---Over
1.5 million consumers across Europe have signed up to green
electricity tariffs. As GIULIO VOLPI and JOHN GREEN describe,
such tariffs simply represent renewable power that suppliers
have to purchase to comply with their national legislation.
How can consumers know that the extra money many are paying
for green electricity is supporting renewable energy schemes?
A new standard for green electricity in Europe (EUGENE)
has been launched to help resolve the confusion.
Liberalization
of electricity markets in Europe has given many consumers
the opportunity to choose their supplier. With the increasing
public concern about the impacts of climate change caused
by burning fossil fuels and the dangers of nuclear power,
some suppliers are now offering their customers a green
electricity tariff. A green electricity product can be
offered to customers in two forms:
electricity
that is bought by a consumer is matched by the same amount
of electricity that has been produced from green sources
(called 'green supply ' tariffs')
customers
contribute to a fund that will be used to develop green
electricity capacity (called 'green fund tariffs').
Market
research shows that consumers want to be sure that switching
to green electricity will result in the generation of
additional renewable energy. However, many of the tariffs
which are being marketed as being 'green' provide no additional
benefit above that which is already required by existing
legislation, such as a feed-in tariff or an obligation
placed on the supplier. Consequently consumers do not
promote new renewable electricity generation, but merely
provides additional income to a supplier.
Ensuring additionality
under a Renewables Obligation system
Some countries,
such as the UK and Belgium, have chosen to impose measures
that compel suppliers to purchase renewable energy sources
for a certain percentage of the electricity they supply.
If a supplier does not purchase sufficient electricity
from renewables to meets its target, it will have to pay
a penalty. Under such a system, a green electricity product
will provide additionality only if the electricity sold
as a green electricity product does not count towards
the supplier's quota. In the case of fund-based tariffs,
where the extra payment from the consumer is used to fund
new capacity, the electricity generated by this capacity
should not generate certificates that could be used to
fulfil the supplier's obligation.
For
instance, there is only one supply tariff in the UK for
domestic customers which provides additionality. The tariff
offered by the green energy supplier unit[e] ensures that
an additional 7% of the Renewables Obligation Certificates
it purchases from renewable energy generators are retired
from the market, thus providing additionality. There are
several other tariffs that are fund-based which do provide
some additionality;
however, several suppliers are marketing 'green' tariffs
which in-reality provide no addirionality at all.
Ensuring additionality within
a feed-in tariff system
Feed-in
tariffs have proven to be a very successful instrument
for the promotion of renewable energy. A number of European
countries, including Germany, Spain, Austria and France,
have implemented such schemes by placing an obligation
for utilities (usually the regional distribution system
operator) to purchase electricity at fixed, minimum prices.
However, there are certain types of renewable power plants
which do not receive feed-in payments, or which are still
not economically viable even if they do receive the tariff.
These are the technologies that could be supported by
consumers wanting to choose a green electricity product.
Under
a supply-based tariff, additionality is only achieved
if the electricity comes from plants that are not financially
viable with feed-in support alone, or which are not eligible
for the feed-in tariff. Under a fund-based tariff, where
an additional payment is made by the consumer to support
new renewable energy developments, additionality can result
if the extra money paid by customers is used to support
the difference between the feed-in tariff and the cost
of generation from the new plant, or is used to support
schemes that are not eligible for support under the feed-in
tariff.
The EUGENE initiative
To address
this issue, the conservation organization WWF has partnered
with other environmental and consumer groups to form the
European Green Electricity Network (EUGENE), an independent
European labelling scheme for green electricity. EUGENE
aims to guarantee that a green power scheme is displacing
polluting energy sources and resulting in new green electricity
generation over and above that provided for by nationally
mandated markets.
The EUGENE
standard is based on five basic principles to be met by
green electricity schemes (see box, right). Under these
criteria, green electricity must come from natural energy
sources such as solar, geothermal, wind, tidal and wave
power, burning of carbon-neutral biomass, (for example
energy crops, agricultural and forestry waste, other organic
waste and sewage gas), or hydro electric schemes that
preserve the river system's principal ecological functions.
Not all
non-traditional energy sources are considered by EUGENE
to be green. For example, electricity coming from new
types of power station that still creates a considerable
environmental burden will not be eligible under the EUGENE
standard. Such power stations include waste incineration
installations, which often burn non-renewable sources
such as plastic; environmental groups believe that such
facilities undermine recycling policies, as well as producing
toxic emissions. Most importantly, EUGENE sets a requirement
that green tariffs must lead to increases in green electricity
generation. In this way, customers are guaranteed that
their business supports new installations. Finally, all
suppliers undergo an annual independent verification,
and must fully disclose the percentage and type of renewable
resources in their electricity product.
EUGENE
standards are complemented by national criteria for implementing
the international standard at a local level. One of the
advantages of EUGENE is that, within the European market,
one single labelling system will identify the benefits
of green electricity, providing a harmonized, international
standard for green electricity suppliers and customers.
