Most renewable electricity tariffs are pointless

Do you get your electricity with a “100% renewable” electricity contract? Most of these contracts do nothing to promote renewable electricity and some of them make use of power with higher emissions than average on the grid. A few retailers genuinely supply renewable power. You may need to pay a bit more, (or maybe these days, a bit less, since they do not use gas)!

The energy group learned about this at our last meeting. One of our members, Adam, has just completed an MSc on the subject and explained all. Thanks Adam! This post was written by another member, Chris - thank you too!

What is renewable electricity?

Electricity is generated and pushed into the National Grid by “generator” companies. Some of them use gas, coal and nuclear power to generate electricity, which we call “non-renewable” because it is extracted from the Earth and can be used up. Gas and coal also contain carbon which they release (as carbon dioxide) when burned, which contributes to climate change (global heating).

Some generators use solar, wind, hydro, biomass (wood chip) or tidal power, which we call “renewable” because the Sun is constantly powering them, so they won’t run out. Building them emits carbon dioxide too, but they don’t usually emit any while operating (or, in the case of biomass, re-emit carbon dioxide that they recently removed from the air). We consider that they contribute much less to climate change.

What is an electricity tariff?

A tariff is a contract with an electricity supplier, which allows you to buy electricity. This could be at a fixed price for a period of time, or variable. Tariffs differ in price, and in what they claim about where their energy comes from, and its effects on the planet.

What is a 100% renewable tariff?

Renewable energy generators (solar farms, wind farms, biomass power plants) can claim certificates for every 1000 kWh of renewable energy that they generate. They can sell these certificates to anyone that they want.

Electricity suppliers (British Gas, Octopus, etc) can buy these certificates to create “100% renewable” tariffs. They have to buy enough certificates to match all of the energy that they sell to customers on the tariff.

There are a few electricity suppliers who go further than such “100% renewable” claims. They are much better! We will explain why below.

Table of life cycle GHG emissions for different renewable energy sources, per kWh. For comparison, the best fossil fuels without CCS (natural gas using a combined cycle gas turbine) is about 200 gCo2/kWh considering the fuel alone. Biopower emissions are very variable, depending on how the biomass is grown, transported and converted to energy.

What’s wrong with 100% renewable tariffs?

There are many problems with these tariffs. They are cleverly marketed to make us think that all of our energy is coming from renewable sources, with zero carbon emissions. This is completely untrue and misleading:

• The certificates and the electricity don’t have to come from the same place, or at the same time. A supplier can buy electricity from fossil fuels (gas and coal) and certificates from solar farms, and combine them to create a “100% renewable” tariff where none of the electricity was actually renewable at all!
• The certificates are absurdly cheap, because there are too many of them. It costs about £2 per year to buy enough certificates for an average home (5000 kWh/year). That’s not enough to make any meaningful contribution to building more renewable electricity generators.
• There are too many certificates because most of our energy demand comes from homes and businesses that don’t buy renewable tariffs, but use renewable energy anyway (because about 40% of our energy is renewable in the UK). The certificates from that energy are not needed by their supplier, so they can be sold to someone else. This doesn’t increase the supply of renewables.
• Even if every household in the UK switched to a 100% renewable tariff, we would still have more certificates than we need, so the price would not go up.
• We can import certificates from the EU, and we do import about 20% of the certificates that we use. That keeps prices low here, and does nothing to encourage more renewable generation in the UK.
• Suppliers are allowed by Ofgem (the regulator) to claim that their 100% renewable tariffs have zero carbon intensity (carbon dioxide emissions per MWh), and they frequently do. This is a complete lie. Every renewable generator has some carbon cost associated with its construction, operation and maintenance. Some of them are surprisingly high (as you can see in the table above).
• The cost of certificates is much lower than the market price for electricity, so selling the certificates is not a significant extra source of income to renewable generators.
• Some renewable generators are subsidised by the government, boosting the price that they get for their electricity, which makes certificates even less valuable to them.
• A large proportion of our renewable electricity is generated without certificates, because they are so cheap that the generator doesn’t bother. Increasing demand for certificates would push up prices and encourage them to register, but this would not add any actual renewable generation to the market.
• Some renewable energy sources have a higher carbon intensity than others. For them, generating energy at a time when the grid has a plentiful supply of lower-carbon electricity might create more certificates, but lead to some power being wasted, and increase the average carbon intensity of the grid at that time. If they do so, then they are claiming to protect the environment while actively harming it.

How can we fix it?

Some electricity suppliers buy large, fixed amounts of power from renewable generators at a fixed price. This is called a Power Purchase Agreement (PPA). Selling these allows generators to fund their construction and operation, and makes them more commercially viable and secure. This genuinely encourages and enables building more renewable generation. “With a PPA, you can point to a project that was constructed as a direct result of your actions: your impact is clear.” (LevelTen Energy)

Some electricity suppliers are also renewable generators, i.e. they own (some) generation equipment.

We should reward suppliers who do either of these, and especially the ones who do the most. We should ignore the effects of certificates and treat “100% renewable” tariffs backed by certificates as meaningless, or deceptive marketing (greenwashing).

We should encourage suppliers to publish the amount of electricity that they generated themselves and purchased through PPAs, and build a league table. We should spread the word to anyone who cares about the environment to choose a supplier using this league table. Which? Magazine has a table here which shows the percentage of renewable energy bought directly from generators via PPAs.

Some of these suppliers have been exempted from the Ofgem price cap, so they can charge more than the capped price. We need to be prepared to pay extra for truly green electricity.

We need to pay attention to the actual carbon intensity of our electricity, and not believe the marketing hype that renewable electricity is neutral for the planet.

“For this reason, along with research by Which? and the Energy Saving Trust, we consider those three companies - Good Energy, GEUK and Ecotricity - to have the greenest tariff (as of September 2020) and are the ones to choose if supporting renewable energy is important to you. However, we are not endorsing these companies, and recognise that for some households a cheaper non-green tariff may be more appropriate.” (Centre for Sustainable Energy)