Make the switch to GreenPower and make (virtually) no difference to your carbon emissions

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

OR

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]

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18 Comments

  1. One thought — I’d bet the drafts of the problematic regulations were written by and for industries that are going to benefit from them — and that’s not going to ever include individuals or people selling equipment to individuals. The big money pays for the big lobbying work.

    If your local laws allow, I’d urge you (someone there) to actually go into the regulators’ office and read the written comments on the last go-round, or otherwise look at who wrote the language that ended up in the current official text. Get an idea where the drafts originate.

    Don’t just respond to what’s published. Look in the drawers and count the number of times each industry talking point was repeated, who the lawyers or PR firms are doing the drafting, and where the leverage is.

    It’s possible you have industries involved who are simply looking out for their own interests in this proceeding who wouldn’t lose anything by actually standing up for the individuals’ place in this process. But you’d likely need to get them together to talk about how it’s better for the whole marketplace if all the big players assure that the individual citizens have a chance to vote with their own pocketbook without being penalized.

    Get the big guys to sponsor the language you want — get them to agree to it.

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  2. Hmmm… I must admit I’d never bothered with GreenPower for precisely those reasons. Why would I want to pay more for electricity they have to produce anyway to meet MRET targets… But I did not make the connection to my new solar panels installed last week, as I have indeed signed across my RECS to the electricity retailer…

    I guess at least I know there is actually 1kw more solar in the system than there was the week before as I can see it when I walk out the door. Also in case anyone missed it the Labor govt in WA just promised to buy back renewables at 60c/kWh as opposed to 10/11 of the 14 c/kWh they charge for power.

    All the complications mentioned in the article, of course, get taken out of the equation in my mind with the introduction of an ETS – because it will basically be impossible to buy electricity without having paid for your carbon rights at a cost set by the marketplace. Surely under an ETS Greenpower gets taken out of the equation though because ALL power you buy will either be renewable, or fossil with the price of carbon internalised.

    For mine the only real purpose of signing up for greenpower at the moment is in demonstrating that you are prepared to pay more money for electricity – ie that you are happy to bear the increased costs under an ETS.

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  3. 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.

    Sure. But if people care about this, there’s an easy solution – don’t sign across your RECs when you buy a PV or solar system. Nothing says you have to sell them.

    Your broader point is fairly obvious – under an ETS, any voluntary action to reduce emissions will free up more permits for others to use. That’s the way it’s supposed to work. Yes, it makes something like GreenPower difficult.

    However, the introduction of the ETS will offer a rolled-gold way for individuals to reduce Australia’s emissions once it starts up – assuming it really is genuine cap-and-trade rather than a de facto carbon tax, and that it’s properly enforced. In a nutshell, there’s nothing to stop you, me, or anyone else buying permits and putting them under the bed, taking them out of circulation permanently. With less permits available, Australia’s total emissions will go down. No GreenPower required!

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  4. Matt and Robert, you are probably right – in one sense at least. But the problem is that it is not possible, under the current system, for the Australian population to go beyond what government mandates – the momentum must be political. Sure, this can be influenced by polls and election numbers, but that is a blunt, indirect tool. We’re robbed of the more direct route. There is no point putting carbon permits under your pillow if the market is awash with them… (that is my fear – EU revisited)

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  5. if the targets are aggressive enough the last thing we need is permits under the pillow when the total sum of permits is equal to an appropriate level of emissions. When there are a sustainable number of permits in the system we all benefit if they are being economically productive.

    But yes sadly I see now that the 1kW I have on my roof is a kW that an electricity generator will never need to build (and would have been compelled to do so otherwise). At least under the proposed WA scheme I’ll make a few hundred bucks a year after my 2-3 year payback period is up:)

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  6. Fair points. I suppose I hold out little hope for individual actions by a minority of Australians (and more broadly, middle-class Westerners) as a way of reducing the risks of climate change. They represent too small a proportion of emissions, and their actions may have rather less impact than they think. A the moment, for instance, buying a more fuel-efficient car doesn’t directly reduce global oil consumption (and thus emissions) very much, it just distributes it away from you and to the most marginal customers.

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  7. Dave Rado – yes, this information was provided to an MP (indeed, members of both the Government and of the opposition) – some showed interest and promised to look into it (including one high profile MP), but it didn’t seem to get anyway!

