I am not a transvestite, I just want to talk green electricity
- 21 Dec 06, 05:05 PM
Take a look at the picture of my four-year-old, Zola. I defy you to deny that she appears a sweet and gentle child. But beware: Zola also has a wicked sense of humour.
Last week she may have besmirched my reputation with her teachers forever and may also have ruined my chances of the school governorship I had set my sights on.
Her nursery school teacher, Mrs D, was making herself a cup of tea when Zola proffered that her father likes wearing tights.
Now Mrs D is not one to encourage gossiping in children but she couldn’t help but blurt out a shocked “really?”
“Yes,” Zola confirmed. “He put on Mummy’s tights and now Mummy is very angry with him.”
Let’s just pause to consider what Zola has done here. She’s seeded a thought in her teachers’ minds which, I suspect, will be almost impossible to wholly eradicate. It is – let me assure you right now – completely false but is sufficiently non-threatening yet saucy enough to be a joy to everyone apart from me.
So why do I tell this story? Well, regular readers of this blog will know I have been learning that - just like my angelic daughter - green electricity tariffs are not what they seem. You can see my film investigating green electricity on Newsnight, Thursday 19 December at 2230GMT on BBC Two and on the Newsnight website (note: at no point during the film am I wearing tights).
I’ve signed up with a company called Good Energy which comes near the top of most of the rankings of green electricity suppliers. I pay a premium for its service – about 30 per cent above the so-called “brown” electricity price. In return Good Energy buys a unit of electricity from renewable sources for every unit of electricity I use.
It sounded like a good deal for a would-be ethical man like myself. I pay a bit more but can claim that my electricity now comes carbon-free. That’s very important to me. Electricity accounts for ten per cent of the family’s carbon footprint and I’ve been claiming that switching to a green supplier has cut that to zero – reducing my family’s emissions by a ton of carbon a year.
I was feeling pretty good about the transaction until someone calling themselves “Spartacus” wrote in to my blog to argue that our calculations were way out. What’s more he seems to be right.
The problem lies deep in the arcane mechanics of the electricity market so bear with me if you can….
In order to develop a low-carbon electricity industry in Britain the government obliges all electricity suppliers to buy a rising proportion of their power from renewable sources. This year the so-called Renewable Obligation is set at 6.7%.
In order to prove that they’ve met their target suppliers have to submit something called Renewable Obligation Certificates, or ROCs, to the industry regulator. You get a ROC when you buy electricity from a company which generates power from renewable sources. If you can’t produce ROCs to cover 6.7% of your output you pay a “buy-out” penalty.
Now the problem with my carbon calculation arises because green electricity suppliers like Good Energy have ROCs to spare. Because all their power come from renewable sources they have 93.3% more ROCs than they need.
And ROCs are worth good money because, to make the renewable energy market as flexible as possible, ROCs can be bought and sold. So what Good Energy - and all the other green electricity suppliers – do is sell most of their surplus ROCs on.
I’m making electricity suppliers sound like crack dealers but it is this trade in ROCs that causes the problems. The green suppliers say they have to sell ROCs to make their services affordable. But, think about it. If green electricity companies didn’t sell on their surplus ROCs then the other electricity suppliers would have had to have found the renewable power from somewhere else.
What Spartacus argues is that it is therefore wrong for green suppliers to claim that they have funded any additional renewable resources. In essence, he believes that because of the Renewable Obligation the renewable energy I’m using at home would have been generated anyway.
Good Energy accepts there is a problem with what economists call “additionality” so it keeps hold of around 5% of its ROCs. Spartacus argues that 5% is the only carbon cut I can claim. For my family that means 50kg of carbon saved instead of the full ton.
And, on the basis of the research I’ve done I reckon he is right. But, just as Zola’s teacher doubts my claims that I am no cross-dresser, my carbon guru doubts that Spartacus is being fair on the green suppliers.
And as he pointed out to me in no uncertain terms, he’s the guru! So over to you Professor Tim…
PROFESSOR TIM JACKSON'S ANALYSIS
First off, let me say, I have a great deal of sympathy with Spartacus. There is something distinctly suspect about a system in which electricity suppliers offer their customers ‘green electricity’ that they’re under an obligation to provide anyway.
But as I’ve explained in a lot more detail on Justin’s previous blog , I am also suspicious about ‘additionality’ arguments. In the existing renewable energy market, it is just too difficult to tell whether Justin’s actions in signing up for a green tariff do or do not lead to a reduction in carbon.
And in a sense, I would argue, it is also beside the point.
I’d like to go back to first principles and ask some basic questions about fairness. And it’s not fairness towards green energy companies I’m worried about. It’s fairness towards consumers. Fairness to people across the country who, like Justin, have signed up for green electricity tariffs. People who have made an ethical choice about the kind of electricity they want to consume. And entered into a contract with a supplier who promises to deliver it to them.
If you like, it’s not so much a question of Zola’s apparent innocence and mischievous sense of humour. It’s more a question of how you’d feel watching a pair of svelte stocking-clad legs swaying gracefully towards you, only to discover at the last minute that they belonged to Justin! Well, I’m not saying you’d be disappointed. But you might feel slightly deceived.
And when it comes to green tariffs, you’d have a right to feel that way.
In my mind the key to whether Justin can claim carbon free electricity is the question of whether or not he’s paid a fair price for it. The fact is, as Spartacus himself has pointed out, renewable energy tariffs are cheap right now for 'ethical' customers because they’re subsidised by the sale of ROCS on the market. In a sense, Justin has purchased his own ‘ethicalness’ at a knock-down price. So for me, the question is this:
How much green electricity can Justin claim at a fair price? Or in other words, what proportion (p) of his total electricity demand (N) can we claim is carbon-free, and what proportion (1-p) must we regard as ordinary ‘brown’ electricity?
It turns out that we can answer this in a pretty straightforward manner. Suppose the unit price for ‘true’ green electricity is Cg, the average domestic unit price is Ca and Justin’s unit price is Cj. His total annual bill comes to Cj*N pence and this can be divided into green electricity and average electricity as follows:
Cj*N = Cg*p*N + Ca*(1-p)*N
Dividing through by N and re-arranging we get:
p = (Cj-Ca)/(Cg-Ca)
which is pretty easy to calculate using existing tariff data. In Justin’s case, assuming an annual demand of 5,000 units per year, Cj comes to 12.94 kWh and the average price Ca comes to 9.65 p/kWh. (You can check out all these numbers at www.uswitch.com). I’m going to assume here that Cg – Ca, the difference between a true green tariff and the brown tariff is given by the average price of a ROC, which at the last auction in October was around 4.5p/kWh for the kinds of renewables that Good Energy invests in.
And all this tells us that for Justin, the proportion (p) of his electricity that he can claim to have paid a fair price for is just over 70%.
It will vary of course from tariff to tariff and depending on the price of ROCs. Take a look at my sensitivity curves on the graph below, if you’ve got the stomach for it!
But my overall point is this. Justin signed up for green electricity. He paid a fair price for around 70% of his consumption. That should be the percentage he is able to claim as carbon free. Not the much smaller 5% figure Spartacus is arguing for.