Existing national labels for green electricity which are
collaborating under EUGENE include OK-Power in Germany,
Naturemade in Switzerland, Bra Miljoval in Sweden, and
Norppa in Finland. Other national initiatives are being
developed in France, Spain, Italy and the UK. EUGENE plans
to complete its first accreditation of national schemes
by early 2003.
THE
FIVE PRINCIPLES OF EUGENE
1. Green
electricity sources
Green
electricity must come only from one or more of the following
eligible resources: ¡ò
solar power
¡ò wind
¡ò geothermal
¡ò green biomass
(energy crops, agricultural and forestry wastes, other
organic wastes or sewage gas)
¡ò green hydro
(the hydro power plant has to meet basic ecological criteria
at the local level, so that the river system's principal
ecological functions are preserved).
In some countries highly efficient natural gas-fired cogeneration,
up to a maximum share of 50%, is also accepted.
2. Additionality
The green
power offering must either contribute to increases in
green electricity generation over and above the governmental
requirements (such as feed-in tariffs and quota systems),
or reduce the environmental impacts of existing hydro
power plants.
3. Independent
verification
The suppliers
undergo an annual independent verification to substantiate
product content claims, and to ensure that enough renewable
power has been purchased to meet customer demand.
4. Consumer
information
The supplier
fully discloses to customers the percentage am type of
renewable resources in their electricity product.
5. Energy
imports
Import
of green electricity is allowed, but only if the imported
electricity is generated from eligible sources and meets
the additionality principles according to the standard
defined by the label of the exporting country. The imported
green electricity also has to meet the eligibility criteria
of the importing countries.
Policies
to promote labelled green power
Several policies can facilitate and
promote the switch to labelled green power. Along with
tax incentives and public procurement guidelines, one
of the most promising measures is the disclosure of electricity
information. In a liberalized market, consumers need access
to information in order to make informed decisions regarding
the electricity products they buy. However, at present,
very few consumers are aware of the 'ingredients' of their
electricity supply, nor the environmental implications
of such ingredients.
An information label, showing the sources
used to generate electricity and the associated environmental
impact, would enable consumers to make informed choices
about the electricity tariff they wish to choose. This
would influence the mix of energy sources used to generate
electricity, and provide an incentive for electricity
suppliers to offer renewable energy options. Currently,
22 US states (all states that have liberalized markets,
and three that do not) have requirements for electricity
disclosure. In Europe, Austria was the first country to
pass a law on disclosure, with labels on consumer bills
being applied from 2002. Several other European countries
are considering following suit, and power disclosure is
a key issue in the further liberalization of EU electricity
markets. In March 2002, the European Parliament (EP) voted
for the full disclosure of energy sources and associated
impacts such as carbon dioxide and particulate emissions,
and nuclear waste generation. Energy Ministers are expected
to reach a common position by the end of November 2002.
Current signs are, however, that they could adopt much
vaguer requirements that would leave each member ? state
to implement its own disclosure rules. This would create
a confusing situation which could undermine the effectiveness
of the whole system.
The implementation of the European Renewables
Directive has brought about a number of energy certification
systems (such as the utility-led Renewable Energy Certification
System), to establish common rules for verifying the origin
of electricity. Now these certification mechanisms can
be extended to facilitate disclosure of information on
conventional electricity generation. It has been estimated
that electricity disclosure would cost less than €1 per
household per year, according to the first phase of an
EU-funded project to investigate ways of greening power
supply. (Table 1 shows how electricity costs have fallen
in Europe since 1985.)
Residential consumers
A growing number of domestic customers
throughout Europe are signing up to green electricity
tariffs. Figure 1 presents the level of residential uptake
in several European countries. The wide variation can
be explained in part by the variation in environmental
awareness of people in each EU country, by different marketing
strategies for green electricity and by the differences
in the legislation used to support green electricity.
The striking success in the Netherlands
has beer facilitated by a number of policy and communication
measures. The most important policy driver is the tax
exemption for green power purchases. The ecotax, which
was introduced in 1997, has increased substantially each
year since then, particularly for small consumers using
less than 10,000 kWh/year. Since 1998, green power customers
have been exempt from paying the tax, and as a result,
green power has steadily become more cost-competitive
with conventional power, to the point where green power
is actually cheaper than power produced by conventional
means, and is typically being offered at no extra cost
to the consumer. In Germany, meanwhile, the national mail
service Deutsche Post has been marketing green electricity
offered by the green supplier Lichtblick. By collaborating
with Deutsche Post, Lichtblick have seen client numbers
more than double since summer 2001.
However, even with the large growth
experienced in recent years, these figures do not represent
a large percentage of electricity consumption in Europe.
The support of business and government bodies for green
tariffs will need to increase dramatically if major inroads
are to be made.
Industry
Electricity use in the industrial sector
in Europe is approximately 950 TWh/year. If industry purchased
10% of its electricity from renewable energy sources,
this would lead to a reduction in emissions of 38 million
tonnes of CO2 per year from the power sector, or over
10% of the EU's Kyoto Protocol reduction target commitment.5
At present, all businesses and local authorities in Austria,
Finland, Germany, Norway, Sweden and the UK have the opportunity
to support renewable electricity via the purchase of green
electricity, as do many larger organizations in other
EU countries. Furthermore, even in those countries where
full liberalization has not yet occurred (see Figure 2),
electricity suppliers are still able to offer a green
tariff to their consumers. For instance, green tariffs
were successfully launched in the Netherlands in 1999,
even though energy markets had not then been liberalized.