    So I guess when all other avenues fail, lament on a blog…

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  8. Pingback: Top 10 ways to reduce your CO2 emissions footprint « BraveNewClimate.com

  9. in 06/07 Greenpower customers nationally saved the equivalent of around 1 million tonnes CO2.

    So that’s somewhere around 0.2% of emissions for that period. (taking total to be around 500-600mt).

    People sign up to greenpower essentially because they want to reduce overall emissions (and I for one don’t care if they are ‘mine’ or not – whatever that means in an integrated grid).

    The Feds will see the Garnaut/DTF modelling and say that’s a bit too expensive for serious reductions and going to hurt the economy so will limit our cap to something managable. say return to 2000 levels by 2020.

    there will be parts of australia that say “that’s not enough! what can we do?”
    “But Permits and put them under your pillow!” should be the reply.

    sure it’s not going to be much, but it will help drive up the permit price ever so slightly and bring down our overall emissions.

    the question is whether we keep Greenpower ‘brand’ or call it something else ‘Permit Buying power’ and whether consumers really care.

    a difficult one for sure!

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  10. I agree on the whole that it’s very important for the legislation to be tightened up, to eliminate double-counting, and that this shouldn’t be too difficult.
    But, I’m concerned that your piece takes away credibility from GreenPower. Your headline implies that GreenPower doesn’t make much of a difference and it’s not until halfway through the article that you say that “householders and businesses should not feel discouraged from buying GreenPower in the short term…”. GreenPower is still one of the cheapest and most effective ways for most Australians to make a difference to the world’s GHG emissions. People shouldn’t not buy GreenPower.

    For me, I’m happy to pay a bit extra provided it makes a difference.
    So firstly, paying twice under an ETS is bad, and I’d rather not, but it’s not the end of the world. And in any case Problems 1 and 2 only occur after 2010. I see your point, it’s very important to fix them before then, but people shouldn’t be discouraged from buying GreenPower.

    Secondly, there are other ‘solutions’ that don’t make a difference, which is Greenwash. MattB has paid for 1kw of solar panels to be installed on his roof rather than have them installed somewhere else in Australia. Is it really worth all that money just to move some renewable generation around Australia? As Robert Merkel says, you don’t have to sell the RECs, but the implications of this aren’t understood by consumers, even reasonably well informed ones.

    Your piece offers a great solution, and an aggregated target sounds like a good idea. I’m just a bit concerned that people will think your are saying it’s not worth buying GreenPower. I buy 100% GreenPower, you buy GreenPower. If your anonymous citizen is Mr X (then I’d like to thank him for his work & advocacy too), I’m pretty sure he buys 100% GreenPower too. It doesn’t cost too much, and even despite needing to tighten up the accounting of who’s renewability it is, GreenPower does make a genuine difference.

    Regards,
    Mark

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  11. But I LOVE my panels, neighbours love em, mates love em. Greenpower is hardly a great conversation starter;)

    Plus they will turn me a tidy profit when Mr Carpenter wins the state election in WA – 60c/kwh!

    I can see the argument against, but I’ve looked in to natural and green power over here in WA and I must admit I felt I was just paying more for power they had to install anyway… (yes I see that I;ve jsut installed power they would have had to install anyway).

    I could be wrong but I’m more than happy with my decision.

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  12. For those interested, let me suggest you take a look at the following articles, published in the journal Energy Policy. They specifically address these issues. But if you do not have access, there are discussion paper versions available on my website.

    You can find these documents at:

    Gillenwater, M., , Energy Policy, Volume 36, Issue 6, June 2008, Pages 2109-2119.

    Gillenwater, M., , Energy Policy, Volume 36, Issue 6, June 2008, Pages 2120-2129.

    Michael

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  13. Matt, I have no doubt your panels are very lovely and it’s nice to have them. The would be new renewable generation if you had kept your RECs, which would be better. I think you should encourage your friends to keep the RECs if they chose to buy panels or solar hot water systems.
    GreenPower comes from RECs from the same market as MRET RECs, so all GreenPower is new renewable generation in addition to what is already required under the MRET.
    It’s an important difference. If consumers sell their RECs, they end up feeling like they’re doing something for the environment, they get a ‘green’ feeling, a feed-in tariff, a 3 year payback period, etc, the solar industry gets their money too. Everyone’s happy, but it’s business as usual for our emissions, they keep accelerating and our atmosphere is once again carrying the can.
    I wish people had a better understanding of the impact of selling RECs. I’m pretty sure lots of people who currently sell them would change their minds if they knew the effects and were to do it again.
    Michael, thanks for the links to your papers. They look interesting. I’ll have a read when I have time.

