Accounting for STCs and LGCs: How Australian Solar and Renewables Operators Should Treat Renewable Energy Certificates

TL;DR. Small-scale Technology Certificates (STCs) and Large-scale Generation Certificates (LGCs) are two of the most common items on the books of Australian solar and renewables operators, and two of the most commonly mishandled. They're created under different schemes, recognised at different points in time, and can sit on your balance sheet as either a cost offset or a tradeable asset depending on how your business actually uses them. This is a plain-English CPA walkthrough of the questions to work through before year-end, not a substitute for advice on your specific facts.

STCs and LGCs are not the same thing

Both are renewable energy certificates administered by the Clean Energy Regulator, but they behave very differently. STCs are created up front under the Small-scale Renewable Energy Scheme (SRES) for eligible small systems. The quantity is "deemed" based on expected generation over the deeming period, so they typically exist at the point of installation. LGCs are created under the Large-scale Renewable Energy Target, one certificate per megawatt-hour of eligible generation, so they accrue over time as a power station actually generates. That timing difference, deemed up front versus earned over time, is the root of most of the accounting confusion.

The deeming period for small-scale solar also shrinks each year until the scheme ends in 2030. Our guide to the 1 January 2027 STC step-down covers what that does to installer pricing, GST and cash flow.

The three accounting questions that trip operators up

• What is the certificate, in accounting terms? Depending on how your business holds and uses them, certificates may look like inventory held for sale (AASB 102), an intangible asset (AASB 138), or simply a reduction in the cost of a system you're installing. The classification drives everything downstream.

• When do you recognise it? At creation, at the point the customer assigns them to you, or on sale or surrender? For deemed STCs and progressively earned LGCs the answer is rarely the same.

• How do you measure it? Cost, net realisable value, or fair value where an active market exists, and how you treat movements in the certificate price between creation and sale.

Assigned at point of sale vs certificates you hold and trade

Most installers take assignment of a customer's STCs and pass the value straight through as a discount on the system price. In that model the certificate is usually a cost or price adjustment rather than a standalone asset, and the accounting is comparatively simple. It looks very different for operators who create certificates and hold them to trade, for example a larger solar or renewables business generating LGCs. There the certificate is closer to a recognised asset, with revenue recognised on sale and a genuine question about how to carry it in the meantime. Getting the two models mixed up is where balance sheets drift away from reality.

GST and income tax touchpoints

Certificate transactions have GST and income tax consequences, and the timing of assessable income doesn't always line up with when cash arrives or when the certificate was created. These are fact-specific and change with your structure and volumes, so treat the Clean Energy Regulator's guidance and the ATO as the authorities and confirm the position for your business rather than assuming last year's treatment still applies.

Where operators get it wrong

• Booking assigned STCs as revenue when they're really a price discount, which inflates both revenue and cost of sales.

• Carrying held certificates at a stale value and ignoring price movements before sale.

• No documented policy for recognition timing, so treatment drifts year to year and auditors ask questions.

• Treating STCs and LGCs identically despite the deemed vs earned timing difference.

How to get the treatment right

The fix is a short, documented certificate accounting policy: classify the certificate for your actual business model, fix the recognition point, and set a measurement basis you can defend at year-end. If your renewables business is scaling and certificates are becoming material, this is exactly the kind of judgement an outsourced finance leader should own. See our guide to choosing a fractional CFO, Financial Controller or Head of Finance, our walkthrough of carbon credit year-end disclosure under AASB 138, the R&D Tax Incentive for EPC, solar and renewables operators, and what the R&D Tax Incentive changes from 1 July 2028 could mean for renewables R&D claims.

Talk to a CPA

TechEdge Accounting is a CPA-led outsourced finance office for Australian construction, EPC, solar and renewables businesses. If certificate accounting, carbon disclosure or project margin visibility is getting ahead of your finance function, we can help.

Book a free 30-minute call with a CPA, email info@techedgeaccounting.com.au or call +61 468 634 973.

General information only, prepared by a CPA for Australian operators. It is not tax, accounting or legal advice for your specific circumstances. Confirm the treatment for your business with your registered adviser and current Clean Energy Regulator and ATO guidance.