There was a story in today’s Adelaide Advertiser about GreenPower. This is a catch-all word to describe the option to buy your energy from renewable sources (aka ‘green energy‘), or purchase offsets, rather than simply source it from fossil fuel-fired power stations – all by simply choosing to pay a bit extra per kilowatt hour for your electricity or gas. More and more Aussies are taking this option up (including me, of course!). This growing interest is great news, because it shows that a lot of people are already willing to support renewable energy generation via (initially) paying more. So… why did my quote in that Advertiser story include the following gripe?
University of Adelaide Climate Change Professor Barry Brook said it was great to see a dramatic increase in GreenPower usage in the community. But he said Governments needed to do more to resolve bureaucratic issues to ensure more people bought emission-free energy in years to come.
Eh? What ‘bureaucratic issues’ you say? Alas, there is indeed a sting in the tail of GreenPower as it is currently set up – which risks undermining the whole system once the Carbon Pollution Reduction Scheme swings into operation, and as the task of realising the Mandatory Renewable Energy Target (MRET) is grappled by the Government. Some of these issues I have were written up in The Australian a few months ago, but here I’ll go into the problem in more detail.
Here is the brief version:
1) Under an emissions trading scheme (ETS), GreenPower is at serious risk of imploding, because it has not been included under the proposed new National Greenhouse and Energy Reporting System (NGERS) in any legal sense for businesses to avoid or reduce their electricity related emissions and GreenPower contains some simple yet insidious accounting problems. The GreenPower Accreditation Scheme does not legally include critical aspects of its product, being reduced emissions and use of renewable energy for the customer. These aspects are assigned to the grid and all other customers.
2) People who buy GreenPower will be penalised under an ETS, because they’ll pay an extra cost to buy their power from renewable sources, and then also pay extra to compensate the grid for higher costs of carbon.
3) The MRET, as proposed, effectively excludes any individual or organisation from choosing to do something extra to hasten the update of renewables. So it could equally be called a Maximum Renewable Energy Target. Every time a household installs solar hot water and PV systems and sign across their RECs they count towards the MRET target and displace other renewables already required by law.
4) It is easy to fix (2) and (3) by fixing the accounting problems (1). There is the urgently need for the establishment of a much clearer Aggregated Renewable Energy Target (AARET) for Australia, which shows much more transparently the older renewables baseline, the mandatory component (MRET), and a voluntary component e.g., rooftop solar hot water and PV systems.
The problem (and proposed solution) in detail…
When households and businesses pay extra for GreenPower, their greenhouse reductions are legally assigned across all grid customers, now that the Government’s National Greenhouse and Energy Reporting Act 2007 has come into force. So, as it stands, GreenPower advertising should be changed to read:
Make the switch and reduce the greenhouse intensity of the grid
Make the switch and make virtually no difference to your emissions
… which obviously has a completely different meaning the current GreenPower slogan of:
Make the switch and cut your greenhouse gases today
Although there is no doubt that GreenPower customers are paying for renewable energy investments, they are not being handed over their reduced emissions. In being assigned to the grid, their benefits actually count towards reducing the greenhouse gas emissions of everyone, including to help give a free ride to Australia’s biggest electricity users.
Problems have always been present in Australia’s greenhouse accounting for customers but until now, such systems were never covered by legislation. But commencing in July, greenhouse accounting has become legal under the National Greenhouse and Energy Reporting Act 2007 (yes, complaints one these issues were made to the Government before the NGERS came into force, but they were ignored).
The current flawed approach will lead to even more serious consequences as the Carbon Pollution Reduction Scheme is introduced in 2010. Retail customers will only be able to buy standard grid emissions electricity despite any green branding, and there is no mechanism to prevent the cost of carbon permits being unfairly passed through to GreenPower customers.
Just imagine the situation where struggling families that are committed to play their part to fix climate change spend hundreds of dollars extra per year for renewable energy and are then charged hundreds of dollars more to cover emissions permits for the emissions that they have paid to avoid.
