LGC procurement strategies: Spot market vs. Power Purchase Agreements (PPAs)

Each procurement strategy has its own benefits and challenges depending on your corporate sustainability goals, risk tolerance, and budget. In this blog, we’ll compare these approaches and highlight best practices to help businesses make informed decisions.

Spot market vs. PPAs: What’s the difference?

 

Procurement strategy	Benefits	Challenges
Spot market purchases	Flexible - allows businesses to buy as needed. Immediate access to LGCs.	Exposure to price volatility. Requires access to wholesale markets. Limited long-term impact on driving new build or additional renewable energy generation.
Power Purchase Agreements (PPAs)	Offers long-term price stability. Supports new renewable projects. Strengthens ESG credibility.	Requires long-term commitment. Financially complex.
Retail contract	Purchasing is relatively simple. Access to LGCs is also less complex.	Less able to take advantage of market price movements.
GreenPower programs	Guarantees LGCs are sourced from accredited renewable energy sources. Flexible for businesses	May not offer the same price stability as PPAs.

Best practices for corporate LGC procurement

Organisations often take the following factors into account when planning LGC procurement:

• Market timing: Spot prices fluctuate due to supply, demand and policy factors. Staying informed on trends may help guide purchasing decisions.
• Procurement mix: Some businesses use a hybrid of spot purchases and long-term agreements to balance flexibility and cost visibility.
• Retail and GreenPower options: Retail contracts and GreenPower programs offer simplified access to certified renewables, with less contractual complexity than PPAs.
• Strategic alignment: Companies with strong sustainability objectives sometimes choose PPAs to align long-term procurement with renewable development goals.
• Trusted insights: For guidance tailored to your business needs, consider reaching out to a trusted advisor or LGC market expert who understands the latest trends and certification developments.

Procurement preferences vary. Some businesses value the flexibility of the spot market, while others see PPAs or retail contracts as more aligned with their renewable energy goals or risk profile.

Final takeaway: There’s no one-size-fits-all strategy. Each organisation brings different financial, operational and sustainability goals to the table, whether that points to PPAs, spot purchases or retail solutions like GreenPower. Smartest Energy has experts across renewable electricity contracting and LGC procurement for businesses in Australia. Contact us for help and support. 

What’s next? 

In our third and final blog of the series, we’ll explore what happens after 2030. We'll discuss the future of LGCs and renewable energy markets, the impact of the Renewable Energy Target’s conclusion and potential new certification mechanisms.

Missed the first blog in this series? - Go back to “Navigating LGC Market Trends – Prices Close at All-Time Lows and the Transition to a Voluntary Scheme Post 2030” where we take a deep dive into Australia’s large-scale generation certificate (LGC) market trends and unearth why now could be the ideal time for your business to act.

Disclaimer: The information enclosed is general information only; it cannot be relied upon as legal or financial advice. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person or entity.