Government needs to shape up green electricity market argues hurleypalmerflatt

The UK Renewables Obligation (RO), requiring power suppliers to source an increasing proportion of the electricity they sell from renewable energy sources, was launched more than six years ago. It was an important step that will continue to be the primary driver for increased renewable generation capacity.

However, since the introduction of the mandatory RO scheme, the voluntary market for green electricity has never quite been right. It has been fraught with competing claims on what is “green”, sullied by accusations of foul play and confusion as to what its various products represent. This is despite a now abandoned effort by Friends of the Earth to compile an independent league table of green tariffs.

In a 2006 report the National Consumer Council blamed this confusion and a lack of independent verification for the low take-up of green electricity tariffs.

This should not be seen as an indictment of the RO – the demand for new renewable capacity created by the mandatory obligation is far greater than that which would have been created by a purely voluntary market. However the low take-up does raise an important issue. Switching to green power often features as one of the top 10 quick actions for consumers or businesses with green aspirations; and as a first step in this direction it is a useful tool in engaging individuals and organisations with the climate change challenge. The confusion over it, coupled with a perceived risk of being burnt by choosing the wrong tariff, appears to present a barrier to wider engagement.

In 2007, electricity regulator Ofgem and the Energy Saving Trust launched parallel consultations aimed at tackling this confusion by developing a set of guidelines for green supply and an independent tariff accreditation scheme. Two further consultations have now been conducted by Ofgem and a quick glance at the results suggests stakeholder consensus on the direction of the green tariff guidelines remains elusive.

Confusion about green electricity tariffs appears to be presenting a barrier to wider voluntary engagement

The reason may be that at least a part of the green electricity issue is inherently political. Ofgem can provide clear guidance and oversight, appoint an independent verifier to audit green tariff claims, and close a loophole that allows unscrupulous suppliers to sell the same unit of green power twice: once to a commercial customer (backed by a levy exemption certificate), and again to a domestic consumer (backed by a renewable energy guarantee of origin).

But there are deeper issues. The first is another form of “double counting” related to carbon emissions from electricity consumption. It occurs when consumers of green electricity are allowed to report their electricity use as zero CO2 while other consumers report the average emissions of the UK or of their supplier’s overall fuel mix (double counting the benefit of the green power).

The second deep-set issue is “additionality”. This arises from the parallel existence of a voluntary market with the mandatory RO. “If I pay extra for green power, how do I know I am creating any additional environmental benefit rather than merely paying extra to help the supplier meet their legal obligation?”

Solving these issues will require the UK to make a philosophical decision, either:

• banning the sale of green electricity; or
• extending fuel mix disclosure requirements to require all suppliers to label the attributes of all the electricity products they sell.

This is a fundamentally political decision that requires a proper assessment and debate. In the absence of such direction it is unsurprising that the green electricity market remains broken. Perhaps fixing it is a task our new Secretary of State for Energy and Climate Change needs to address? n