LGC Price Collapse Highlights a Missing Piece in Australia’s Renewable Strategy

Australia’s renewable energy landscape is shifting, and our latest piece dives deep into the record-low LGC prices and their impact on commercial solar operators.

With federal support heavily focused on utility-scale and residential projects, is the crucial mid-scale commercial and industrial (C&I) segment facing an unintended policy gap?

Last week, the Large-scale Generation Certificate (LGC) spot market reached a record low of $11.25 per certificate – a historic dip that has raised fresh questions about the future of mid-scale renewable energy in Australia. While market cycles are not new, the speed and depth of this price decline have left many commercial solar operators, particularly those generating power behind the meter, navigating a growing value gap between expectations and current market realities.

Projects that anticipated LGC revenues in the $30 – $40 range, alongside energy prices of approximately 12c/kWh, are now experiencing a significant shortfall. For many businesses, this equates to a ~20% drop in the financial benefit they expected from their solar assets. While investors understand risk, the context surrounding this market movement has prompted considerable discussion about where support is, and is not, being directed.

For solar companies and Australia’s renewable energy transition, this means many new projects are being paused and re-evaluated.

The LGC market was once a foundation of Australia’s renewable transition, driving and underpinning the significant uptake of clean generation and surviving through multiple changes in government. Yet as LGC prices now risk approaching parity with administrative costs for many facilities, the effectiveness of this mechanism, at least for behind-the-meter and smaller projects, is being called into question.

At the same time, the federal government has made several major announcements that reshape the renewables support landscape:

• • In November 2023, the Capacity Investment Scheme (CIS) was expanded, committing federal backing to 32 GW of new capacity—largely utility-scale generation and storage.
  • In Early 2024, the proposed Guarantee of Origin bill was introduced to Parliament, signalling a shift in how Renewable Energy Certificates (RECs) may be treated post-2030, potentially reclassifying them as voluntary offsets rather than compliance instruments (a change that would signify low to no value for many non-utility-scale facilities).
  • July 2025 saw the CIS expand by a further 25%, bringing the total support to 40 GW.
  • In May 2025 the Cheaper Home Battery Program (Battery STC program) was announced, providing a long-needed solution to the value proposition gap for home batteries.

Together, these announcements represent a strong federal focus on utility-scale and residential projects. Whether intentional or not, the absence of dedicated support for medium-scale commercial and industrial (C&I) solar deployments stands in stark contrast to the backing being offered to residential (through STCs and battery programs) and large-scale developers (through the CIS).

The consequence is that the crucial C&I-scale segment, which represents direct, consumer-led, behind-the-meter projects, is effectively being left out of recent policy advances. These systems are often quicker to deploy, less reliant on new transmission infrastructure, and better aligned with daytime business energy use than their utility-scale counterparts. Yet they now face headwinds not from technical or economic fundamentals, but from policy imbalance.

This is not to suggest that recent government actions are misguided as the rapid uptake of home batteries seen in just the first month of the program proves their value. Rather, it is an opportunity to consider what is missing.

If Australia is to reach its 82% renewable electricity target by 2030, contributions will be needed from every part of the system, including the medium-sized generators that operate at a facility level and now find themselves operating without clear federal backing or an indication of future recognition.

A common discussion this year has been whether the LGC price collapse is a fundamental case of supply and demand, or if it is linked to the LRET’s static target of 33 million LGCs per year – a target not scaling up to meet the nation’s 82% renewables goal or to match the industry’s success from previous years when strong support was present. What leaves many scratching their heads, however, is that between 2022 and 2024 (when LGC prices were strong), LGC creation volumes grew by an average of 8.28% annually, while voluntary demand increased by over 18% per year. Additionally, voluntary retirement in 2025 is on track to grow by over 40% compared to 2024’s figures. Couple this with consistent delays to anticipated large-scale renewable projects and a debt of over 5 million LGCs from previous years that liable entities have yet to surrender, and the maths does not seem to justify the price bloodbath seen in the last 12 months.

Markets will fluctuate and policy settings will continue to evolve, but the current state of the LGC market and the corresponding impact on smaller commercial projects raise a fair and timely question – should there be a targeted intervention to preserve the role of behind-the-meter commercial generation within Australia’s renewable strategy?

What is clear, an LGC intervention, or broader recognition of C&I renewables, is needed. If we are serious about the energy transition, we will need contributions from every part of the system, not just the biggest projects or the houses owned by the most vocal voters.

Aaron Jenkins | CEO, Ecovantage
Aaron is a specialist in end-to-end solutions for medium to large energy users. This includes energy audits, technology implementation, carbon offsets and energy certificates.