A certificate that traded above $40 in late 2024 was worth roughly $6 to $9 by September 2026. Prices do not fall that far on a single cause. Several things lined up: a target that does not grow, a building boom that does, a new competing instrument and an end date that is getting closer.
This article explains the causes one at a time, shows what the fall means for the people on each side of the market and notes how it connects to the commercial solar rules that changed on 1 October 2026. Prices are approximate and drawn from public reports. For the timeline, see LGC price history.
First, what sets an LGC’s price
An LGC is created for each MWh of eligible renewable electricity generated by an accredited power station. Demand comes from liable entities, mainly electricity retailers, which must surrender LGCs each year in proportion to the electricity they acquire. The proportion is the Renewable Power Percentage (RPP), published by the Clean Energy Regulator, and was 16.67 percent for 2026. There is no clearing house at a fixed price, so the market sets it. When supply exceeds what liable entities need, the price falls toward whatever voluntary buyers will pay.
Cause 1: the target is fixed, supply is not
The large-scale target is constant at 33,000 GWh a year until 2030. Once that target is met, additional generation does not create more compliance demand. The build-out of large-scale renewables continued anyway, driven by state contracts, corporate power purchase agreements and the federal Capacity Investment Scheme, so certificates kept coming. A fixed demand and a growing supply produce a surplus.
Cause 2: a large surplus that persists
Market sources reported a 2026 surplus in the range of roughly 10 to 15 million LGCs, and the Clean Energy Regulator has said oversupply is expected to persist to 2030. A market that expects surplus every year has little reason to bid up the price. Holders who bought at higher prices have been sellers.
Cause 3: REGO offers a different route
The Guarantee of Origin scheme began on 3 November 2025. Renewable Electricity Guarantee of Origin certificates can be time-stamped, can be created by batteries and hybrid projects and continue beyond 2030. Buyers who want a claim that lasts past the RET may prefer them, drawing some voluntary demand away from LGCs.
Cause 4: the clock
LGC creation under the RET ends in 2030. A buyer who wants a certificate for a long-dated claim values one with a shelf life. As 2030 approaches, the later vintages carry less value, and forward prices have been quoted below spot.
Cause 5: voluntary demand has not filled the gap
Corporate buyers, mandatory climate-related reporting and speculation add demand, and they have grown. But voluntary demand responds to price slowly and to reputational factors, not to compliance deadlines, and has not absorbed the surplus.
Cause 6: momentum
When a price falls sharply, some holders sell to avoid further losses, and buyers wait. In 2025 the spot price fell by about a third in one quarter. That behaviour can overshoot fundamentals, which is also why the price can rebound sharply in a short period if sentiment turns.
Cause 7: the rest of the market is cheap too
Cheap LGCs make LGC-linked power purchase agreements less valuable, and project developers adapt by seeking REGO-compatible contracts. That reduces the future pull on LGC creation, but it takes years to flow through.
Worked numbers: who gains and who loses
For a liable retailer, the cost of the scheme per MWh acquired is the RPP multiplied by the LGC price. Using the 2026 percentage of 16.67 percent for comparison:
| LGC price | Retailer compliance cost per MWh |
|---|---|
| $45 | $7.50 |
| $20 | $3.33 |
| $8 | $1.33 |
The retailer’s cost per MWh falls by about $6 between $45 and $8. For a generator, the same fall cuts certificate revenue directly. A 50 MW solar farm with a 27 percent capacity factor creates 50 x 8,760 x 0.27 = 118,260 LGCs a year. At $45 that is $5.32 million. At $8 it is $946,000. The farm loses about $4.4 million a year in certificate revenue.
What this means for commercial solar installers
Low LGC prices change the commercial solar conversation. A customer who was told in 2023 that certificates would cover a share of the system cost needs a revised model. And a policy change from 1 October 2026 gives a better route for many mid-sized systems: systems above 100 kW and up to 1 MW installed from that date create STCs, with a fixed five-year deeming period, instead of LGCs. A 500 kW system in a zone 3 postcode creates 500 x 1.382 x 5 = 3,455 STCs, worth roughly $134,700 at $39, against perhaps $5,600 a year of LGCs at $8. Applications open mid to late November 2026 according to the CER. See mid-scale solar STCs and our answer on commercial solar over 100 kW.
Systems above 1 MW remain in the LGC scheme.
From the desk: when a customer asks “why did the certificate value drop?”, resist the urge to say it will recover. Say what you know: supply exceeds demand, the regulator expects that to continue and the quote assumes a conservative price. Then show the maths at a lower price. Honesty on the LGC line builds credibility on every other line.
What to watch next
- The CER’s quarterly carbon market report for the surplus estimate.
- REGO volumes and whether buyers shift.
- The first mid-scale STC applications from late November 2026.
- The forward curve for 2028 and later vintages.
For a forward view see LGC price forecast 2027, and for definitions the LGC glossary entry. The LGC versus STC answer covers the difference in plain terms.
What could turn the price around
A balanced piece names the upside risks too. A tighter pipeline of new projects, a rise in voluntary demand through mandatory climate reporting, a policy change that adds demand or a regulator decision that changes how surplus is treated could each lift the price. So could a run of weak wind and solar output that cuts creation in a given year. None of these is a forecast. They are the places to look if you want to know whether the trend might change. Our answers on the LGC spot price and how much an LGC is worth explain how to read a live number.
A note on STC holders
If you are a small installer who only deals in STCs, the LGC story affects you in two ways. It is a warning about what happens when a certificate market has more supply than demand, and it is a reason the policy moved mid-scale solar into the STC scheme. Neither changes the clearing house ceiling, which still caps STCs at $40.
What to do next
- Rebuild any commercial quote that used a 2023 LGC price.
- Read the LGC pillar at /lgcs/.
- For small-scale certificates, see STC trading and the pricing page.