If you have ever signed up to an energy retailer for your household power, you’ve most likely been given the option to purchase all or a percentage of your power from a "green" source.
You’re given this option because of the government accreditation program GreenPower, which allows energy retailers to purchase accredited renewable energy on your behalf.
GreenPower aims to drive investment in renewable energy and claims to be "the easiest way to significantly reduce your impact on climate change". For green-minded consumers, it sounds like an obvious choice. For just a few dollars extra, you can power your home with renewable electricity, without having to install solar panels on your roof. But how does it all work? New Matilda set out to investigate.
A brief history of GreenPower
The program was established in April 1997 by the Sustainable Energy Development Authority (SEDA) in New South Wales and went national the following year. There are now over 700,000 residential and commercial GreenPower customers, including businesses and events around Australia. GreenPower providers (the energy retailers) pay an annual fee of $5000 to the National GreenPower Steering Group (NGPSG) to contribute to the cost of administering the program.
The program is a joint federal-state program, but it’s only offered in those jurisdictions which comprise the NGPSG. At this point, GreenPower is the only renewable energy accreditation program in Australia.
Big gentailer Origin Energy is the largest supplier of GreenPower products, with around 460,000 customers on their books. However, according to GreenPower’s most recent report, overall customer numbers are declining. A GreenPower report from March 2012 showed a decrease of 15 per cent in the total number of customers over the year from March 2011.
How does it work?
GreenPower plans are marketed using percentages — opting for the 10 per cent plan means that an amount of energy equivalent to 10 per cent of your total power consumption will be purchased from a renewable source. Some companies offer plans of between 10 per cent and 100 per cent renewable power; others may only offer the 10 per cent option. It varies from company to company.
Matt Grudnoff, a senior economist at The Australia Institute, describes this as a "donation" scheme. That’s because opting for GreenPower doesn’t mean your household is powered by renewable energy. In fact, it can’t be, because you’re buying electricity from the national grid, which is approximately 75 per cent powered by burning coal.
Instead, GreenPower works a little like a carbon offset program. When you sign up, an amount of renewable electricity equivalent to the percentage that you nominate in your GreenPower plan is purchased by your retailer. It doesn’t mean your retailer is only sourcing its electricity from renewables, though. And it doesn’t necessarily mean that more renewable electricity is being fed into the grid. What you’re doing, effectively, is shifting the emissions intensity of the grid in a slightly more green direction.
Grudnoff explains the process with a handy metaphor. He says to imagine the electricity grid as a pool.
"Going into the pool you have all the different power sources-brown coal power stations, black coal power stations, gas stations, and wind farms… If you buy GreenPower," he says, "you’re lowering the emissions intensity of the entire pool by a miniscule amount."
Where does GreenPower come from?
In January 2012, there were 134 renewable energy generators across Australia accredited by GreenPower.
The majority of those are bioenergy sources (mostly operating from landfill sites), followed closely by wind power. A lot of energy companies will use solar power as a major example of renewable energy generation when promoting GreenPower products. However, there are only two accredited solar power generators across Australia, and they only generate 0.6MW of power between them (although the ACT has recently awarded a contract to build a 20MW solar project to Spanish firm FRV).
Accredited generators range in size and output-from 0.01MW at the Wind Generation Unit in Townsville to 206MW at the Collgar Wind Farm in Western Australia.
How does the accreditation process work?
Accreditation can go two ways. Generators can apply for GreenPower accreditation themselves, or the application can be lodged by the energy retailer that is purchasing power from them. A GreenPower accreditor will make an assessment of the generator based on the regulations outlined in the National GreenPower Program Rules document.
Accreditation can only be granted to generators if they began operating after 1997 (when the scheme began) and approval for accreditation can only be granted once all details of a generator are finalised. In other words, a generator that is still in the planning stages cannot be accredited.
An energy retailer will draw up a plan for a GreenPower product with a proposed renewable energy generator to buy from. Individual GreenPower products (the plans) are audited yearly to ensure they remain compliant with GreenPower accreditation criteria.
Generators must be "based primarily on a renewable energy resource", which means that more than half of a generator’s energy output needs to be attributed to a source other than those based on fossil fuels. There’s a bit of wriggle-room here: a GreenPower generator can produce up to 49 per cent of its power using fossil fuels.
GreenPower and green ratings
Approximately half of GreenPower customers are businesses. GreenPower has an infographic that says that if every business in Australia took up 100 per cent GreenPower by 2020, Australia would be powered by 85 per cent renewable energy. But GreenPower is more expensive than non-renewables, so what benefit is having GreenPower to the average business?
There is no financial benefit, currently. However, there are some marketing and environmental auditing benefits.
For instance, if a commercial customer purchases at least 10 per cent GreenPower, they are eligible to use GreenPower’s logo in their marketing. Having GreenPower also improves a company’s rating when undergoing an environmental impact report.
Another thing that GreenPower can help with is with NABERS (National Australian Built Environment Rating System) energy ratings. NABERS is an Australian rating system that measures energy efficiency, water usage and waste management of buildings. Environmental auditing companies around the country use this system to measure the environmental impacts of businesses and homes.
When a NABERS energy rating is calculated, essentially two ratings are generated: a greenhouse gas emissions rating, and an energy efficiency rating.
"The greenhouse rating, which is the official one reported on the NABERS website, accounts the energy from accredited GreenPower as producing zero greenhouse gas emissions," a spokesperson for NABERS said. "This results in a higher NABERS Energy rating, and lower reported greenhouse gas emissions."
GreenPower and the carbon tax
One of the strangest quirks of the Gillard government’s carbon legislation is that GreenPower still attracts the carbon tax. On the face of it, this seems absurd. But it’s certainly happening, as a number of media reports confirm.
After digging down into the policy details, we can see why. According to Grudnoff, as the legislation stands, there is no reason for energy retailers not to pass the cost of the carbon tax on.
Grudnoff says that this is because of the way the carbon tax treats emissions fed into the national electricity market. Each form of electricity that goes into the grid produces a different amount of greenhouse gas emissions. Those emissions are noted as each source goes into the grid, and the pool is given an average emissions intensity. This means that everybody who buys electricity from the grid is charged the carbon price at the average rate, according to average emissions.
Grudnoff argues that this is a big perverse incentive built into the current system: "There is a financial benefit in buying green power, but that benefit is spread over every user." He suggests one solution could involve creating multiple pools (one for gas, one for wind power, one for black coal power) to enable separate wholesale prices for renewable electricity.
A guide to GreenPower
New Matilda contacted each major Australian energy company to find out where they sit on GreenPower. We’ve compiled that information below to help you make a more informed decision about your power choices. See a larger version of the table here.
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