Green electricity renewed
Katy Brown compares the suppliers of green electricity.
Ten years ago the government started making it a legal requirement for energy companies to source an increasing amount of the electricity they supply from renewable sources. They did this through the ‘Renewables Obligation’; if companies don’t source the required amount from renewable sources they must pay a penalty fee for non-compliance.
The introduction of the Renewables Obligation was clearly a significant positive step taken by the government to start to structurally address carbon emissions through a market-based mechanism.
However, its introduction created a lot of confusion and some dishonest dealings in the green energy market. The worst excesses included companies charging a premium on green tariffs which supplied customers with renewable energy that they were legally obliged to produce. Companies were also found to have sold the green credentials of the same unit of electricity up to three times over using the three different certificates that can be generated for every unit of renewable energy produced – ROCs, REGOs and LECs (see glossary below).
Green Energy Scheme
When we last covered green electricity suppliers, Ofgem, the electricity and gas market regulator, had announced that it was proposing an independent accreditation scheme to give customers assurance that green tariffs come with genuine environmental benefits.
It is therefore very welcome news that this scheme has now come into effect.
To be accredited by the scheme, suppliers must be vetted by the scheme’s independent panel – made up of energy and sustainability experts – to ensure they meet Ofgem’s Green Energy Supply guidelines for green tariffs. Those certified by the scheme are guaranteed to offer:
- Matching: Members have to match all supplies under certified tariffs with renewable electricity purchases, creating extra demand for green electricity and encouraging the development of new renewable sources.
- Additionality: All certified tariffs must also provide an additionality benefit, such as contributing to a Green Fund supporting community renewables initiatives, installing energy efficiency measures beyond those required by law, or purchasing carbon offsets to support CO2 reduction projects internationally.
- An independent audit: All certified green energy tariffs are independently audited every year to give customers confidence that the claims on matching and additionality are being met.
Although the scheme is voluntary, and a number of green tariffs aren’t signed up, Ian Byrne, of the scheme’s secretariat, says that it is useful, and has eradicated the worst excesses whilst finally bringing order to the market. Even organisations not in the scheme are offering broadly comparable products, he says, and that those that have not joined are smaller companies that have chosen not to for financial reasons – in addition to the cost of the independent audits there is a fee for being part of the scheme.
The one exception is Ecotricity, which Ian says is a special case. Investing in its own renewable energy generation is at the core of Ecotricity’s business model, but this is not compatible with the scheme which only recognises supporting other renewable initiatives such as community energy generation schemes.
Following a Retail Market Review, Ofgem has proposed to place a cap on the number of tariffs suppliers can offer. Ian is concerned this may reduce the number of green tariffs available to consumers.
Of the companies covered in this report, Scottish Power, Centrica (British Gas), EDF, RWE (Npower), SSE, E.ON and Good Energy have tariffs accredited by the scheme. However, they are only available to existing domestic customers so they no longer offer the option of switching to a green tariff with them – unless you’re on that tariff already. Good Energy has an accredited green tariff available for new small business customers.
Further information on details of the green funds and carbon offsets can be found on the Accreditation Scheme’s website.
Green Energy Scheme accredited tariffs
- ROC = Renewables Obligation Certificate – produced for every unit of renewable energy produced and surrendered to Ofgem as the mechanism for guaranteeing compliance with the Renewables Obligation.
- REGOs = Renewable Energy Guarantees of Origin – a certificate issued by Ofgem to certify that the electricity in respect of which it was issued was produced from an eligible renewable energy source.
- LECs = Levy Exemption Certificates – exempt electricity supply generated from qualifying renewable sources from the Climate Change Levy – a tax on the use of energy in industry, commerce and the public sector.
Electricity fuel mix 2014
(ranked by % supplied by renewables)
* Independent green energy company. Ebico is supplied by SSE. # Owned by a co-operative
How are the Big Six acting on climate change?
With each company setting out carbon reduction targets in different ways it is nigh on impossible for people to make a comparison. Ethical Consumer asked Dr Steven Glynn, from the Tyndall Centre for Climate Change Research, to comment on the published targets of the Big Six energy companies.
EDF has committed to reduce the intensity of CO2 emissions from electricity production by 60% by 2020.
Steven: EDF already has low carbon intensity due to the large nuclear component. It is not clear how they intend to reduce this by 60% and whether this is based on the unlikely notion that any new nuclear would be up and running by 2020.
Scottish Power has committed to reduce the intensity of its emissions by 30% in 2020 as compared to 2007.
Steven: This is a lower reduction in intensity than the Committee on Climate Change are talking about. On the plus side they do have a much higher proportion of renewables in the generation portfolio than most other companies.
Centrica has committed to reduce group power generation carbon intensity to 260gCO2/kWh by the end of 2020, though it is unclear from what and from when.
Steven: This is interesting as figures on their website indicate that they are already below this target.
SSE has committed to reducing carbon dioxide emissions from electricity generation by 50% by 2020.
Steven: Absolute reductions are more transparent and easier to understand than intensity figures so that is good but again not clear how they are going to do it.
RWE has committed to reducing carbon dioxide intensity of power generation portfolio to 0.62 mt CO2/MWh by 2020.
Steven: This target is unclear. If it equates to 620gCO2/kWh then this is still pretty high and would differ in the UK, where carbon intensity in 2010 was 509gCO2/kWh
E.ON has committed to halving the CO2 intensity of its electricity generation in Europe by 2025 (compared to the 1990 benchmark).
Steven: EON’s strategy seems to be based on closing coal and also converting other coal stations to biomass (which has its own issues). They also set out a target of 26% reduction in CO2 emissions by 2020 which is UK specific.
