This eighth post provides information on the new Renewable Electricity Guarantee of Origin (REGO) scheme and what is means for Hydro Tasmania. This is a quite complex (some may say nerdish) area and included to try and provide some background and context to the posts that follow related to the key issue – what all this means for Hydro Tasmania’s financial position now and into the future. There are 18 Chapters in total and I will continue posting a new post daily.
The purpose of these posts is to show how Hydro Tasmania actually earns money, how the National Electricity Market shapes its fortunes, and why the numbers in its accounts now matter more than at any time in the past two decades. It also seeks to dismantle the myths that have dominated public debate.
I thank John Lawrence for his assistance in preparing this information, his attention to detail and research over many years as we have worked together to better understand one of the most complex areas that impact our state, economically and functionally.
Glossary of acronyms used in this chapter
ACCU – Australian Carbon Credit Unit: a tradable financial product to incentivise carbon abatement activities through projects ranging from reforestation to energy efficiency and is an additional income source for individuals and businesses running ACCU Scheme projects. One ACCU represents one tonne of carbon dioxide equivalent (tCO2-e) that would have otherwise been released into the atmosphere.
CIS – Capacity Investment Scheme: Australian Government initiative to provide revenue support/safety net for new renewable energy (wind, solar) and clean dispatchable (battery) projects to support the 82% renewables target by 2030.
LGC – Large‑scale Generation Certificate: A renewable energy certificate created for each MWh of eligible renewable generation.
MW – Megawatt: A measure of power (capacity). One MW equals one million watts.
NEM – National Electricity Market: A collection of five separate regional markets linked by interconnectors.
PPA – Power Purchase Agreement: A contract to buy or sell electricity at an agreed price.
REGO – Renewable Energy Guarantees of Origin: digital certificates in Australia’s Guarantee of Origin scheme to track and verify renewable electricity, proving when, where, and how it was generated.
RET – Renewable Energy Target: Australian government scheme to incentivise 33,000 GWh electricity from renewable sources each year from 2020 to 2030.
Chapter 8: REGOs -The New Certificate Scheme, and the Physical Reality That Limits Their Worth
Why REGOs matter for Tasmania’s industrial future – and why they risk becoming Australian Carbon Credit Unit – ACCU‑style greenwashing unless governed tightly.
The Renewable Energy Target is ending. Large Generation certificate (LGC) prices have collapsed to levels no one imagined even two years ago. Hydro is carrying $142 million in losses from certificate‑heavy Power Purchase Agreements (PPAs) that were supposed to be safe. The losses are likely to worsen. Into this vacuum steps a new instrument: REGOs – Renewable Electricity Guarantee of Origin certificates.
REGOs will shape the next decade of industrial contracting, export credibility, and renewable branding. They will be central to hydrogen proponents, data centres, green metals, and any industry that needs to prove its electricity is renewable. But REGOs will only be an asset to Tasmania if Hydro avoids repeating the mistakes that turned LGCs into a financial trap – and if REGOs avoid becoming the greenwashing instrument that Australian Carbon Credit Units (ACCUs) have become in the carbon market.
And above all: REGOs can never overcome the physical reality of electricity in the NEM.
And above all: REGOs can never overcome the physical reality of electricity in the NEM.
What REGOs Are — and Why They Exist
REGOs certify the provenance of renewable electricity. They answer one question:
“Can you prove this electricity came from a renewable source?”
They are not a subsidy. They are not tied to a target. They are not a compliance instrument. They are not designed to spike in price.
They are a credibility tool – a way for industrial customers, exporters, hydrogen proponents, data centres, and green metals producers to demonstrate that their electricity has renewable origin. REGOs exist because the world now demands traceability, not just generation.
But REGOs exist in a world where electricity itself cannot be traced.
The Physical Reality: You Can Never Trace Electrons in the NEM
This is the truth almost no one says out loud.
Once electricity enters the NEM:
- it mixes instantly
- it loses identity
- it cannot be tagged
- it cannot be traced
- it cannot be separated into “renewable” and “fossil” streams
The NEM is a giant electrical soup. A drop of water in the sea becomes indistinguishable from every other drop.
So when a smelter, hydrogen plant, or data centre claims “100% renewable electricity”, what they actually have is:
Grid electricity + a certificate saying that somewhere, sometime, someone generated a renewable MWh.
That’s it.
REGOs do not guarantee:
- that the electrons consumed were renewable
- that consumption matched renewable generation in real time
- that emissions were actually reduced
This physical reality permanently limits the worth of REGOs. They can certify provenance. They cannot certify physics.
