How green are green tariffs?
Are green energy tariffs a good way to get to Net Zero?
More and more people are looking for ways to reduce the greenhouse gas emissions from their energy use. As well as looking for ways to reduce energy use there is increasing demand for green energy tariffs. But what actually is a green tariff and how much difference does it make?
It turns out this isn’t a straight forward question.
The first thing to know is that the companies selling energy to consumers are not normally the companies who actually own the power stations or wind turbines. They are traders who buy and sell energy and make a profit from the difference.
Many energy suppliers promote green tariffs, often selling them as 100% renewable energy. Anything promoted in this way should be backed by a Renewable Energy Guarantee of Origin (REGO) certificate. This confirms that for every unit of electricity sold on this tariff a unit has been generated from a renewable source.
However this is where it starts to get more complicated. This is because the certificates can be detached from the electricity and sold separately. This means that there is a market for the certificates with intermediaries buying and selling, and profiting from them. It also means that a supplier can buy 100 units of electricity produced from fossil fuels, and then buy 100 renewable certificates, and sell the electricity on a “renewable” tariff.
The certificates have to accounted for annually, so energy companies will try to buy them at times when they are cheapest, and then separately try to buy electricity from the cheapest sources regardless of how it is being generated.
So does this matter?
Some will argue that the energy suppliers are guilty of greenwash. Others will say that if an equivalent amount of renewable energy is being generated somewhere then that’s what really matters. I think the key question is whether the green tariff is leading to the development of more renewable generation, because ultimately that’s what we need. The consensus seems to be that it probably is, but not as much as one might think.
The final thing to be aware of is that renewable generators tend to generate as much as the conditions will allow, i.e. how sunny and windy it is. Nuclear generation tends to be pretty constant, and fossil fuels make up the difference between that and total demand. This means that when we turn an electric appliance on, the extra power needed for that appliance is likely to be coming from a fossil fuel station turning up its output. This underlines the importance of energy efficiency and doing what we can to control demand.
The most important thing is to know what we are actually paying for from our energy supplier. Some suppliers are genuinely buying the majority of the renewable tariff electricity from renewable sources, but others are not. Try asking your supplier how much renewable energy they are actually buying.
My feeling is that this system of green tariffs is better than nothing, as part of a transition to fully renewable electricity generation. However it is not a good long term solution. The important thing is that we are using energy efficiently as possible and generators are investing in more renewable generation.
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