The difference between STCs and LGCs – and why these matter
If you are one of the many people in WA who have invested or are considering investing in renewable energy installations such as rooftop solar for your home or business, you may have come across the terms “STCs” and “LGCs”.
Here’s your guide to what these terms mean and the role they play in in relation to Australia’s Renewable Energy Target.
What is the Renewable Energy Target?
The Renewable Energy Target is a Federal Government policy made up of two legislated schemes:
- Small-scale Renewable Energy Scheme (SRES)
- Large-scale Renewable Energy Target (LRET)
The SRES creates small-scale technology certificates (STCs) and the LRET creates large-scale generation certificates (LGCs). These two renewable energy certificate types are designed to encourage home and businesses to invest in the generation of renewable energy such as solar power.
The Renewable Energy Target is proposed to operate until 2030 under the Renewable Energy (Electricity) Act 2000 (Cth).
What are STCs?
Small-scale technology certificates (STCs) relate to the amount of electricity generation provided by eligible small-scale renewable energy systems. These systems include solar PV systems, small-scale wind systems, small-scale hydro systems, solar water heaters and air source heat pumps.
Things to know about STCs:
- STCs are issued for renewable energy installations under 100kW in size.
- STCs are issued for the amount of energy expected to be generated from the year of installation until the scheme ends in 2030. One STC is equivalent to one megawatt-hour of electricity.
- STCs can be purchased, sold, and traded on an open market, meaning their value or price fluctuates with supply and demand. The price typically fluctuates between $34 and $40, and at the end of 2022 the average price of an STC was around $39* .
- STCs are often allocated to renewable energy system providers in exchange for a discount offered to customers on the upfront purchase price of an eligible system. You might notice an "STC discount” in the price payable for your solar PV system – check the explanation and the terms and conditions of the purchase to confirm.
The number of STCs you could receive will depend on a number of factors including on your location – as different parts of Australia mean the system is expected to generate different quantities of renewable energy. Here in WA, for example, we’re likely to generate more solar power than in Tasmania because of the higher number of daylight hours we receive. This means someone would be likely to receive a higher number of STCs in WA compared to someone with the same or similar system size in Tasmania.
STCs are being phased out
The Small-scale Renewable Energy Scheme is expected to be in place as part of Australia’s Renewable Energy Target until 2030, however the Federal Government may extend, change or end the scheme at any time.
STCs are expected to reduce by around 6 to 7% each year between now and 2030 before they are phased out completely. This could mean that investing in solar power sooner could offer a greater reduction on the upfront cost of a system when factoring in STCs.
What are LGCs?
Large-scale generation certificates (LGCs) relate to the Large-scale Renewable Energy Target. This scheme was introduced to help Australia achieve 33,000-gigawatt hours of extra renewable electricity generation by 2020. Now, the scheme has been extended to 2030 however the target stays the same. New renewable energy power stations can continue to be accredited after 2020 and any solar power system which has energy generation capacity of more than 100kW is subject to the Large-scale Renewable Energy Target scheme.
Things to know about LGCs:
- One LGC is created for every megawatt-hour of electricity an eligible system generates.
- LGCs can also be purchased, sold, and traded on an open market, so, the value or price fluctuates according to supply and demand. At the end of 2022, the average price of an LGC was around $57*.
- To be allocated LGCs, your business needs to have an eligible solar PV system and be an ‘accredited power station’. To be registered, a business must first apply for accreditation under the Renewable Energy (Electricity) Act 2000 (Cth) (REE Act).
Once you have completed the accreditation process, LGCs can be allocated in the government REC Registry, validated and then made available for purchase. As with STCs, LGCs are sold through the open market, where the price will vary according to demand.
What is the difference between STCs and LGCs?
Understanding the difference between STCs and LGCs is an important part of understanding WA’s DER Roadmap, for distributed energy resources (otherwise known as DER).
The main difference between STCs and LGCs is based on system size. STCs are allocated to eligible small-scale renewable energy generation installations under 100kW, while LGCs are allocated to eligible large-scale renewable energy generation installations above 100kW.
Another key difference between the two types of renewable energy certificates is that LGCs are issued and allocated on an ongoing basis while STCs are allocated upfront.
If you are considering installing solar for your home or business, here are 5 things to know about investing in a rooftop solar power system.
*STC and LGC prices based on spot pricing via Demand Manager. Correct as of December 2022