    Mark.

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  14. Mark,
    I think that the vast majority of Australians support the concept of having a choice to buy GreenPower including the 778,000 Australian households and businesses that buy the product. So I agree that “People shouldn’t not buy GreenPower”.

    That does not mean that the problem shouldn’t now be discussed loudly to get more people to drive home the message that the schemes need fixing before we go any further. It shouldn’t be difficult to fix the system but from what I understand, the system hasn’t been fixed in four years of the problems (absence of clarity and double counting) and solutions being presented to Federal Government Agencies and Ministers.

    Problems have been dismissed and ignored partly because of a wish to not to harm the concept of GreenPower by some, whilst others tend to dismiss problems of the voluntary schemes as insignificant. Silence and apathy has been taken by Scheme Administrators as acceptance that everything is OK, but it isn’t. GreenPower is very sick. Businesses cannot now buy GreenPower to reduce or avoid their electricity emissions under the National Greenhouse and Energy Reporting System (NGERS), so for how long will they be able to justify their purchases? Why should the system be set up to free ride others and print a double counted zero value on a GreenPower electricity invoice?

    It is not the article that takes away the credibility of GreenPower but the accreditation system itself and more importantly, it is those that set the rules within GreenPower and the Federal Government that do harm by not fixing the rules and accounting systems.

    With a price on carbon coming soon, renewables should be ready to flourish as an alternative to retail customers to avoid paying the passed through cost of carbon permits, but instead they may be stifled.

    In addition, if you read Michael Gillenwater’s article carefully you will notice that under an emissions cap and trade system such as our CPRS, there is a question as to whether voluntary renewables can even work to reduce emissions.

    The Federal Government is silent on how Greenpower might be used to reduce customer greenhouse gas emissions from electricity use into the future under a CPRS. The Green Paper does not discuss these issues which are a problem for the CPRS, but would not be a problem under an emmissions tax system.

    I believe that voluntary renewables can work with very careful scheme design.

    If I am wrong, and if the CPRS extinguishes the effectiveness of voluntary systems of GreenPower and accredited carbon offsets (in much the same way that when householders sell RECs from their systems they displace other renewables already required by law) then voluntary destruction of CPRS permits may be the only practical market mechanism for householders and non generator businesses to reduce their emissions. It will be a very murky and abstract carbon market that is created in Australia, always prone to negotiations of carbon pathways and gateways that could undo voluntary achievements.

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  15. Pingback: Are voluntary actions meaningful where an emissions cap is introduced? « BraveNewClimate.com

  16. Micheal W,

    I agree with you.
    The issue makes me angry & I think it needs to be dealt with carefully. I’m concerned that it undermines the credibility of GreenPower and I’d like to make sure that the the (correct:) response is to get it fixed (as you point out) and not to be discouraged from buying GreenPower.
    It’s a bit of a dilemma.

    I read the first one of Michael Gillenwater’s papers. I have to say I’m not sure it applies in the same way here as in the States & his paper was based on the US experience/legislation. In Australia I think we have a much more homogeneous GreenPower marketplace with lower production subsidies. So we do have Additionality in Australia (until we get to about $55/REC where emitters just start paying the fine).

    Anyway. I’m getting a bit off my next point. I would like to know where the ACCC is, and section 52 of the Trade Practices Act. Many double-counting claims are currently being made. The ACCC has recently released guidelines about environmental claims. But none of this makes any difference. Barry Brook, Tim Kelly, anyone? I’d love to know how a Melbourne tram can make commercial claims about environmentally friendliness using GreenPower when their Scope 2 emissions are virtually unchanged. I think the enforcement of S52 of the TPA would be one way of drawing attention to this problem, and that might help get it fixed.

    Regards
    Mark

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  17. Pingback: Solar Credits – just bad policy! « BraveNewClimate.com

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