Can you even buy green electricity?

Guy Lipman
Jan 18 · 7 min read

It is an odd feeling to be researching a topic that many people believe makes no sense whatsoever. Maybe it is normal for mathematicians and theoretical physicists, but I am studying economics/social science and chose to study something that was directly relevant to people in society today. As a result, it is crucial for me to grapple with this divide.

I’m researching how people connected to an electricity grid can buy green electricity. To be honest, I had previously barely even considered that this might not even be possible, but more recently I’ve begun to realise that not everyone feels this way. For example, I stumbled across this Facebook advertisement for UK green energy supplier Good Energy, in which many of the commenters suggested it made no sense.

Does green electricity exist?

The first question is that of whether green electricity even exists. After all, even solar panels and wind turbines have to be constructed, and take up land that might be used for planting trees. There is more to environmental sustainability than just reducing carbon dioxide. Some people consider electricity produced in nuclear power stations to be the worst possible form, while others consider it greener than, say, gas. In the words of one commenter*, “as long as by clean power you don’t mean those awful wind turbines which are NOT clean at all as well as ruining the countryside!!”, to which another replied “Totally agree. They use colossal amounts of concrete and reinforced steel in the bases. Only the top metre of which will ever be removed. So very green. Crazy to be building them on naturally CO2 storing peatlands. They’re all set to destroy Shetland with scores of them, too.” Another asked “And what about the pollution created in the manufacture of panels/wind turbines /batteries etc ?..most require rare earth elements which means mining / processing etc…..”, and another even more strongly: “a ton of NEODYNIUM in each turbine. Go look it up one ton of NEODYNIUM creates one ton of radioactive thorium waste a 2000 liters of toxic liquor. Good old dirty windmills!

These questions are important (even if sometimes poorly posed or overblown, and not just on social media), and we must recognise that greenness is a matter of degree. That said, I do believe that it is helpful to talk about some forms of electricity as green, and for purpose of my research I am talking about renewable electricity as defined in the European Union’s Renewable Energy Directive (2009): “wind, solar, aerothermal, geothermal, hydrothermal and ocean energy, hydropower [but not pumped storage], biomass, landfill gas, sewage treatment plant gas and biogases”.

Can you ever buy green electricity?

Assuming then that green electricity exists, can you buy it? Let’s first think about a case where it seems fairly obvious to me that you can buy green electricity. If all your electricity is supplied directly from one or more renewable generators, which you don’t own, then I think it is fair to say that you are buying green electricity. If you happen to own all the generators (say you are living off-grid), then it probably doesn’t make sense to say that you have bought it, but you are definitely consuming green electricity.

Some might argue that with electricity, unlike gas or oil, there is nothing physical that you can be said to be buying. When you buy electricity, you do not consume electrons. However, we are comfortable with the concept of buying services. As a result, I argue that it is still reasonable to talk about buying electricity, even if it is perhaps more like a service than a physical good.

Can you buy green electricity from the grid?

But what about when you buy your electricity from the grid, which inevitably includes non-green sources of electricity generation? Several critics of the Good Energy post had the most issue with this question. One remarked “When are people going to wake up we all know it comes via the grid …none of us know what was generated where”. Another replied: “Rubbish it all comes from the grid system They should be prosecuted for false advertising”, later clarifying “While I agree with your comments that we need cleaner energy ,I was commenting that as things are at present electricity from the grid is a mixture of all types of generation ,so to infer that if you buy from a “green” supplier you do not get green elecricity in your home .is false advertising.” Another even created a meme to convey their frustration at the question:

I do believe that those of us involved in the selling of green electricity have a responsibility to answer this question, and the remainder of this post aims to do that. But before I talk about what it might mean to buy green electricity from the grid, I think it is helpful to think about what it means to even buy electricity at all, when you are connected to the grid.

In Europe, the United States and Australia, we often talk of buying electricity from our supplier, despite these suppliers sometimes not generating any electricity at all, and despite them almost never generating the exact amount they sell to customers. Instead, I believe there is an implicit recognition that they can buy electricity from generators, and sell it to us. In fact, the typical supplier not only buys electricity from generators, but also buys from intermediaries (perhaps banks and hedge funds). It also buys from the grid itself (if it hasn’t bought as much as its customers use). And a supplier can sell excess electricity to other suppliers, or the grid. As a result, it would in general be impossible for a supplier to identify all the generators from which their electricity come, or how much came from each.

On the other hand, many people do want to know where their electricity comes from. Many people would prefer that their electricity came from green electricity, and would indeed be willing to pay a premium for this. There is evidence of a willingness to pay to install solar panels on one’s own buildings to reduce one’s own carbon footprint — why should it be impossible to choose to buy solar, wind or hydro power produced by someone else?

Three ways one could tracking purchases

I see three ways in which we could allow buying green electricity from the grid to make sense. Firstly, and most simply, we could restrict suppliers to just buying from generators, and prevent generators from buying electricity. However, economists would argue (and I would agree) that this would be inefficient. Suppliers would need to buy the exact amount for each time period (say each half-hour), and one supplier’s excess power couldn’t be sold to another supplier.

A second solution would be to allow any trading, but to insist all power sold included a reference to the power station it came from. The difficulty with this approach is that it would make trading a lot more complex. Different packets of 5MWh would cost different amounts, depending on their origin. A 20MWh might end up including power from multiple sources, requiring participants to track the precise mix. And if I bought power for a whole month, quarter or year (quite a common way of doing it), it might include different mixes for each half hour during that period. In short, this approach would be more permissive than the first solution, but at the cost of considerable complexity.

My third solution is the one actually used in European electricity markets. Here, the origin of the electricity is separated from the electricity itself. If, for example, a wind farm produces 5MWh, as well as selling the electricity, it can separately sell to a supplier the right to claim that 5MWh of its supply is from that generator. This removes the extra complexity of the second from electricity markets (which are already complicated enough, given the need to balance supply and demand every half hour), and allows suppliers to acquire these “guarantees of origin” as part of a separate, simpler process. Separating the origin from the power does make the solution a less natural, a more abstract. But I believe it makes sense, and indeed more sense than the first or second solutions.

Some concluding thoughts

As a result of the reasons given in the previous sections, I do believe it makes sense to allow customers to buy green electricity from the grid, and I believe the best way to allow that is by separating the guarantee of origin from the underlying electricity, and allowing them to be sold separately.

However, I do accept that this is a bit unnatural, and generators, regulators and suppliers will have to work together to make sure they don’t undermine the system. The more suppliers can develop relationships with the generators they are buying guarantees of origin, and disclosing details of these, the more confidence buyers will have. On the other hand, buying cheaper guarantees of origin from overseas is likely to undermine the sense that suppliers have bought green electricity.

And finally, while buying green electricity is a good thing, it can’t be our only consideration. We should look at how the green electricity is produced. Also, reducing our overall usage is likely to be beneficial, even if all our electricity is green.

* In this article I have quoted a number of comments from a public Facebook post. My objective is to explore the ideas, not to criticise individuals, and I don’t expect people to express themselves as carefully on social media as they would in other formats. As a result, I have not named the individuals in this post. This has the added advantage of maintaining their ability to delete or edit their original comment. However, should anyone quoted want their name included in this article, or alternatively want the quote deleted, please feel free to comment. I have kept screenshots of the Facebook post as it stood on 13 January 2009.

Guy Lipman

Written by

Fascinated by what makes societies and markets work. Undertaking a PhD in sustainable energy at UCL. http://guylipman.com.

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