Can consumers influence mix of electricity generation methods in the EU?

The Council of European Energy Regulators believes that, through their purchasing of power this is possible – providing that consumers have reliable information on how electricity is produced. Its consultation on recommendations to make electricity disclosure “more transparent, resistant to fraud, reliable and consistent” ends on Friday (February 7).

The main instrument for electricity disclosure (note not subsidy) in the EU is the Guarantee of Origin (GO) which is issued on request for every MWh of renewable electricity produced. I am not aware of any fraud around these certificates, which can retail for as little as £1 per MWh, but I do think their use is confusing.

Directive 2003/54/EC requires electricity suppliers to tell to their customers what contribution different energy sources made to their supply portfolio in the preceding year and GOs may be used to evidence the renewable electricity portion.  But suppliers are required to disclose on the origins of the electricity that they supply to all their customers and not on any renewable electricity products that they carve out in their overall supply. Neither are suppliers required to disclose how the carbon-intensity of the remainder of their supply portfolio changes as a result of this renewable product being created.

This second part is important: if the customers buying the renewable product are told it is less carbon-intense, shouldn’t the supplier’s other customers be told their product is more carbon-intense than the supplier’s overall portfolio? And hopefully they will care about this…

Let’s suppose that they do care and more consumers buy a renewable electricity product, what would be the effect? The CEER consultation says that GOs are requested for only one third of renewable production. A reason isn’t given. Maybe producers don’t consider it worth their while to request and sell the GOs. But this situation suggests that demand would have to increase greatly to soak up latent supply.

Another point is that the price of GO may be dwarfed by public subsidy. In the UK one form of subsidy for renewables, the Renewables Obligation Certificate, sells for about £40 per MWh.  GO prices have a long way to go before they can match that.

Public subsidy of GO leads back to the disclosure issue. If renewable electricity has been subsidised by all consumers, then it seems logical that it should be reflected in the information given to all consumers, but how does that fit with the differentiation of overall supply into renewable electricity products? The renewable electricity will be double-counted if it is shown both in the overall supply mix and again concentrated in renewable products and this would need to be explained. More fundamentally, is it right to sell publicly subsidised goods onto private entities? Bear in mind that consumers in this context includes businesses that may make statements about their concern for the environment based on these purchases. An alternative argument might be that this sale of a publicly-funded good should be encouraged if it leads to extra renewable capacity.

It is clear that some individuals and organisations are willing to pay more for their electricity. Is there a way of ensuring that this demand leads to extra renewable capacity? Schemes that provide evidence of production in the form of GOs and pledge to commit a percentage of funds from their sale to new renewable capacity may be part of a solution, but their impact needs to be tested.

Nevertheless a debate on the pros and cons of the sale of publicly-funded goods to private entities would be a helpful steer. The deadline for the CEER consultation closes this week, but if you have views and miss this deadline, there are other opportunities to comment in related consultations. Ofgem, the UK energy regulator, is consulting on revisions to its green tariff guidelines (deadline February 14) and the GHG Protocol team, the publishers of the dominant standard on how corporations should account for their GHG emissions, is expected to consult soon on how businesses should report on emissions from purchased electricity

Andrea Smith is an ESRC funded doctoral researcher based in the Sussex Energy Group at SPRU, University of Sussex

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