I am pleased to announce that Gridcognition is now officially a signatory of the 24/7 Carbon-Free Energy Compact.
What’s the future of Renewable Energy Certification in Australia
Australia has a renewable energy certificate scheme to support our renewable energy target (RET). Under this target, liable entities, mostly electricity retailers, have to acquire and surrender a number of renewable energy certificates until 2030, when the scheme ends.
There is also a large and growing voluntary market for these certificates to support renewable energy and carbon reduction commitments. Demand for these certificates from liable entities and voluntary purchases creates a market price, and the market value for these certificates supports investment in new renewable energy generation.
But what happens after 2030?
Renewable Energy Guarantee of Origin
With the RET scheme ending in 2030, how will consumers procure renewable energy? And how will project developers finance their projects without surety on the revenue they might earn from investment in renewables?
Enter Renewable Energy Guarantee of Origin Certificates or REGOs. The Australian Government is planning to introduce a scheme for REGOs in 2024. This will be an entirely voluntary scheme (liable entities won’t be required to purchase and surrender REGOs).
REGOs will have a number of new and interesting attributes attached to them which will be maintained in the Clean Energy Regulator’s certificate register, including:
- Renewable energy source
- Hour and date of generation
- Location of generation (state/territory and grid)
- Power station commissioning date
This means, for example, that someone that procures renewable energy can know the source of their renewable energy (origin), they can know whether it was from a new project (additionality), they can know the location (locational emissions), and they can know the time of generation (load matching).
This is in contrast to our current renewable energy certification scheme that allows 100% renewable energy claims to be made from certificates generated in the past in completely disconnected grids or from old power stations that pre-date renewable energy certification (e.g. old Hydro projects).
What we have seen in other markets is that these characteristics can attract real premiums: clear origin, clear additionality, and time and location matching is worth more to consumers who care about the true decarbonization of their products or operations.
Interestingly, the REGO scheme will also support storage systems like batteries. Batteries will be able to generate REGOs for each unit (MWh) of electricity they send out, provided they can demonstrate the source of the electricity is renewable.
This will enable time-shifting of REGOs. For example a REGO produced in a solar farm in the middle of the day could be acquired and surrendered by electricity storage operator, and then the battery operator could generate a new REGO at night from that same energy, which will attract a premium from consumers who are seeking true 24x7 decarbonization of their operations.
Between 2024 and 2030, owners of renewable power plants can choose to produce LGCs or REGOs and they will be able to attach the same attributes to LGCs as REGOs (i.e. we’ll have support for location and time-matched LGCs). It will be interesting to see how this affects market prices for LGCs when they are not a pure fungible commodity any more.
What does this mean for energy buyers and sellers?
It’s important we have a plan for renewable energy certification after 2030, and attaching more attributes to certificates will enable sellers to offer differentiated products and buyers to purchase products that better match their renewable energy and decarbonization goals.
Whether you are a project developer, an electricity retailer, or a renewable energy purchaser, there will be some new interesting opportunities to explore in 2024.
At Gridcog, we're starting to explore what this means for buildings with a new project kicking off in April: 24/7 Carbon Free Buildings.
Register for our launch event.