Are Renewable Energy Certificates Really Green?
Corporations are overstating their emissions reductions by significant proportions using existing tracking and accounting methods. According to Chalendar and Benson in a Stanford paper, more than 50% of overinflated greenhouse gas reductions due to the use of yearly averaging [1]. Currently, Energy Attribute Certificates such as International Renewable Energy Certificates (I-RECs) and Guarantees of Origin (GOs) only display the evidence of the origin of renewable energy at the MWh level and are able to bought from any time period within a 12-month period or location, which results in energy providers being incentivized to purchase the cheapest EACs to support their sustainability claims. This casts doubts on whether they create additional renewable capacity or support existing ones [2].
The problem is too big to ignore. Jörg Mühlenhoff, Renewable Energy Project Coordinator of BEUC (the European Consumer Organisation) explains the problem in his article named “Why most ‘green’ electricity in Europe isn’t green” [3]. Consumers assume that by purchasing green energy that they are aiding the construction of new renewable energy production facilities. However, this rarely leads to any additional renewable energy capacity being added to the grid. This means that millions of European citizens are not able to have the sustainable impact that they expected to have by paying more for green energy.
This market failure can be attributed to the innate deficiencies of energy attribute certificates such as GOs. These certificates help track the statistical share of renewable energy of a supplier and are traded separately from the production of a specific renewable generator. Energy providers have used this to prop up their fuel mix and sell 100% renewable electricity while continuing to produce and sell non-renewable electricity. Unfortunately, this is a shockingly common practice throughout Europe and the lack of transparency has resulted in the loss of consumer trust in green tariffs.
Furthermore, these methods not only lack the ability to reflect the true emission reductions resulting from not matching of consumption profiles in real-time but also due to location as they do not take grid loss into account. In some cases, the renewable energy could be procured from a totally different region or country. This does not meet the demands for corporations that are looking to procure impactful renewable energy with higher degrees of additionality, locationality and emissionality.
For example, as it is explained in The European Consumer Organization (BEUC) report [3], Europe has had an oversupply of GOs, to a large extent because energy suppliers buy these certificates from Norwegian hydropower plant operators. Big capacities of these hydraulic dams cause oversupply of certificates which leads to cheap prices for certificates (average price is €0.10/MWh). If we assume a household’s average electricity consumption around 1MHh/ month would only cost €1.2 annually for any electricity provider.
The problem becomes clear when we look at Luxembourg and the Netherlands. How is it possible that Luxembourg and the Netherlands are at the bottom of the list when it comes to meeting their national renewable energy targets even though they have the highest share of consumers choosing ‘green’ tariffs. Actually, the answer is very clear. Again, GOs were used to facilitate the greenwashing of ‘dirty’ electricity and subvert consumer expectation. Although suppliers in these countries sell a lot of ‘green’ electricity backed by GOs to their customers, this does not lead to an increase in domestic renewable electricity generation.
Here is a graph showing the relation between GO demand and renewable energy production in Netherlands between the years 2010–2015 and this is still same:
Almost two thirds (64%) of Dutch households selected ‘green’ electricity. However, the increase in consumer demand for ‘green’ electricity did not have any measurable impact on domestic renewable electricity generation which has stagnated since 2010. Dutch electricity suppliers have simply imported cheap GOs from Norwegian hydropower plants in order to make their electricity look green.
Real ‘green’ electricity would have stimulated the investments necessary in additional renewable generation capacity in the Netherlands, helping Netherlands meet its renewable energy target. That would have been an example of putting consumers in the driving seat and driving an energy transition to renewables. This is just an example for one country using GO. The situation is exactly the same for other countries using GO, REC or I-REC. This is what GreenLink will completely disrupt. Now is the time to add transparency on top of EACs and start real time location-based matching. Consumers are now aware that it is impossible to consume solar or wind power on a windless night.
The lack of transparency of energy causes dissatisfaction amongst energy consumers. There is currently no universal accounting tool to communicate finely-grained data on emission usage and savings for residential, corporate and industrial consumers. Energy consumers are increasingly demanding localized and real-time sustainability services from their utilities and retailers to fulfil their corporate or individual sustainability goals.
A disruptive solution is needed for consumers to be empowered to make the highest positive emission impact. As Blok-Z, we have developed the GreenLink to completely eliminate this problem.
References:
[1] J. de Chalendar and S. Benson, “Why 100% Renewable Energy Is Not Enough”, Joule, vol. 3, no. 6, pp. 1389–1393, 2019. Available: 10.1016/j.joule.2019.05.002.
[2] “Corporate Sourcing of Renewables: Market and Industry Trends”, 2018.
[3] J. Mühlenhoff, S. Dongre, M. James, M. James and G. Mete, “Why most green electricity in Europe isn’t green”, Energy Post, 2020. [Online]. Available: https://energypost.eu/green-electricity-europe-isnt-green/. [Accessed: 06- Oct- 2020].
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