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Does another new environmental scheme create more uncertainty?

In December the Department of Climate Change, Energy, the Environment and Water released two papers. One on Renewable Electricity certification and one on the Guarantee of Origin Scheme.

These are mainly aimed at the hydrogen industry but the first could have a significant impact on the electricity sector if the proposals are implemented as per the position paper.

The Renewable Electricity Certification paper asks for feedback on the need for a new mechanism for electricity to be certified, currently to be used only for voluntary surrender purposes. It proposes it will act alongside LGC creation (Large-scale generation certificates) with the developer able to decide if they produce an LGC or a REGO (Renewable Energy Guarantee of Origin certificate) on any given period, in any given day.

The REGO can be used for all uses, bar RET liability i.e., voluntary surrender.

The main difference of the REGO to the LGC elements being proposed in the paper are:

  • It proposes to allow the use of below-baseline generation to create a REGO.
  • It will also allow STCs systems to create a REGO once the maximum deeming periods from date of installation has been met. If the minimum threshold isn’t met they can aggregate multiple small scale systems to create a certificate.
  • Further it suggests almost a double counting whereby a battery could purchase REGOs to “store” green electricity then re-sell as green electricity with a new REGO.
  • For exporting renewable energy i.e. Sun Cable whereby the REGO can be created even though the electricity is exported overseas, this is not allowed under the RET scheme for LGCs. How we can claim that against a domestic usage is yet to be seen!
  • There is a proposal any vintage can be surrendered at any time for this year’s claim
  • It is also worth noting a REGO would require a time stamp under the proposals – meaning hourly matching could be undertaken. However, a note for is you are in an aggregated system for the REGO the last hour to make the 1MWh REGO would be the one counted.

It is proposed this will allow claims post the sunsetting of the RET in 2030 but does not go as far as to state it will replace the RET – however this must be implied that it is the intention of the scheme.

If this is to go ahead there are a few concerns:

  • Will it crash the price of the LGCs?
    • Could the market be flooded with “equal value” REGO certificates and bar RET liability the LGC market move?
  • Alternatively – What happens to the LGC market if everyone signs up to REGOs – would it mean LGCs could potentially go up in price as people are only creating REGOs and the LGC RET liability can’t be met
  • Will it increase volatility with an arbitrage being available between the two schemes?
  • Does this really level the playing field for Hydrogen in the way they think it will? I am not sure we meet all criteria in the market leading hydrogen certification markets with this proposal
Consultations close 3rd Feb but this is one to watch. It may be being pushed through a side door but it could blow open the LGC market as we near the end of the RET scheme. Have your say here: