Green Electricity Rating Guide:
We hope the information and guidance offered on this section of our site will better
allow you to make an informed decision on your choice of green energy. Points are
awarded both to companies as a whole and to specific tariffs as described below.
1. Renewable Sources: What percentage of the electricity supplied under the tariff
is from renewable sources.( we have not for the purposes of allocating rating
under this heading sought to make a distinction between old and new renewable
sources, the importance of which is acknowledged and is discussed in this
section of our site and which we invite you to read and consider) We have awarded
one star for tariffs where the renewable percentage is 50% or less and 2 stars
for 51% or above.
2. Future Generation of renewable energy: The impact that choosing a particular
tariff will have on the contribution to the future generation of renewably sourced
energy. For the purposes of allocating rating we are of the view that direct
investment in new capacity represents the most tangible contribution to the
reduction of carbon emmissions through future energy generation and have
accordingly awarded 2 stars where the company providing the tariff is involved
in such investment. We have awarded 1 star where a contribution is made
indirectly, for example, through the retirement of renewable obligation certificates
(ROC's see below), or where a fund exists which supports new capacity. But only
where such indirect contributions are significant. We have excluded other funds
under this second limb where we feel the contibution is token or non existant.
3. Price premium:. We have awarded 1 star where a tariff is cheaper than or matches
the supplier's standard tariff or the standard price of the regional electricity
supplier so that no premium is paid.
4. Company portfolio: Green credentials of supply company as a whole providing a
paticular tariff: We believe when choosing a particular green tariff, you as a
consumer making the conscious decision to make a difference to the environmental
impact of your energy consumption, would also like to know how the company which
supplies that particular tariff operates generally in terms of green issues. We
have therefore awarded 1 star to companies where their whole portfolio of products
has a renewable element of 50% or less and 2 stars for companies whose portfolio
is 51% or more. Awarding points on this basis boosts the ratings of compnies
whose principle purpose is to icrease the install base of renewable energy
generation capacity over companies who are meerly allowing customer's choices to
drive this investment.
5. Endorsements from green organisations. Whilst electricity production is one of,
if not the biggest, causes of climate change, the industry is only part of the
environmental campaign and accordingly we believe that endorsements from other
organisations committed to environmental causes is an indicator of the
credentials of the company as a whole and have awarded 1 star to any company or
indeed tariff which attracts such an endorsement.
* company investment in new capacity uses the figures for 2005 and is taken from
the .Which Green. league table.
Accordingly the highest rating a company can receive under our guide is 8 stars
In general terms there are 2 categorisations of currently available products which
will help you understand the product offerings when viewing the details of
individual tariffs offered by the companies set out below. These can be classified
as .green source. and .green fund.. Green source consumers buy electricity from
suppliers and are assured that for every kWh of electricity they consume the
corresponding amount of renewable generated electricity will enter the network
over the span of one year.
Green fund customers on the other hand, donate money into a fund that supports
new renewable capacity or other related initiatives. Green funds are often
administered through an independent body established by the supplier or through
an unrelated charity. Typically the fund will pay for new capacity to be installed
either by independent developers or by the supplier themselves
In the latter case the electricity supplier will continue to own, operate and make
profit from the RE development. Some products do not invest their funds in new
renewable generating capacity, preferring instead to donate to environmental
causes (e.g. RSPB) or fund research and development (e.g. npower juice. It is
important to note that the source of electricity for green fund projects need not
be renewable. Green supply offerings are almost always, provided they meet other
accreditation criteria, classified as GE, but the case for green funds is not so
straightforward since it is not always clear what benefit they offer in terms of
additionality.
1.Renewable source of energy
Under this heading we look at the source of electricity supplied under a given
tariff assessing the extent to what proportion of the supply is renewable.
Whilst a source can be renewable, there is a distinction between .old. green or
.new. green energy. Old green ( primarily Hydro ) utilizes existing legacy
capacity which has much less of an effect on the issue of environmental impact
of consumption than new capacity.
