Renewable energy certificates are a powerful tool for Australian businesses aiming to enhance sustainability, reduce emissions, and support the renewable sector. Whether used for compliance or to demonstrate ESG leadership, RECs—especially LGCs—play a key role in a modern energy strategy.
Estimated Reading Time: 10 minutes
As Australia accelerates its transition to a low-carbon economy, renewable energy certificates have become a vital part of the landscape. For businesses striving to reduce their carbon footprint or meet compliance obligations, understanding how these certificates work is crucial. Whether you're new to the concept or looking to integrate them into your sustainability strategy, this guide will demystify renewable energy certificates and explain how they benefit Australian enterprises.
A Renewable Energy Certificate (REC) is an electronic record that represents proof that 1 megawatt-hour (MWh) of electricity was generated from a renewable energy source like solar, wind, or hydro. In Australia, the Renewable Energy Target (RET) scheme uses two types of certificates:
| Type | Abbreviation | Applicability | Eligibility |
| Large-scale Generation Certificate | LGC | For large-scale power stations (e.g. solar farms, wind farms) | Generated above 100 kW |
| Small-scale Technology Certificate | STC | For small-scale systems (e.g. rooftop solar for homes, small businesses) | Up to 100 kW |
RECs can be sold or transferred, making them a tradable commodity in the renewable energy market.
RECs are issued when renewable electricity is fed into the grid. Businesses and energy retailers purchase these certificates to:
Each certificate serves as verifiable evidence that the corresponding energy was generated cleanly. Buying RECs does not necessarily mean the business receives the physical electricity but supports renewable generation on the grid.
Under the Large-scale Renewable Energy Target (LRET), accredited renewable energy generators create LGCs. These LGCs can be:
| Key Features of LGCs | Details |
| Unit value | 1 LGC = 1 MWh of renewable energy |
| Trading platforms | Spot market or Power Purchase Agreements (PPAs) |
| Price range (2023–2025)* | Approx. AUD $35–$50 depending on supply/demand |
| Compliance requirement | Mandatory for liable entities under RET |
| Voluntary market use | ESG reporting, sustainability strategies |
* Based on historical data; future prices subject to market forces and policy updates.
Australian businesses are increasingly turning to RECs as part of broader energy and sustainability strategies. Here's why:
Businesses that are liable under the RET must surrender a certain number of RECs each year. Failure to comply leads to penalties.
Using RECs allows organisations to reduce Scope 2 emissions—the indirect emissions from purchased electricity. This improves ESG scores and stakeholder confidence.
Modern consumers and investors are drawn to eco-conscious brands. Procuring RECs demonstrates genuine environmental responsibility.
Buying RECs drives demand for renewable projects, contributing to Australia's clean energy transition.
Although both tools help reduce carbon footprints, they serve different functions:
| Feature | Renewable Energy Certificate (REC) | Carbon Offset |
| Focus | Electricity generation | Broader emissions reduction (e.g., forestry, methane) |
| Usage | Scope 2 emissions | Scope 1, 2, or 3 emissions |
| Tangibility | Linked to energy infrastructure | Often project-based and remote |
| Government linkage | RET scheme compliance | Voluntary market, some regulated schemes |
There are two main pathways for Australian businesses:
Businesses sign long-term contracts to purchase renewable electricity and the associated LGCs from a generator. This is cost-effective and supports project financing.
Organisations can buy LGCs independently through accredited brokers or energy consultants. This approach offers flexibility but is more exposed to price volatility.
Before integrating RECs into your strategy, consider the following:
The REC market is influenced by several dynamic factors:
| Trend | Impact |
| Growing corporate sustainability goals | Increases voluntary demand for LGCs |
| Renewable energy project growth | Boosts supply, potentially reducing prices |
| Policy changes (e.g., updated RET targets) | Can significantly shift market equilibrium |
| Global ESG alignment | Promotes higher uptake of RECs across international supply chains |
Renewable energy certificates are a powerful tool for Australian businesses aiming to enhance sustainability, reduce emissions, and support the renewable sector. Whether used for compliance or to demonstrate ESG leadership, RECs—especially LGCs—play a key role in a modern energy strategy.
For tailored energy solutions and assistance in navigating REC procurement or structuring a renewable Power Purchase Agreement, partner with Energy Action. Their expertise ensures you maximise both financial value and environmental impact.
A renewable energy certificate (REC) is proof that 1 megawatt-hour (MWh) of electricity was produced from a renewable energy source. In Australia, these certificates help meet legal obligations under the Renewable Energy Target (RET) and are used by businesses to demonstrate sustainable energy use.
LGCs (Large-scale Generation Certificates) apply to large-scale energy producers like solar or wind farms. STCs (Small-scale Technology Certificates) are for smaller systems, such as residential or small business rooftop solar. Both support renewable energy growth but cater to different project sizes.
While RECs don’t physically reduce emissions, they verify that renewable energy was produced and added to the grid. By purchasing RECs, businesses offset their use of fossil fuel-generated electricity, reducing their net emissions and improving their sustainability performance.
Yes. Small businesses can purchase RECs directly or participate in group procurement schemes, such as aggregated Power Purchase Agreements. This allows them to access renewable energy benefits similar to large corporations.
Yes, for certain electricity retailers and large users under the RET scheme. However, many businesses also buy RECs voluntarily to meet internal sustainability or ESG goals, or to achieve carbon-neutral certification.
