The Ins and Outs of STCs and LGCs: Making Sense of Solar Rebates
Blog | May 9th, 2023
The Renewable Energy Target is a Federal Government policy made up of two legislated schemes that, though initially designed to end in 2020, continue to operate until 2030 under the Renewable Energy (Electricity) Act 2000.
Split into two parts, the Renewable Energy Target encompasses the Large-scale Renewable Energy Target (LRET) and the Small-scale Renewable Energy Scheme (SRES). The LRET creates LGCs, while the SRES creates STCs, financial government incentives designed to encourage home and business owners to invest in renewable energy.
Essentially performing the same function, STCs are eligible for small scale renewable energy generation installations under 100kW, while LGCs are eligible for large scale renewable energy installations above 100kW.
STCs and LGCs also differ in how they are generated and sold, which this blog will explore.
Small-scale Renewable Energy Scheme
The Small-scale Renewable Energy Scheme (SRES) aims to create a financial incentive for individuals and small businesses to install eligible small-scale renewable energy systems such as solar panel systems, small-scale wind systems, small-scale hydro systems, solar water heaters, and air source heat pumps. Small-scale technology certificates are provided upfront for the system’s expected power generation from the year of installation until 2030, when the scheme ends, essentially giving eligible participants an upfront discount for their investment.
How STCs are Generated
As previously mentioned, the role of the SRES is to issue Small-Scale Technology Certificates (STCs) for renewable energy installations under 100kW in size.
The number of STCs issued is based on how much electricity the system will generate until 2031, with one STC equalling one megawatt-hour of electricity.
STCs are a type of electronic currency that can be purchased, sold, and traded on an open market, meaning their value fluctuates with supply and demand. The value typically fluctuates between $32 and $40, and is based on supply and demand and the value of the Australian dollar. It’s common practice to allocate the STCs to the system provider in exchange for a discount on the upfront purchase price.
Commercial Example
A 100kW system will produce around 919MWh worth of electricity until 2030, meaning your business would currently receive 919 STCs. So if the value of an STC is $37, you’d receive a $34,003 discount off the cost of a 100kW system.
STC Phase-Out
Due to Federal Government changes, STC’s will reduce by 1/15 (around 6-7%) every year. They will continue to decrease until 2030 when phased out completely. Therefore, the sooner you invest in a solar power system, the more you’ll save on the upfront cost.
Unfortunately, there is also no guarantee the Small-scale Renewable Energy Scheme will stay in place until 2031, as the Federal Government, regardless of which party holds power, has the ability to axe the incentives at any time.
The Large-scale Renewable Energy Target scheme
The Large-scale Renewable Energy Target scheme was initially designed to encourage investment in large-scale renewable power stations to help Australia achieve 33,000-gigawatt hours of additional renewable electricity generation by 2020. Since this date has been reached, the date has been extended to 2030. However, the target stays the same from 2020 to 2030, and, under the current law, new renewable energy power stations can continue to be accredited after 2020. In addition, any solar power system that can generate more than 100kW is subject to the Large-scale Renewable Energy Target scheme.
How LGCs are Generated
One Large-Scale Generation Certificate (LGC) is created for every megawatt-hour of electricity your system generates. Like STCs, LGCs can be purchased, sold, and traded on an open market. So, the value fluctuates according to supply and demand. As of 2023, the average price of an LGC was $54.
The key difference between STCs and LGCs is that LGCs are produced on an ongoing basis instead of STCs created upfront. Hence, your business receives a yearly “rebate” instead of an upfront discount on the system’s total cost.
For example, a 200kW system would produce an average annual solar output of 320,000kWh or 320MWh. Therefore, it would create 320 LGCS per year. Using the average 2023 price of LGCs as a guide, a 200kW system would receive around $17,280 per year in government incentives.
Accreditation and Creating LGCs
To create LGCs, your solar PV system needs to become an ‘accredited power station’, and your business must apply for accreditation as set out by the Renewable Energy (Electricity) Act 2000 (REE Act) and the Renewable Energy (Electricity) Regulations 2001. The first step in doing so involves you becoming a ‘registered person’ in the REC Registry.
Following successful accreditation, LGCs can be created in the government REC registry, where, once validated, they can be made available for purchase. As previously mentioned, just like STCs, LGCs are sold through the open market, where the price will vary according to demand.
Solar Energy Enterprises offers commercial clients our expert assistance in this process.
With thousands of commercial solar installations across Australia, Solar Energy Enterprises is well versed in assisting and managing the process for both STCs and LGCs.
If you would like more information on the available government incentives for solar, please call us on (02) 8318 460, or submit an enquiry: https://www.solarenergyenterprises.com.au/contact-us/
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