There are existing industry certifications which provide the necessary information
on this aspect.
REGO.s ( Renewable Energy Guarantees of Origin )
Under this European Directive producers of eligible renewable-sourced electricity
have to be issued with renewable energy guarantees of origin (REGOs).One important
purpose of REGOs is to increase transparency for consumer choice.
The REGO must include the following information at a minimum:
. specify the energy source(s) from which the electricity was produced, the dates and
place of production, and in the case of hydro-electricity, the capacity of the
installation;
. enable producers of electricity from renewable energy sources to demonstrate that
the electricity they sell is produced from renewables energy sources;
. be mutually recognised by Member States, and any refusal to recognise should be based
on objective, transparent and non-discriminatory criteria.
Member States, or the competent bodies appointed by them, must put in place mechanisms
to ensure that REGOs are accurate and reliable (i.e. that the electricity concerned
is produced from eligible renewable sources and any information provided is accurate).
Ofgem is designated as the body to issue renewable energy Guarantees of Origin (REGOs)
in Great Britain.
Disclosure (Fuel Mix Labels)
The European Commission Directive for the Internal Market of Electricity requires
Member States to implement electricity disclosure whereby electricity suppliers must
provide information to final consumers about the composition of the fuel mix used to
generate their electricity.
Disclosure provides objective, standardised information about consumers. electricity
supply and so helps create market transparency and provides environmental information
on which you the consumers can make a choice about which supplier to choose.
2. Contribution to future generation of renewable sources of energy
Under this heading we have looked at the various ways in which contributions are made.
Direct Investment
We believe direct investment in the building of new generating capacity is the most
easily identifiable contribution to tackling CO2 emissions in the future.
Less clearcut are contributions which make an indirect contribution but which it can
be argued make as meaningful a contribution. These discussions centre around the whole
issue of what is termed .additionality.
Additionality
One of the key concepts within the green electricity sector is that of additionality
- the idea that products should provide benefits beyond that already required by
existing legislation. Many of the green tariffs that are marketed as being .green.
actually provide no additional benefits above those already required by existing
legislation (e.g. guaranteed prices for renewables or obligations placed on energy
suppliers) promoting renewable energy. This is particularly important in the UK
where the Renewables Obligation required a defined level of green electricity
generation. As consumers many of you want to see that your voluntary action in
support for renewables is doing something in addition to this legal requirement.
Under this heading we have looked at the issues of .ROC.s. and .green Funds.
ROC.s:
The Utilities Act 2000 introduced regulations to promote the generation of electricity
from renewable sources, known as the Renewables Obligation (RO). The RO is a
requirement on licensed electricity suppliers to provide a specified proportion of
electricity from renewable sources. The amount of the obligation increases every year
and is set for 15.4% by 2015/16. Suppliers can only meet their obligation through
producing Renewables Obligation Certificates (ROCs) and/or by paying a buy-out fee.
However, Suppliers can trade ROCs, which means generators, suppliers or third party
traders can sell the surplus to a generator not able to meet it. Renewable Obligation
Certificates can be sold in conjunction with any type of electricity, and electricity
generated to meet the RO can currently be sold as green. This means that you may end
up supporting power that has to be generated anyway to comply with a suppliers obligation;
and no additional supply is added to the system. In essence, the consumer market for
green electricity has become a subset of the obligatory market (FoE, 2004) rather than
using your consumer demand to create additional generation. Consumers who purchase GE
from suppliers who do not generate or purchase a surplus of ROCs may not know that
their purchase does not lead to additional renewable generation. To be additional
to the RO, ROCS have to be retired which means a trade in or transference of
.greenness. (represented by ROCs) cannot happen. Hence, products that retire ROCs
create additionality above and beyond that required by the Renewables Obligation,
and accordingly we have given such products or companies that employ such a
strategy ratings under the future generation contribution criteria.However, there is
the added complication of the amount of ROC retirement required to impact on the
existing surplas at any given time.
