Australia's new renewable energy certificate regime — changes to Power Purchase Agreements (part 2)

In the first part of this series, we discussed the federal government’s transition from the Large-scale Generation Certificates (LGCs) to the Guarantee of Origin (GO) system for its renewable energy certification systems, directly affecting organisations who finance, buy or sell renewable energy projects.

This article examines how the transition impacts Power Purchase Agreements, which must clearly define certificate ownership, address legal changes, ensure compliance with statutory restrictions on certificate creation (including the prohibition on creating both an LGC and a Renewable Electricity Guarantee of Origin (REGO) certificate for the same electricity), and adjust pricing since the REGO scheme works differently from LGCs. Without proper updates, businesses risk disputes, financial loss or misleading sustainability claims.

The dual regime problem

A Power Purchase Agreement (PPA) is a long-term contract between an electricity generator and a buyer (typically a utility, government entity, or corporate off-taker), under which the generator agrees to produce and supply a specified quantity of electricity and the buyer agrees to purchase it at a pre-agreed price or pricing mechanism over a fixed term.

PPAs are commonly used to finance renewable energy projects, providing revenue certainty for the generator and price stability for the buyer, without the buyer needing to own or operate the underlying generation assets. Many PPAs currently in force were drafted around LGC mechanics. New agreements and amendments to existing ones must now account for REGOs. The practical difficulty is that for some projects, both regimes are simultaneously relevant; a project's commissioning date may straddle the transition, legacy LGC entitlements may continue alongside REGO eligibility (the LRET continues to operate until 31 December 2030, meaning LGCs can still be created and liable entities remain subject to surrender obligations until that date) and buyers' internal reporting systems may still reference LGC language.

Without clear contractual language, businesses risk disputes, financial loss, or misleading sustainability claims. Disputes over who owns which certificates, how they are valued, and whether environmental claims must be properly substantiated.

Five things to get right in your Power Purchase Agreements

• Define environmental attributes precisely – the definition of ‘environmental attributes’ in a PPA must now cover LGCs issued under the former Renewable Energy Target (which continues to operate until 31 December 2030), REGOs created under the GO scheme, and any future replacement certificates arising from further legislative reform. A definition that is too narrow, or simply copied from a pre-2025 template, risks leaving the parties uncertain about who holds what, with real financial consequences.
• Address change in law properly – the transition from LGCs to REGOs is exactly the kind of regulatory change that PPA change-in-law clauses are meant to capture. A well-drafted clause should address the parallel operation of the LRET and REGO schemes, the introduction of REGOs, and how the economic benefit or burden of that change is shared between the generator and the buyer. Critically, the clause should distinguish between regulatory compliance costs and changes that affect certificate value, as these require different treatment and different remedies.
• Prevent double counting – while it might be assumed that both an LGC and a REGO could be created for the same megawatt hour, this outcome is expressly precluded by legislation. Under the Renewable Energy (Electricity) Act 2000 and the Future Made in Australia (Guarantee of Origin) Act 2024, only one certificate — either an LGC or a REGO — can be created for a single megawatt hour of electricity. Contracts should therefore focus on ensuring compliance with these statutory rules, including representations and warranties that address compliance with scheme eligibility rules, prohibition on duplicate monetisation of environmental attributes, and accurate registration and transfer through the Clean Energy Regulator's systems. PPAs may, however, provide for election or switching mechanisms between schemes, or otherwise allocate the economic benefit of whichever certificate is created, but cannot enable concurrent monetisation of both LGCs and REGOs for the same electricity.
• Recalibrate pricing mechanics – LGC pricing was driven by compliance demand and the statutory penalty benchmark. REGOs operate in a different market, their value is shaped by voluntary corporate demand, export market requirements and product certification needs. Where PPAs contain fixed bundled pricing, the parties should assess whether the original economics remain sound under the REGO framework. Unbundled or indexed certificate pricing clauses may need adjustment. Objective market benchmarks for dispute resolution will reduce the risk of protracted valuation arguments.
• Align contractual obligations with scheme rules – corporate buyers use certificates to substantiate renewable electricity claims in sustainability reporting. A PPA must align its delivery mechanics, when certificates are created, transferred and retired, with the technical requirements of the GO scheme. A mismatch between what the contract says and what the scheme requires can expose buyers to greenwashing risk or regulatory scrutiny, both of which carry reputational and legal consequences.

State schemes and international alignment

At present, the GO scheme operates at the federal level, with the Clean Energy Regulator as the central administrator. Some states have their own renewable energy targets and support mechanisms, but there is no parallel state-based certificate regime that competes directly with REGOs. State schemes generally interact with, rather than replace, the federal framework.

Internationally, the GO scheme has been designed with alignment in mind. The European system of Guarantees of Origin (EGOs) under the Renewable Energy Directive is the most developed international analogue, and Australian policymakers have drawn on that model. For businesses exporting into European supply chains, particularly in hydrogen and green metals, the compatibility between REGOs and European certification frameworks will be a live commercial question. That alignment is not yet seamless, and further work is expected as the scheme matures.

The bigger picture

The move from LGCs to REGOs is not a bureaucratic reshuffling. It reflects a deliberate policy decision to build a certification system that can support Australia's role in global clean energy trade. For businesses in the renewable energy sector (whether as generators, corporate buyers, lenders or investors), the new framework changes the evidentiary basis of environmental claims, the risk profile of certificate revenue streams, and the commercial logic of long-term energy contracts.

PPAs executed now need to be drafted with that future in mind – flexible enough to accommodate further reform, yet precise enough to avoid the disputes that vague or outdated drafting will inevitably cause.

If you have any questions about Australia's new renewable energy certification system or how you should draft or update your Property Purchase Agreement, please contact us here.

Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Jeanne Vallade

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