How REGOs Differ From LGCs — and Why That Matters
LGCs were compliance certificates created under the RET. Their prices were volatile, policy‑driven, and often speculative. They were bundled into PPAs, and when the RET target was met early, LGC prices collapsed. Hydro was left holding long‑dated, fixed‑price exposures that turned into a financial trap.
REGOs are different:
- provenance certificates
- not tied to a target
- expected to be low and stable in price
- used for branding and verification
- intended to be bundled with energy
- not designed to subsidise new build
REGOs are not the new LGCs — but they could become LGCs 2.0 if misused.
Enter the CIS: The Policy Shift That Changes Everything
The Commonwealth’s Capacity Investment Scheme (CIS) is the quiet force reshaping the economics of renewable development – and by extension, the role of REGOs.
CIS underwriting gives developers:
- revenue certainty
- downside protection
- long‑term contractability
- lower financing costs
This means developers no longer need to rely on high‑priced certificates to make projects bankable. The CIS has effectively removed the scarcity value that once propped up LGCs – and will prevent REGOs from ever becoming a meaningful revenue stream.
It also means Hydro is now competing in a market where CIS‑backed projects can offer lower‑priced, lower‑risk PPAs than Hydro can match. The CIS has shifted the balance of power decisively toward developers and away from buyers like Hydro.
The implication is simple:
REGOs will never be worth much — and they should never be treated as a financial instrument.
The Critical Risk: REGOs Could Become ACCUs 2.0
REGOs share structural vulnerabilities with ACCUs, which have been widely criticised for weak baselines, questionable additionality, and enabling greenwashing. REGOs face similar risks:
1. REGOs can become a tick‑box instrument
A company can buy REGOs and claim “100% renewable electricity” even if it consumes grid power at fossil‑heavy times and contributes nothing to new renewable build.
2. REGOs can “launder” fossil‑heavy electricity
A smelter or hydrogen plant can consume grid electricity, buy REGOs separately, and claim “100% renewable energy”. This is renewable laundering – the electricity equivalent of ACCU‑based carbon laundering.
3. REGOs can be double counted
Weak governance can allow the same renewable MWh to be claimed by multiple parties.
4. REGOs can become a political shield
Governments love certificates because they are cheap, easy, and create the appearance of progress.
5. Developers will try to turn REGOs into a revenue stream
Hydro must refuse fixed‑price REGO offtakes, long‑term REGO contracts, REGO floors and collars, and REGO‑indexed PPAs.
The Opportunity: REGOs Can Still Be Valuable – If Used Properly
Used correctly, REGOs can:
- Support green industrial customers Bell Bay Aluminium, Norske Skog, hydrogen proponents, data centres, green metals exporters.
- Differentiate Tasmania Firmed renewable energy, traceable provenance, low‑carbon credentials.
- Strengthen Hydro’s contract portfolio Bundled REGOs can justify premium contract prices and secure long‑term industrial load.
- Support export markets Hydrogen, ammonia, green metals – all require certification.
But their value is bounded by the physical reality of the NEM.
The Rule for Hydro: REGOs Must Be Bundled, Not Traded
Hydro must adopt a simple principle:
REGOs should be bundled with energy contracts, not bought or sold separately.
That means:
- no fixed‑price REGO PPAs
- no long‑term REGO purchase agreements
- no REGO speculation
- no REGO inventory
- no REGO exposure
- no repeat of Note 11 / Note 17 reporting
REGOs should be issued, bundled, transferred, and retired — not traded.
Linking Back to Chapter 6 (LGC Losses)
Chapter 6 showed how Hydro:
- bought LGCs at $50
- sold them at $22–$30
- wrote down inventory by $27.6 million
- recognised $142 million in future losses
- will lose $182 million by 2030
- will likely lose more as LGC prices continue to fall
All because Hydro treated LGCs as a financial instrument, not a credibility tool.
REGOs must not repeat this mistake – financially or reputationally.
Conclusion
REGOs are not the new LGCs. They are not a subsidy. They are not a speculative asset. They are not a revenue stream. They are a credibility tool — but one permanently limited by the physical reality of the NEM.
Used correctly, REGOs can strengthen Hydro’s industrial contracts, support green exports, differentiate Tasmania, and add value without adding risk.
Used incorrectly, REGOs could become ACCU‑style greenwashing instruments – a way to claim progress without delivering it.
The lesson is simple:
REGOs must be bundled with energy, not traded. Hydro must never again take certificate risk. And REGOs must be governed tightly to avoid becoming the next credibility crisis.
Next, in Chapter 9, we turn to FCAS – Hydro’s last strong revenue pillar, and one that is beginning to show cracks.