Renew On Line (UK) 16

Extracts from the May-June 2000 edition of Renew
These extracts only represent about 25% of it

4. Green Power Going Cheap

Launching the new DTI report on renewables, Energy Minister Helen Liddell talked of developing 'lean and mean' power- and it certainly looks like cheap green power could be the way forward for the green power retail market. Dave Elliott reports.

The UK green power market looks like blooming, now that there is a zero-premium price scheme on offer to domestic consumers. While the Renewable Energy Company has been offering 'ecotricity' at no extra charge for some while, this is only available to business users, not to individual customers. But now ‘RSPB Energy’, the new scheme launched by Scottish and Southern, is beginning to pick up domestic consumers – not surprisingly, given that the Royal Society for the Protection of Birds, has around 1 million members. As we noted in Renew 124, their scheme not only incurs no premium price, it also involves a donation towards mitigating the impact of Climate Change on birds. That should mobilise a lot of altruistic consumers. And, in addition, some funds will go to support the development of extra renewable capacity. That’s just as well, since much of the existing power used in the scheme comes from well established hydro, which is cheap, but not new.

The rest currently comes from landfill gas, sewage gas and energy from waste – the latter possibly being the only contentious point. Although this is allowed under the Energy Saving Trust’s ‘Future Energy’ scheme, not everyone is keen on waste incineration – and most of the other green power schemes have avoided it.

The Renewable Energy are of course also using power from waste incineration, as well as top up’s from some conventional ‘brown’ power, in their Ecotricity scheme. This latter element was why Ecotricity was not given accreditation under EST's Future Energy scheme. That, however, does not seem to have worried the Millennium Dome organisation who have signed up for Ecotricity, or World Wide Fund for Nature, who have also signed up for it – although WWF argue that what they are actually getting is power from sewage gas, which they are happy with. But the clincher was, evidently, the low price.

If this pattern is repeated across the board, then the zero-premium schemes, so far just ‘RSPB Energy’ and ‘Ecotricity’, could soon dominate the market, leaving the more expensive schemes just for those who can afford hefty premiums – 15-17% in the case of Unit(e). Of course some of the other schemes offer other benefits. For example, Yorkshire Electricity provide free energy conservation advice and a CFL low energy light bulb to offset their 8% premium charge, and this package seems quite popular. Leeds Metropolitan University has just signed up for it, as have S. Yorks Police! But the zero-premium option seems likely to win the day, especially in the domestic market: the business market is more complex, with local supply deals often being struck. In which case, Scottish and Southern will presumably soon use up all the extra hydro capacity they have available for the RSPB Energy scheme – and will have to branch out into new renewables.

Expanding Supply

Up to a 50% contribution from hydro is allowed under the EST’s ‘Future Energy’ accreditation system, and it seems the DTI will allow small hydro to be counted in the new Renewables Obligation – but large hydro is explicitly disallowed under the renewables exemption for the Climate Change Levy.

But, one way or another, the hydro element can only provide a temporary, cheap, input – as demand for green power rises, the hunt will be on for other sources. There’s only so much landfill gas and waste incineration capacity available, and there are limits to the number of new sites that can be found for on-land windfarms. So offshore wind and energy crops look like being next in line.

The Renewables Obligation will help force the pace on the supply side, though the new electricity trading arrangements may make this harder – new renewable projects are going to be hard to finance. But the big question is whether the demand side, i.e. a green power consumer boom, will generate sufficient interest from investors to raise the necessary finance to face the difficulties of expanding supply.

Demand side

The business side of the market may take the lead in this context, given the impact of the Climate Change Levy, which will make companies keen to sign up for green power - since it is exempt from the levy. The scale of expansion of the domestic side will depend on individual consumers – who do not have to pay the levy.

There are, however, various ways in which that interest could be stimulated – quite apart from offering zero-premium schemes. For example, a new energy labelling system could be introduced (for fridges, TV, washing machines etc.) which indicated the amount of carbon dioxide emissions that each consumer device produced – and then pointed out that this could be avoided if the consumer switched over to a green power scheme.

There are some parallels to what is happening with computers – these days, when you buy one, you are offered a free or cheap Internet connection. A similar scheme could be run by individual white goods retailers in collaboration with green power retailers, with the labelling system perhaps overseen by the Government via the EST.

In terms of stimulating demand for green power, it would be even better, of course, if somehow the price of this sort of package, with some conservation measures thrown in, could be adjusted to make some clear overall savings for consumers. Cut price green power – why not?

Of course the balance between demand and supply is crucial. The potential boom could be starved if there is insufficient funding for new projects: even the most devoted of free marketeers will admit that supply and demand do not always stay in tune – there can be delays. In which case, there could be a need to unblock the system with some extra support for new developments – offshore wind, wave, energy crops, tidal stream technology, PV solar. Just what the DTI seems to want to avoid.

* Interestingly, the Renewable Energy Company recently won an award for Business Innovation and its Ecotricity scheme has been given ‘Millennium Product’ status by the government. So EST accrediation is clearly not seen as vital. REC say that they didn’t apply for accreditation since they saw the scheme as too inflexible.