Oxford Environmental Change institute in there Report of May 2006 suggest there
should be a minimum percentage of ROC retirement for it to be considered additional.
They placed the figure at a retirement of ROCs equivalent to 10% of supply as
amounting to be a significant enough proportion to visibly increase the renewable
generation demanded by the Obligationin the UK. Whilst we have accepted this argument
we have only awarded 1 star in our rating guide under the future generation criteria,
as opposed to 2 stars for direct investment as given the current levels of RO
requirement, retirement of ROCS in our view does not equate to direct investment in
new capacity.
Green Funds:
Additionality of funds;
There is some debate as to whether green funds should count as additional or not at
all. Some funds do not contribute to new renewable generation, such as Scottish and
Southern's RSPB product which donates £10 per annum to the RSPB. This is not
onsidered additional as it does not lead to the installation of capacity, but rather
contributes to other wider environmental causes. Whilst this is certainly beneficial,
it should not count as additional.
For green funds where customers contribute to a pool of money that is then used to
develop new generating capacity at a later date the situation is less clear.
Historically, when the first green electricity products were created, the fund was
additional and led to more green electricity generation than would have occurred in
the absence of the fund. However, this was mainly due to a policy vacuum within
central government that did not require installation of new generating capacity.
The implementation of the Renewables Obligation Order in 2003 has altered this picture.
Because the RO requires suppliers to increase the proportion of green electricity in
their portfolio, new capacity must be installed (in the absence of dramatic decrease
in demand for electricity). Therefore, although green funds allow the installation of
new generating capacity, this is not above and beyond that required by Government now.
Such a situation is misleading to the consumer. Customers contributing to a green fund
are paying a premium for that product, and do so willingly because they believe they
are making a difference.
However, because the new renewable generating capacity has to be built anyway, they
are actually subsidising their electricity supplier to meet their Obligation.
Moreover, some suppliers also act as developers, and will own the asset (e.g. wind
turbine) and then be able to sell electricity and ROCs from that development. There
is then the further issue of whether the profits from that development are ploughed
back in to further new capacity.
There is also a further issue related to timescale. The money paid into green funds
does not alter the amount of green electricity produced today, rather it contributes
to an unspecified amount of electricity produced at some point in the future.
Green funds therefore pose a problem for rating and we have taken a case by case view
of the various funds and awarded ratings on what we considered to be schemes or funds
where continued investment played a part and those where it did not. It is not
possible in many cases to discern exactly how all fund monies are used and we have
based our findings in this area taking on face value, pronouncements of the relevant
companies as to the use of such funds.
3. Price premium
Here we have awarded a star where the green tariff offered is cheaper or matches the
standard price of the regional electricity supplier or the standard tariff of the
company providing the green tariff. In this cases we have taken the view that you
are not being asked to pay a premium for your choice.
4. Green credentials of supply company providing tariff
Green credentials of supply company as a whole providing a paticular tariff: We
believe when choosing a particular green tariff, you as a consumer making the
conscious decision to make a difference to the environmental impact of your energy
consumption, would also like to know how the company which supplies that particular
tariff operates generally in terms of green issues. We have therefore awarded 1 star
to companies where their whole portfolio of products has a renewable element of 50%
or less and 2 stars for companies whose portfolio is 51% or more
5.Endorsements from the green industry
As a final rating criteria we have looked at whether the company or the particular
product has received endorsement from any recognised body in the green industry.
Whilst electricity production is one of, if not the biggest, causes of climate change,
the industry is only part of the environmental campaign and accordingly we believe
that endorsements from other organisations committed to environmental causes is an
indicator of the credentials of the company as a whole and have awarded 1 star to
any company or indeed tariff which attracts such an endorsement.
Switch2help emphasizes that our rating guide is our view on the various issues
surrounding greenness and is offered as a guide and information only and does not
represent any industry accepted accreditation criteria. We welcome feedback from
industry and you the consumer on our guide.
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