Why buying Renewable Electricity is a backward step.

Many organizations buy “green electricity” and report lower emissions as a result. These claims have been legitimized by a major revision to the Greenhouse Gas Protocol which introduced the concept of the market method for accounting for emissions, which allows a supplier-specific emissions factor to be used to convert electricity to emissions (in the case of green or renewable power, the factor is usually zero). This use of supply-specific emissions factors contrasts with the alternative location method, which stipulates national or regional average grid factors. This rule change had a huge - in my mind, negative - effect on emissions reporting, given that the GHG Protocol is the global standard.

There are many problems with this treatment of green electricity. First of all is the question of whether the claim of zero emissions is justifiable. The principle of additionality states you can only claim an improvement if it can be demonstrated that it is as a direct result of your actions. In the UK, the vast majority of organizations claiming reduced emissions as a result of the purchase of green electricity are, in fact, free riders. 

A fundamental problem with these “green electricity tariffs” is that they don’t actually get anywhere remotely close to meeting the real cost of the renewable electricity generation – this is separately paid for by all electricity users as part of the green levies on bills. In fact, every household in the UK contributed around ￡37 in 2015 to pay for this renewable generation (from two subsidy schemes, ROCs and FITs), together with all institutional electricity users.

The green electricity generators have to keep the ROCs or FITs associated with their green generation as these are worth a considerable amount to them and are essential for them to cover the additional cost of renewable generation compared to conventional generation. A ROC in 2018 was worth over ￡45 per MWh of electricity produced.

Instead, the green electricity suppliers offer the green electricity buyers REGOS (Renewable Electricity Guarantees of Origin) which, although they do prove the equivalent amount of electricity was actually produced somewhere from a renewable source, they do not signify that electricity actually supplied came from a renewable source or that a payment was made to cover the subsidy needed to enable the electricity to the produced in the first place.

If we consider that a REGO costs around 15p per MWh in the UK or less than 0.4% of the ￡45 subsidy required, then we can see that REGOs have no ability to stimulate renewable electricity supply. The “green electricity” market is actually a REGO market and since REGOs cost so little, the equivalent of 0.015 p/kWh, many green electricity suppliers don’t even bother to charge more for their green electricity contracts than for their conventional contract.

The further absurdity of this situation is demonstrated by the fact that a coal-fired power station can buy unwanted REGOS from another electricity supplier and so claim that their electricity is 100% renewable! The REGO market can help the most polluting generators appear green!

Some proponents for green electricity claim that if enough folks insist on renewable electricity, then this will stimulate demand. This is nonsense and not borne out by the facts. In 2018 Electricity companies had an obligation to generate 40% of their electricity from renewable sources. In fact, they came up 13% short of this target, which resulted in penalty charges. Clearly even a ￡45/MWh+ penalty is not quite enough to drive the required volume of generation, so 15p is not going to have any effect. Nor is there a realistic prospect of REGOs running out – we would need 40% of all UK customer (domestic, commercial and industrial) demanding green electricity before we had any prospect of running out of REGOs and in that event there are plenty more available from other markets, such as Scandinavia, where the huge volume of hydroelectric energy means that they are plentiful and cheap (€0.05 per MWh).

In the US and Canada there is a origin labelling system, called Renewable Electricity Certificates (RECs), which creates similar problems, so this issue is not unique to the UK.

An analogy would be that I choose to give a charity a ￡100 donation towards 10 school books, but the charity then sold the “bragging rights” to the schoolbooks to my neighbour for 10 pence! Now my neighbour can say they have contributed 10 schoolbooks in their public reporting. We wouldn’t tolerate that for a second, would we? And yet major UK corporations, such as BT, are doing precisely this when they report on their response to climate change by claiming large volumes of green electricity, paid for by others, for themselves. This is a real pity, as BT is otherwise doing some excellent work on reducing its emissions. Instead, they are now potentially exposed to the risk of a consumer backlash if their claims are considered to be misleading by a public increasingly convinced that we are in a “climate emergency” and who may turn against corporations they perceive to have been foot-dragging as a part of the problem.

This brings me to the second problem with “green electricity” which is double-counting. As the generators provide more renewable electricity - paid for by all electricity consumers through the environmental levies on their bills - the overall UK grid emissions factor, expressed in kgCO2/kWh, decreases. Now the vast majority of electricity consumers use this location-based reporting factor which incorporates the same green electricity that the buyers have claimed for themselves, using the market method. This overlap makes the carbon neutrality claims incompatible with PAS 2050 (see 7.9.4.1 of the Standard), which says that you can only claim a specific emissions reduction, if it is not claimed elsewhere.

My third, and biggest, concern with “green electricity” and the market method of reporting is that these undermine the case for investment in reducing energy use. By offering organizations a relatively simple, painless and lower-cost route to improvement, green electricity helps them avoid making the substantial reductions in energy use that we need them to achieve.

For example, BT stated that it has achieved, in 2016, over 80% emissions reductions since 1997 by buying 100% green electricity and reporting this under the market method. However, using the location method, the emissions reduction over this time is a less flattering 19%, much of which, arguably, could be credited to an overall decarbonization of supplies rather than the organization’s own efforts. 

I can imagine that, when told their emissions have reduced by 80%, senior executives would consider climate change a “job done”. The would not be inclined to spend people’s time and money driving the deep decarbonization needed if we are to properly

The problem for organisations making these types of claims is that, if the public comes to perceive these claims of improvement as “greenwash”, this could have a big negative reputational impact. Those consumers who are increasingly willing to make personal sacrifices to address climate change, or have been affected by impacts such as flooding, will not be favourably disposed to organizations that appear to be gaming the system, regardless of whether “the rules” permit this.

For these various reasons, my advice is: avoid green electricity emissions goals or claims, unless you can genuinely show you have paid fully for the generation of that electricity (in which case well done!).