Renewable energy fuel mix of the Big Six in 2014
The proportion of renewable energy in a company’s fuel mix is a good way to compare company progress on genuinely making the transition to a low carbon economy.
Steven also told us:
“It is also not enough to just look at the targets themselves. What is needed is more information on how each company intends to achieve those targets. This is important because the improvements we need to see don’t stop in 2020 – the Committee on Climate Change suggests that carbon intensity of electricity generation should be somewhere around 300gCO2/kWh by 2020 but by 2030 this needs to be down to around 50gCO2/kWh. Energy companies could achieve substantial reductions in energy intensity by switching from coal to gas, and might meet 2020 targets, but there would then be real issues about how to get to the 2030 target. At the moment we appear to be going down a slightly adjusted business as usual route with the hope that carbon capture and storage and nuclear will save the day.
“If we really want to assess what the energy companies are doing to help address climate change we need to look more broadly at a range of issues like political lobbying, investment in renewable energy and performance on energy efficiency. As an example, Centrica, Scottish Power and SSE all missed targets for promoting energy efficiency improvements and are to be investigated by Ofgem for this failure.
“A final point is that none of these targets are likely to be anywhere near enough to give us a reasonable chance of achieving the reductions we would need to meet our share of the carbon reductions needed to give a reasonable chance of avoiding temperature rises above 2 degrees.”
Dr Steven Glynn works on carbon and energy issues as a Partner in Sustainable Change Co-operative and a Research Associate at Tyndall Manchester.
When we last covered green electricity tariffs in 2008 we highlighted a report published by the WWF and Innovest: ‘The Big Six – Still generating Climate Change’. This ranked these companies in terms of how they were meeting the challenge of climate change as follows from best to worst:
Scottish and Southern (now SSE)
RWE and EDF (joint bottom).
Clearly is would be impossible to re-rank these companies on the information here alone. We would welcome more up to date research in this area and would be keen to collaborate with any organisations interested in developing this research further.
“There is always fine print in these claims. Any ‘reduce intensity’ target is clearly silent on the fact that the company’s *overall* emissions are probably going up (it’s like eating a lot more ‘low-calorie’ food and then – guess what – putting on weight). Secondly, any ‘percentage reduction’ target without a baseline (compared to what year) is also a headline-grabbing but meaningless exercise. Most importantly of all, the depths of cuts we, as a global society, would need to make in our carbon emissions to stop catastrophic climate change are far far beyond the ‘Business as Usual’ proposals offered by the world’s businesses (and, sadly, governments). So any business that is acting ‘as usual’ is not to be trusted.”
Green electricity tariff price comparison
(As of July 2013. Ranked by price)
Annual cost based on small flat in Lancaster, 3 people, low energy use (£300-£450 per year), Northwest region (NORWEB), payment method Direct Debit.
Standing charge plus unit charge then applied to Ofgem medium annual domestic electricity consumption figures for 2011 (3,300 kWh) to calculate a single annual figure.
Results based on a single search of price comparison website www.energyhelpline.com by ECRA on 21/5/13. Prices inclusive of VAT (5%).
Charges may vary for your own circumstances and region.
What coal mines is the coal coming from?
Last year, Dutch campaign group SOMO and Greenpeace collaborated to produce the report ‘The Black Box: Obscurity and Transparency in the Dutch Coal Supply Chain’ which detailed how electricity companies were continuing to withhold important information about the origin of the coal they use. The report’s focus was on coal imported into the Netherlands, which, it concluded, was likely to have been imported from mines where abuses of human rights and the environment were taking place. E.ON and RWE, both covered in this guide, were named in the report as not being transparent about the specific mines where their coal comes from.
EDF, E.ON and RWE are all members of the Better Coal Initiative (BCI), launched in 2011, which “strives for the continuing improvement of the coal supply chain”, focusing on mines in particular. However at the time of the SOMO report the initiative had not led the companies involved in it to provide any additional transparency on the origin of their coal. The Bettercoal Code is being developed in consultation with NGOs, civil society and coal suppliers and will form the basis for assessments of coal mining sites. The code will cover ethical, social and environmental business principles and practices.
We asked Eleanor Baylis, of the Coal Action Network to comment on the Better Coal Initiative. She explained that while this focus on the coal supply chain is welcome, no code can ever bring coal mines up to truly acceptable standards. Her campaign work is focussed on the UK where she says standards are relatively high. Requirements for planning applications and environmental impact assessments means that the code would do little to improve things here. But if the UK is indeed an example of best practice, Eleanor does not believe it is something for other countries to aspire to.
As she explains, the coal industry in the UK affects poor rural communities negatively, damages people’s health, destroys ecosystems and produces large carbon emissions, whilst the mines themselves ruin farmland and woodlands. Opencast coal mining cannot be anything other than damaging to rural people’s quality of life whether in the UK or elsewhere. No one wants to live next to a large hole in the ground where once was countryside. People may benefit in the short term due to job creation but this is outweighed in the long run by the damage to health. Restoration, she says, is a farce.
“The BCI doesn’t go far enough to make real change – it is not in their interests to genuinely improve things as that would involve getting less coal out of the ground. Improvements would drive up their costs and reducing the amount of coal they can exploit – both of which are in conflict with their all important bottom line.”
Whilst of course any improvements in conditions abroad would be welcomed – overall the BCI reeks of green-washing. In order to prevent catastrophic climate change we need to keep coal in the ground, both at home and abroad, not come up with initiatives to give coal a better press.
This product guide is part of a Special Report on the Energy Industry. See what's in the rest of the report.