Due to liberalization of the electricity
sector, energy prices have fallen in most EU countries,
and so many energy consumers are paying significantly
less for electricity than they were a few years ago. In
Germany, for instance, wholesale prices fell by more than
30%. In addition, it can in several countries actually
be cheaper to sign up to a green tariff, as there is a
tax reduction for green electricity which works on the
basis of the avoided pollution costs. In the UK, for example,
organizations that buy renewable energy do not have to
pay the climate change levy of approximately Eurocents
0.65/kWh. This makes green electricity competitive with
conventional electricity, in many cases. In the Netherlands,
renewable electricity benefits from a tax exemption, set
at Eurocents 5.5/kWh in 2001.
Many organizations are taking advantage
of the opportunities offered by purchasing a green tariff.
The Dutch Fair Trade Organization is buying 190,000 kWh
of green electricity per year, thereby saving 100 tonnes
of CO2 Its headquarters also hosts PV panels which produce
1600-1800 kWh per year, providing approximately 1 % of
the Organization's electricity needs.
Public authorities
Approximately 6% of the total electricity
consumed in the EU is purchased by the public sector.
This electricity is primarily used to provide power to
buildings which host government bodies or institutions
such as schools, hospitals or public sports facilities.
If local authorities purchased an additional 30% of their
electricity from renewable energy sources, it would lead
to a reduction of 18 million tonnes of CO^ per year.
Several local and national public authorities
throughout Europe have already switched to labelled green
electricity. For instance, Ebersberg county in Bavaria,
Germany has decided that the 1000 MWh consumed by public
buildings will be supplied by green electricity, leading
to reductions of more than 500 tonnes per year in CO,
emissions.
Government purchasing has also played
a role in supporting the market for green power in the
Netherlands. Today, four federal ministries in the country,
including the ministries of the Environment, Economic
Affairs, Education, and Foreign Affairs, purchase green
electricity to meet all of their electricity consumption.
In addition, the government plans to purchase green power
to meet 50% of the public sector's electricity needs during
2002-2004, as part of a national strategy to achieve carbon
neutrality. Furthermore, nearly all public buildings and
street lighting in the south-east Brabant region of the
Netherlands are powered by green electricity. In March
2002, 21 municipalities in the Eindhoven Co-operation
Region signed a contract to obtain green electricity for
75% of their consumption, representing approximately 29
million kWh. As well as environmental benefits, the negotiated
contract offers a cost saving of €620,000 over previous
contracts.
In the UK, Sheffield Hallam University
discovered that, although green power is not the cheapest
available, it was still below the cost of the standard
tariff from which it was switching. The purchase of green
energy has enabled the university to lower its carbon
emissions by approximately 2%.
Conciusions
The power sector is responsible for
more than 30% of CO, emissions in Europe. As major consumers
of electricity, industry and government bodies have a
significant role to play in reducing CO, emissions to
mitigate climate change. Along with aggressive financial
incentives and power disclosure, green electricity schemes
can enable consumers to support the shift towards greater
use of renewable energy. But consumers need to be reassured
that a decision to purchase green power really does benefit
the environment. EUGENE, an international standard for
green electricity, aims to guarantee this. If European
public institutions and industries purchased 30% and 10%,
respectively, of their power from additional green electricity,
there would be a total pollution cut equivalent to all
the CO^ emissions from Denmark.
Giulio Volpi is Climate Policy Officer
at WWF's European Policy Office, Brussels, Belgium. e-mail:
gvolpi@wwfepo.org web: www.panda.org/epo
Dr John Green is Director of Green
Electricity
Marketplace, UK.
e-mail: john.green@itpower.co.uk
web: www.greenelectricity.org
This article is based on a recent WWF
report. Switching to Green Electricity Can Make a Difference:
The Role of Businesses and Public Authorities in Promoting
Climate Protection, available at:
www.panda.org/climate/greenelectricity
For further information on EUGENE,
visit:
www.greenelectricitynetwork.org
Notes
1. For more information on the UK green
power market, see www.greenelectricity.org
2. For more information, see the European
project 'Consumer Choice and Carbon Consciousness for
Electricity (4C Electricity)' and www.electricitylabels.org
3. Bird, L. and Wiistenhagen, R. Green
Power Marketing Abroad: Recent Experience and Trends.
National Renewable Energy Laboratory, USA. 2002.
4. See also Greenprices - www.greenprices.com
5. WWF and GEM. Switching to Green
Electricity Can Make a Difference!: The Role ot Business
and Public Authorities in Promoting Climate Protection.
Brussels. 2002.
6. Adapted from European Commission,
Staff working paper 'First benchmarking report on the
implementation of the internal electricity and gas market'.
Updated March 2002.
(Source:
Renewable ENERGYWorld/November-December2002)
