What Is an LGC?
An ‘LGC’ is a tradeable unit that is equal to one megawatt hour (MWh) of net renewable energy generated
and exported to the grid by a solar PV system more than 100kW. They are used as a trading mechanism for energy retailers to offset their purchase of non- renewable energy. Similiar to STC’s (a small scale technology certificate), an LGC acts as a currency for renewable energy, and prices can thus fluctuate with supply and demand. Any solar installation over 100kW capacity is eligible to create LGC’s.
How Are LGC’s Traded?
LGC’s are most often spot traded through a registered broker or directly with a liable entity, such
as an electricity retailer or emission intensive industry. Both parties enter into a contract with a broker for a fixed term.
What Are the Risks With LGC’S?
While LGC’s can be used to generate great benefit, they are a commodity created through regulation, and therefore a change in policy
might impact their viability.
Another risk is that prices are difficult to predict, however they are likely to continue to decrease as more large scale renewable plants come online.
How Can These Risks Be Managed?
Such risks can be mitigated by;
- Entering into long term contracts with registered brokers;
- Being or becoming a liable entity, and;
- Ensuring your investment is sized correctly from the outset.
Current Market Status
The price of LGC’s has fallen significantly in the past 2 years, but delays on a number of large
scale plants has prevented the price from dropping too far.
As of April 2020, the spot price for LGC’s is around $28 per certificate, and forward trades have been made up to 2023 at around $18 per certificate.