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GreenPower Part 1: Are you getting what you pay for?

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Alex Stathakis
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Why GreenPower may not be giving you what you pay for

COMPANIES PURCHASING GREENPOWER MAY NOT BE AS GREEN AS THEY’D LIKE TO THINK.

Carbon footprinting is fast becoming a vital part of environmental impact assessments for many organisations in Australia, whether it’s at the demand of a regulatory authority, an investor, or simply based on a progressive company policy. And GreenPower has become a popular option  for Australian businesses to meet their carbon emission reduction targets. Buying GreenPower allows an organisation to claim zero emissions for each MWh of renewable energy it purchases. The  organisation is still using power, of course, but they are now contractually allowed a zero emissions factor.

The majority of Australia’s electricity retailers offer GreenPower products for purchase in lieu of fossil-fuel power. GreenPower is also offered by decoupled GreenPower retailers through the purchase and voluntary  surrender of large-scale generation certificates (LGCs). LGCs are a form of renewable energy currency used to buy electricity from power stations. With this method the providers don’t provide the electricity themselves, but more certified renewable energy is added to the grid on the customer’s behalf.

GreenPower has become a popular option for Australian businesses to meet voluntary emission reduction targets. But is the buyer really getting what they are paying for? Are carbon emissions really being lowered through the purchase of GreenPower?

The Fundamental Problem

The  fundamental issue is that this zero emission contractual method does not represent any real (physical or causal) relationship between the reporting company and the emissions being reported. A company might in fact be creating a large amount of environmental CO2-e but show no  emissions for reporting purposes.

This methodology is an outlier. For all other reporting under the Greenhouse Gas Protocol, a physical  relationship is presumed between the company’s activities and the  emissions that result from these activities. The contractual approach utilised with GreenPower breaks that fundamental relationship. It does not represent the physical realities of how electricity and electricity distribution work.

When a company chooses to purchase GreenPower energy, they are really only choosing to buy a contract that gives them a zero emissions factor – they are not actually choosing zero emission  delivery. In other words, they aren’t actually reducing their own emissions at all – regardless of their intention.

Let’s dig into this a little deeper.

GREENPOWER PURCHASES DO NOT CREATE RENEWABLE ENERGY.

There is an argument that there would be no renewable energy project at all without the financial incentive  provided by the sale of LGCs and GreenPower. But a company does not create a demand for renewable energy by purchasing GreenPower. And GreenPower purchases do not drive investment in renewable energy  production.

In fact, there is an oversupply of renewable energy certificates already in existence because of government sponsorship of  LCGs. And an organisation’s purchase of GreenPower doesn’t change the amount of renewable energy available. So, unless we get rid of this surplus, the purchase of GreenPower is not driving any additional investment into those renewable products.

Instead of creating renewable energy, GreenPower is more accurately regarded as merely a  production subsidy. By buying GreenPower an organisation is better understood to be subsidising the cost of producing that green power, rather than driving demand for additional renewable energy.

REPORTING IS INCONSISTENT.

The Greenhouse Gas Protocol separates environmental emissions into three  ‘scopes’. ‘Scope 1 emissions are direct emissions from owned or  controlled sources. Scope 2 emissions are indirect emissions from the  generation of purchased energy. Scope 3 emissions are all indirect  emissions (not included in scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions.’

GreenPower purchases are considered a zero-emission source under various reporting programs. However, how it is treated varies greatly. For example:

  • Under the National Greenhouse and Energy Reporting Act 2007, GreenPower does not reduce scope 2 emissions whatsoever (even though the Clean Energy Regulator allows for the separate reporting of LGCs voluntarily purchased and surrendered).
  • Under the National Carbon Offset Standard, GreenPower offsets scope 2 emissions, but not scope 3 transmission and distribution losses (which, if we recognise contractual emission factors as a legitimate means to reduce emissions, is the way to account for GreenPower).
  • Under NABERS and GreenStar, GreenPower offsets scope 2 and scope 3 emissions.

While carbon accounting is inherently technical, the purchase of renewable energy should be accounted for and reported properly and in accordance  with internationally recognised project and consequential carbon accounting principles. This is the only way to ensure that we are getting an accurate picture of the environmental benefit of our GreenPower purchases.

THE ENVIRONMENTAL BENEFIT IS DOUBLE-COUNTED.

In Australia, the scope 2 emission factor for emissions associated with electricity purchases considers all electricity delivered to the grid. As mentioned earlier, this means that when your  company purchases GreenPower (or uses another energy reduction program), this ‘slice’ of the energy mix is not removed from the emissions factor from the total grid.

So, your organisation can claim zero  emissions for its electricity purchasing because you have paid for GreenPower energy. But other organisations will be also be reporting lower emissions because that renewable energy remains part of the grid  average (even the part you’ve ‘used’).

This represents double-counting of the environmental benefit.

IT CREATES A DISINCENTIVE TO INSTALL BEHIND-THE-METER RENEWABLE ENERGY GENERATION.

A company that purchases GreenPower is doing a good thing for the  environment. But should an organisation get the same zero emissions recognition for purchasing renewable energy as one installing renewables?

Think of it this way – while purchasing GreenPower is less expensive and easier to manage, if we rely on GreenPower only, and do not invest in actual energy consumption reducing measures,  consumption from the grid remains absolutely unchanged. There is no actual, real environmental effect. Of course renewable energy delivered to the grid reduces grid emission intensity, which is overall a good thing. But it has not had any effect on the amount of emissions from the company purchasing the GreenPower.

On the other hand, a company that invests the same amount of money to implement a renewable energy solution to their own energy production needs has actually reduced its  demand for grid electricity. Some of the electricity that flows through the grid will be supplied by fossil fuel power stations. Therefore,  installing on-site renewable energy, while a more capital-intensive option, will result in an actual and credible emission reduction.

Investors and consumers use the carbon footprint from companies to inform their purchasing and investment decisions. Unfortunately, because of the way GreenPower energy use is reported, it is likely that the company that purchases GreenPower, rather than invests in its own renewable energy sources, may appear to demonstrate superior environmental performance even though it has not created any change in overall emissions. On the other hand, the company that has invested in creating renewable energy production, may not be able to show the same performance in its  reporting, though it has made an actual reduction in overall emissions.

TAKEAWAY

This  does not mean that there should not be any (voluntary) investment into renewable energy generation. But companies need to be aware what their GreenPower purchases are actually buying them – and it is not overall reduced emissions.

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