Total voluntary surrender of large-scale generation certificates in 2019 increased by seven per cent over 2018.

Sustainability goals are motivating corporations to reduce or offset emissions by voluntarily surrendering large-scale generation certificates. In 2019 the first large-scale generation certificates were voluntarily surrendered to offset scope 2 electricity emissions under the Climate Active Carbon Neutral Standard¹⁶ (previously known as the National Carbon Offset Scheme).

Voluntary surrender is also giving business the flexibility to meet renewable energy commitments under programs such as RE100, a global initiative for companies committed to sourcing 100 per cent of their electricity from renewable energy sources.

Throughout 2019, market participants have reported to the Clean Energy Regulator that businesses are contemplating new models to utilise large-scale generation certificates as an offset. Large-scale generation certificates have an inherent carbon value as they represent one megawatt hour of generation which displaces one megawatt hour of fossil fuel generation.

Entities purchasing certificates with the intention to offset scope 2 emissions voluntarily surrender these certificates through the REC Registry. Existing programs such as Climate Active or GreenPower accept the surrender of large-scale generation certificates as proof of renewable electricity use for offsetting purposes.

Large-scale generation certificate prices had remained high for several years as a result of tight certificate liquidity to meet the 2020 target. Large-scale generation certificate prices declined in the second half of 2019 as it became clear the target would be exceeded and a surplus of certificates will arise in the future. Based on current forward declining certificate prices, and assuming no changes to the policy landscape, large-scale generation certificates could reach a price equivalence¹⁷ with Australian carbon credit units at some time in the early 2020s.

Figure 4: Estimated Large-scale generation certificate and Australian Carbon Credit Unit convergence

Tomago Aluminium smelter producing approximately 25% of Australia's aluminium. Photo: Tomago Aluminium.

Footnotes

16. Prior to 2019 only Australian carbon credit units or other international abatement units were surrendered to meet requirements under the Climate Active program.
17. When large-scale generation certificates are converted to carbon abatement equivalent prices based on the emissions intensity of the National Electricity Market.