The Government has focused too much on direct emissions and permits in developing an Australian ETS but has done nothing to reform greenhouse accounting that assigns emissions to electricity customers. The Government has also done nothing to establish a fair mechanism to transfer costs of emissions trading or the benefits of renewable energy choices to electricity customers.
Approximately three quarter of a million Australian households and businesses are currently buying renewable energy voluntarily as GreenPower or Renewable Energy Certificates (RECs) to cover some or all of their electricity needs. To continue the current system that assigns the greenhouse benefits of renewable energy to the grid, at the same time as GreenPower customers see reduced or zero emissions on their electricity bills, is to lock in double accounting and ‘Greenwashing’.
The ACCC is indeed clamping down on businesses that make false and misleading ‘green’ claims but we now need Federal and State Governments to clean up their own act and fix their accounting and accreditation schemes that cover GreenPower and voluntary trading of RECs. Without urgent reform, the whole voluntary GreenPower market and and voluntary trading of Renewable Energy Certificates cannot avoid being branded as ‘Greenwashing’ when marketing is done in a way that leads customers to believe that they are reducing their greenhouse gas emissions, and they don’t.
This is an accounting problem and not the fault of those buying and selling GreenPower. Householders and businesses should not feel discouraged from buying GreenPower in the short term providing the Government pledges to reform the system within months not years. Problems can fixed by the Department of Climate Change if they make some adjustments to the way that state emissions factors are determined for standard electricity customers to net out the dilution impact renewables sold voluntarily and account for renewables that are traded between states. Data for these adjustments can easily be obtained from GreenPower and through minor improvements by the Office of the Renewable Energy Regulator to certificates and the RECs register. If this was done, buying renewables would truly mean reduced emissions for the buyer as marketing suggests already.
Building a carbon based economy to manage emissions that are invisible can only be achieved by setting very good market rules as early as possible. It is not easy for consumers to understand the complexities of carbon accounting and they should not be expected to. The responsibility is with Governments and scheme regulators to make sure that the accounting is right, to commit to ensuring that GreenPower works without the emissions benefits being assigned to both grid customers and GreenPower customers at the same time and to ensure that if consumers buy GreenPower that they are exempt from emissions trading permit costs.
Government on notice to untangle voluntary actions from the Mandatory Renewable Energy Target
When it comes to household, PV and hot water systems, solar cities, football stadiums, airports, renewable energy demonstration sites, etc. – wherever these schemes involve selling their Renewable Energy Certificates to help fund the installation – they become caught up in the MRET scheme, which actually has the effect of displacing other renewables already required by law.
The upshot is that as a policy mechanism, using the MRET mechanism for voluntary sites creates a disappointingly small ZERO net reduction of greenhouse gases for Australia (yes, written in bitter irony), despite most participating households believing that their voluntary contributions are additional.
With the Governments revision to MRET taking place this year and in the wake of the disastrous means testing constraints to be eligible for the Solar Voltaic Rebate Program, now is the time to review all renewable programs and get them right.
As such, the Government’s renewable energy policy to be transparent as follows:
1. Define the Renewable Energy Baseline (REB) (such as the old 1920-1997 hydro electric schemes) – in gigawatt hours (GWh), which does not change, and state its % in a given year.
2. Define the national Mandatory Renewable Energy Target (MRET) requirement (i.e., the additional requirement required by law), in GWh and % in a given year (THIS IS THE MRET COMPONENT BUT NOT THE FULL TARGET).
3. Define the Aspirational Voluntary Renewable Energy Target (Voluntary RET) of households and businesses, in GWh and % in a given year.
4. Define Australia’s Aggregated Renewable Energy Target (AARET) from the sum of baseline, mandatory and voluntary targets.
Increase the MRET target to cover the 20% + of the current MRET (around 2000 GWh) from household hot water systems and PV systems because these actions were believed to be additional by householders. Therefore the 2010 MRET would be (at least!) 11,500 GWh and the new mechanism would drive forward the 2020 voluntary target without misleading participants.
Comments and feedback on the above points would be most welcome – this issue must be fixed…
[My thanks to an anonymous private SA citizen for his detailed work and advocacy on this topic]