NAVIGATING STCS AND LGCS: INCENTIVES FOR INDUSTRIAL SOLAR PROJECTS IN AUSTRALIA

Navigating STCs and LGCs: Incentives for Industrial Solar Projects in Australia

Navigating STCs and LGCs: Incentives for Industrial Solar Projects in Australia

Blog Article

As Australia accelerates its shift toward renewable energy, solar power has become a key pillar of the nation’s clean energy agenda. For industrial and commercial entities, transitioning to solar is not just an environmental decision—it’s increasingly an economic one. A major factor driving this shift is the federal government’s Renewable Energy Target (RET), which offers two key financial incentives: Small-scale Technology Certificates (STCs) and Large-scale Generation Certificates (LGCs).


Understanding how these incentives work—and how to navigate them—is critical for industrial solar project developers and business owners looking to reduce energy costs and carbon footprints.






What Are STCs and LGCs?


Both STCs and LGCs are types of tradeable certificates that form part of Australia's RET scheme. They are designed to encourage investment in renewable energy by providing financial returns to system owners and developers.



1. Small-scale Technology Certificates (STCs)




  • Eligibility: Solar PV systems up to 100 kW in capacity.




  • Mechanism: STCs are created at the time of installation, based on the system’s expected generation over a period (typically 10–15 years). The number of STCs depends on system size, location (climate zone), and the deeming period.




  • Redemption: These certificates can be sold to electricity retailers, who are legally obligated to purchase them to meet their small-scale renewable energy targets.




  • Financial Impact: The value of STCs is effectively a point-of-sale rebate, reducing the upfront capital cost of the system. For many small to medium industrial installations, this makes the ROI very attractive.




2. Large-scale Generation Certificates (LGCs)




  • Eligibility: Systems over 100 kW, typically large commercial or industrial-scale solar farms.




  • Mechanism: LGCs are generated based on actual electricity production. One LGC equals one megawatt-hour (MWh) of electricity generated.




  • Registration and Accreditation: Projects must be accredited with the Clean Energy Regulator (CER) as a Large-scale Generating Unit (LGU), and ongoing compliance and reporting are required.




  • Trading: LGCs are sold on the open market or via long-term power purchase agreements (PPAs). Prices fluctuate based on supply and demand, creating market exposure but also significant revenue potential.




  • Revenue Stream: Unlike STCs, LGCs provide an ongoing revenue stream over the life of the project, offering long-term financial incentives for larger systems.







Choosing Between STCs and LGCs


For businesses planning industrial solar installations, deciding between STCs and LGCs depends primarily on the system size and business goals:








































Criteria STCs LGCs
System Size ≤100 kW >100 kW
Incentive Type Upfront rebate Ongoing revenue per MWh
Certificate Issuance Deemed (based on forecast) Based on actual generation
Market Risk Low Moderate to high
Administrative Burden Low High (accreditation, audits, reporting)




For many industrial projects, systems in the 99–100 kW range maximize the benefits of STCs without triggering the complexity of LGC registration. However, businesses with high energy loads or long-term sustainability goals may find the long-term revenue from LGCs more appealing, particularly if bundled into corporate PPAs.






Key Challenges and Considerations




  • Market Volatility: LGC prices have fluctuated significantly in recent years. Developers should model financial sensitivity based on low and high certificate price scenarios.




  • Compliance and Administration: LGC-eligible projects require accreditation, audits, and reporting through the CER’s REC Registry. Failing to meet these obligations can result in loss of eligibility.




  • Design and Scalability: Projects hovering around the 100 kW threshold should be designed carefully. Slight increases in system size can shift the project from STC-eligible to LGC-eligible, with major implications for cost and complexity.




  • State Incentives and Additional Schemes: In addition to federal RET incentives, some Australian states offer their own programs or low-interest loans to support industrial solar. These should be factored into overall project economics.







Future Outlook


The RET scheme is currently scheduled to run until 2030, with the deeming period for STCs decreasing each year. This means STC-based rebates will gradually reduce, making early adoption more financially beneficial. Meanwhile, LGCs continue to offer potential for businesses with larger systems or those integrating batteries and other renewable technologies.


With the rise of corporate sustainability commitments and energy price volatility, industrial solar remains a strong strategic investment—and navigating the STC and LGC landscape is key to maximizing returns.






Conclusion


STCs and LGCs play a pivotal role in making industrial solar projects in Australia financially viable. While STCs provide immediate cost relief for small to mid-sized installations, LGCs reward larger systems with long-term revenue streams. Understanding the nuances of these incentives allows businesses to make informed decisions, enhance energy resilience, and contribute to Australia’s renewable energy future.

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