As our energy and emissions pages explain, public transport has an inherently low energy and emissions footprint per passenger even when it operates using energy from fossil-fuel sources. Thus for example, travelling on a well-patronised electric tram involves less than one-quarter the carbon emissions of driving an electric car when both are supplied from the 2020 Australian power grid.

But with the need to reduce all carbon emissions now increasingly urgent, every small step we can take to eliminate carbon emissions from daily activities is important.

That’s why it is significant that since 2019, Melbourne’s trams have been linked to solar energy from two farms in northern Victoria, ensuring their electricity supply is ‘as good as’ 100% renewable. Similarly, in 2021 the NSW government commenced linking the Sydney Trains power supply with renewable energy via its contract with Red Energy (the retail arm of Snowy Hydro). Meanwhile, the ACT government has as of 2019 sourced all its electricity from renewable generators, meaning the Canberra Light Rail system also effectively operates on renewable energy. The Victorian government has announced its own ACT-style renewable energy auction which will source renewable electricity for Metro Trains (among other government functions) from 2022.

We have to say ‘effectively’ and ‘as good as’ renewable when referring to these initiatives, because it is always possible to quibble with the detail of how electricity can be said to be completely renewable when supplied from a grid that operates from both renewable and non-renewable energy sources. Physically, all electrical energy is ‘commingled’ in the grid, so all grid electricity is as renewable as the grid average (about 24% as of 2020). This is so for large and small consumers alike—even for residential consumers with their own solar panels (as long as they are grid connected).

This is, and will long continue to be, a dilemma for those who wish to make a thorough commitment to renewable energy, but for whom it is simply impractical (or even illegal) to build a standalone power grid.

There is, however, a practical solution that has been used for some time by everyone who pays for ‘100% Greenpower’ as part of their electricity bill. In brief, our market system accounts for every unit of electrical energy generated from renewable sources, and maps it to specific units of electricity consumption. Each unit of renewable electricity creates a certificate, and the buyer of that certificate has that unit attributed to them as consumption.

To be more precise (and as explained on the Clean Energy Regulator’s website):

• Grid-scale wind and solar farms produce ‘Large-Scale Generation Certificates’ (LGCs) when they generate into the grid. Each certificate is tied to a fixed quantity of actual metered generation, ensuring that LGCs correspond one-to-one with real renewable electricity.
• Small installations like residential PV systems produce ‘Small-Scale Technology Certificates’ (STCs) instead. To avoid the administrative complexity of collecting metering data from millions of individual sources, STCs are issued when systems are installed, based on the estimated energy produced over their lifetime. These estimates are regularly reviewed, and in practice work quite effectively to produce a one-to-one correspondence of STCs with actual renewable generation. However, STCs are not generally involved in the renewable purchase schemes being considered here.

To complete the accounting on the consumption side, both LGCs and STCs are ‘surrendered’ to the Clean Energy Regulator when electricity deemed to be ‘renewable’ is consumed. Australia’s renewable energy target obliges all wholesale consumers and retailers to surrender both LGCs and STCs equivalent to a certain percentage of their overall consumption.

A large consumer or electricity retailer can obtain certificates to surrender in one of two ways:

• They can contract directly with a wind or solar farm to buy all or part of the generated electricity. In this case the LGCs will typically be ‘bundled’ with the purchased energy and surrendered to the regulator in parallel with consumption. (There is an equivalent with STCs when households accept an offer from their retailer to install solar panels—part of the deal will be the retailer taking possession of the household’s STCs.)
• A renewable energy generator can sell their LGCs on the open market. Large consumers and retailers can then purchase LGCs on this market to meet their obligations. (A similar market operates for STCs: often a solar panel installer will sell the STCs on behalf of a household, using the proceeds to offer a discounted contract for the installation.)

The first of these approaches is the one taken by the ACT government, and has a closer intuitive match to the idea of sourcing 100% renewable electricity. The Victorian and NSW schemes, on the other hand, use the second approach. This is done for accounting reasons, to separate the pure operational requirement to procure electricity (a private commercial matter) from the public-interest obligation to certify the electricity as renewable. However, both approaches have the same final effect, of matching units of renewable energy generation to units of consumption by a specific end user.

Regardless of how the accounting is done, the fact remains that LGCs and STCs are an accounting measure to certify renewable electricity, not a physical mechanism for conveying power from a specific producer to a specific consumer. Again, this is as it must be for as long as non-renewable generators remain in the grid, unless we’re to run a new power line across the country every time a supply contract changes. But it still leaves the way open for commentators such as Nine Media’s Chris Uhlmann to obscure what is being done:

The territory’s poles and wires network, Evoenergy, has confirmed that 91 per cent of the electricity consumed in the ACT in 2020-21 came from the National Electricity Market. As the ACT sits within NSW it is actually “powered” by a market that sources 76 per cent of its electricity from coal. So, the ACT hit its 100 per cent renewable energy target through accounting; offsetting the coal it uses with the renewable energy it supports. Welcome to net zero.

It might well be true to say that the territory completely offsets its fossil fuel, but there should be more, publicly available, evidence for the claim and an acknowledgment that what is keeping the lights on is coal-fired generators.

—“Higher prices and coal-fired power: What net zero carbon emissions looks like in the ACT” in The Age / The Sydney Morning Herald, 27 October 2021

It doesn’t help that the Victorian and NSW governments themselves use the dreaded word ‘offset’ in their media briefings on the renewable supply initiatives. In a different context, the idea of emission offsets has gained a deservedly bad reputation: particularly when it applies to schemes such as planting trees to soak up carbon emissions from burning fossil fuels, or even paying someone just to leave existing trees in place on the presumption that without such payment the trees would be chopped down.

But what all three governments are actually doing here is no different in principle from what happens when you sign up for ‘100% Greenpower’ with your electricity retailer. This simply creates an obligation for the retailer to purchase and surrender additional LGCs to match your entire consumption instead of just 24% of it. This obligation is real enough that it comes at a price premium, and by boosting the demand for LGCs it creates a real incentive for additional renewable electricity to be developed. Being entirely internal to the electricity market, it is quite different to the Carbon Credit Units and overseas equivalents used elsewhere to offset non-electricity based emissions.

(There is a tricky consequence of these arrangements for the majority of residential PV owners, who have on-sold their STCs as part of their installation agreement. In order to fully realise their commitment to renewable electricity—including the ongoing generation from their own panels—they need to be reinvesting the proceeds of that STC sale in a Greenpower contract with their retailer. Unless they do so, their consumption is still only 24% renewable, or less, for accounting purposes.)

In short, the government initiatives to procure renewable energy for public transport systems work exactly like Greenpower from your electricity retailer. And because technically both involve only LGCs, every unit of consumption corresponds verifiably to an actual unit of renewable generation metered in real time, as distinct from a mere estimate.

If this can be said to be an ‘offset’, then it is an ‘apples for apples’ offset: electricity consumption that may or may not be renewable is being offset with fully renewable electricity generation, in the same grid, to an equivalent amount of energy. And of course as the grid itself transitions to being fully renewable, any such offsetting will come to have less and less meaning, and the price premium paid by the government for it will diminish. By taking these LGCs off the market on a regular basis, our State and Territory governments are helping speed up this transition.

Last modified: 24 March 2022