 

Let’s stop arguing the inevitable, put votes aside (yeah, right) and actually consider how we can create opportunities for Australians by embracing and working together for a unified solution.

It is there.

Unfortunately, Australian politics, greed and self-interest will always take precedence over progress and achievement.