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Consumer power-A new label for green electricity products
   ---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:     solar power
   wind
   geothermal
   green biomass (energy crops, agricultural and forestry wastes, other organic wastes or sewage gas)
   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)

 

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