How green is my lecky?

Is your green electricity tariff just a con? Rebecca Willis picks a way through the minefield to resolve the current chaos.

switch to a green electricity tariff. You might not be able to afford solar panels, but simply by signing up to one of the many schemes on offer, you can make sure your home is powered by zero-carbon electricity, and provide much-needed help to the UK’s renewables industry. Right?

Not quite. Sadly, what began as a simple green action has become a legal minefield. It’s actually pretty difficult to tell what you are buying when you sign up for green electricity. There’s no agreed standard, and no process of verification: with many (but by no means all) green tariffs, you could be buying fossil fuel generation and nuclear power along with your renewables. And there are no fewer than three ‘proofs’ that a given unit of renewable electricity in the UK really is renewable. The reasons for this sorry state of affairs are complex, but if you don’t know your LECs from your REGOs and your ROCs, don’t panic.

Just bear with me for a quick explanation.

1 Since renewable energy is exempt from the Climate Change Levy (a tax on the industrial use of energy), it is eligible for a Levy Exemption Certificate (LEC).

2 The generator is also entitled to certificates that identify the electricity as renewable – these are Renewable Electricity Guarantees of Origin (REGOs).

3 Under the Renewables Obligation, supply companies must source at least a specified minimum percentage of electricity (currently 8%) from renewables, or pay a penalty. The proof comes in the form of Renewables Obligation Certificates (ROCs), which are issued in the first instance to the generators, and passed on to the supply companies for each unit of renewable power they’ve sourced. But ROCs are tradeable, so if a supply company hasn’t bought enough renewables, it can buy in some certificates from anyone who has.

Confused? It gets worse. Suppliers sell the renewable electricity they buy to their customers, often as part of a ‘green tariff’. But they can sell it more than once. For example, they can sell a business customer a unit of green power backed by a LEC, which means that the business does not need to pay the Climate Change Levy. At the same time, they can sell the same unit of green power to a domestic customer, backed by a REGO or a ROC. So, in the worst case scenario, you could pay extra for a green tariff, but actually find yourself buying renewable power that has been sold once already – and which merely helps a supplier meet a requirement (under the Renewables Obligation) which they have to do anyway.

Hidden gems

At present, points out Virginia Graham, sustainable energy expert and author of a 2006 report on green tariffs for the National Consumer Council, “there’s only so much renewable power to go around”; it represents only about 4% of total UK electricity generated. With demand from business and industry outstripping available supply, Graham warns that “lots of people think they’re buying it, but they’re probably not”.

It’s not surprising that efforts by the Energy Saving Trust, Friends of the Earth and others to offer accreditation or endorsement of green tariffs have ended in failure. Nor that, amid so much confusion, less than 1% of households have made the switch.

“Lots of people think they’re buying green energy, but they’re probably not”

But it’s not all bad news. Some companies have tried hard to rise above the legal mess and offer customers good green deals. The sidebars overleaf show some of the tariffs on offer, both from specialists and from ‘mainstream’ suppliers. Juliet Davenport, chief executive of Good Energy, says she hopes that her customers “sign up to Good Energy for more than just buying green power”. The benefits, she explains, are wide-ranging – the company actively lobbies government for better policy on renewables, and supports small-scale generation through buying excess power at an above-market rate. Good Energy also ‘retires’ some ROCs from the market, so it can show that it is exceeding the minimum standards of renewable supply required by law. British Gas, too, offers a tariff which retires ROCs, as well as offsetting the carbon from gas and fossil-fuel-generated electricity.

Ecotricity takes a different approach. It guarantees that it will invest some of your money in building new renewable energy, and thereby increase the total amount of renewable power generated in the UK. Dale Vince, founder of Ecotricity, argues that what is really needed is greater certainty for renewables investors, and that the best way of doing this is through providing dedicated funds for investment. Controversially, Vince does not believe that retiring ROCs is worthwhile, as it does not send a clear signal to the market: “it’s a very poor second-best to actually building something”.

As these examples show, there are some good deals around, but cutting through the confusion is incredibly difficult. I’ve been writing about energy issues for ten years, but I still had to think hard and ask some trusted friends before deciding on a tariff. The Advertising Standards Agency recently took British Gas to task for claiming that it was selling ‘the greenest energy tariff in the market’, on the grounds that there was no way of verifying the claim. The National Consumer Council blames the confusion, and lack of independent verification, for the less-than-impressive levels of enthusiasm among would-be-greener householders.

Many businesses, too, are calling for greater clarity. As companies are increasingly being asked to count their carbon, they need to know what sort of electricity they are buying. BT, for example, is working with energy suppliers, the gas and electricity market regulator Ofgem, the Carbon Trust and others to get some basic information about the carbon content of the power that it buys.

Help on the horizon

Everyone involved wants the current crazy situation resolved. And it may be, over the next year or so. Ofgem’s Martin Crouch says his organisation is consulting on a set of guidelines which will address “how best to give customers confidence that there are environmental benefits when they choose a green tariff”. And it’s not only Ofgem which realises that the current system is unsustainable, in more ways than one. Government, suppliers, generators, business customers and consumer groups all seem keen to chart a way forward. If agreement can be reached, new guidelines and an accreditation system should follow later this year – though there have already been several delays in the process.

“There should be an agreed standard or definition of a green tariff”

Given the current confusion, this probably needs to be done as a two-step process. First, there needs to be a simple, transparent way of setting out the actual renewable and carbon content of each tariff. Virginia Graham suggests that this could be done through the ‘fuel mix disclosure’ process. Supply companies are already required to state where their electricity supply comes from, overall – how much is from renewables, nuclear, and fossil fuels. If this information were supplied for each tariff, rather than each company, it would provide a much clearer picture of where the renewable energy is going. It would effectively prevent companies double counting, and would make it clear whether the company was meeting or exceeding its legal obligations.

Second, there should be an agreed standard or definition of a ‘green tariff’. There is no need to impose a single blueprint. Some tariffs may retire ROCs, others may specialise in supporting home generators, others will invest in new wind farms. But, as a minimum, such tariffs should exceed legal requirements. They will probably need to be accredited by an independent body, rather than by the suppliers themselves. Given the different approaches, it will probably not be possible to rank tariffs in order of green merit, but a simple pass or fail would be a good step forward. NGOs and others could then make recommendations or even devise their own ranking process, based on the information provided.

“If you really want green power you have to ask some very tricky questions of your supplier”

In the meantime, though, if you really want green power for your home or business, you need to ask some very tricky questions of your electricity supplier. Be prepared for a lengthy phone call. Ask whether your electricity is backed by both REGOs and LECs, so they can’t be counted more than once. Ask whether they are exceeding the legal requirements of the Renewables Obligation. And ask what else they are doing to support renewable generation. At this point, the customer service agent will probably glaze over and then hang up. If conducting this kind of interrogation is too much for you too, then better still, look into generating your own electricity. You’ll know exactly where your power’s coming from – just by looking out the window.

19 March 2008

Rebecca Willis