How green is your energy tariff?

Martyn1981

1961Nick wrote: »

The issue is Mart, that a lot of these so called 'green' tariffs are being sold as green now, when clearly most of them aren't. Promoting 'guilt free energy consumption' is akin to mis-selling imo.

I get what you're saying about driving green energy demand over the threshold of what's already being produced and forcing generators to add more capacity, but there's so much apathy that it may never happen. Ken made a good point about supply & demand - if the demand increases to the point that the 'green' energy price exceeds regular tariffs, we'll probably see customers reverting back to 'not bothered' tariffs.

The only way Mikey can make a difference tomorrow by switching to a green tariff today, is to choose a supplier that invests in their own renewable generation. Octopus appears to be one & I'm sure there must be others out there. A comparison of the self generated units compared to the units sold would indicate the true 'greenness' of the company.

Green gas by virtue of carbon offset is blatant mis-selling.

Yep, I agree that a switch today does not instantly change the energy mix, it can't obviously, but it will lead to change. An increase in demand for 'green' energy will drive a greater, and faster supply of green energy. It's really as simple as that.

I don't get the apathy bit? If demand for green tariffs increases, then the energy suppliers have to contract for more green energy, thus forcing an increase in demand.

As regards Ken's argument, it makes no sense. We've already seen a demand for green tariffs at higher rates, so the demand is there, clearly. As costs fall, we will, and I'd suggest are seeing a further increase in demand. The prices people pay for their leccy is contracted, as per the tariff you agree to, and will reflect the cost of the leccy the supplier has contracted to buy.

Over time I completely agree that all other things being equal the price of green energy would rise, but all other things aren't equal, Ken only applied half of Economics 101 to the issue - more demand = higher price, but he forgot the second half, which is higher price = more supply (as that market, product, area becomes more attractive), and of course, on top of all of this, is the falling cost of RE. So I'm sorry, but I just don't see a result where customers switch back, as too much progress has already been made, plus the argument is self defeating, as customers moving away would reduce the price resulting in them moving back - can you see how silly this gets if we exclude logic.

Remember that with PPA's (I appreciate this relates more to the over version of this discussion), the generator is also acting as the retailer, something that took a bit of time happening, and if you trawl back far enough you will very old posts of mine talking about the changes to UK legislation to enable generators to purchase and operate a leccy supply licence. So the generator sells at a higher than wholesale price, making a greater profit, and making that RE technology more viable to expand, and the customer buys at lower than retail, making the product more attractive to them.

I fully accept that there are probably a 1,000 ways to look at the concept negatively, skeptically or worse, but when you boil it all down to the absolute basics you are left with more demand which via basic economics will drive more supply. And that's a win for everyone.

Martyn1981

Just some general notes on this issue, as sometimes the background can get forgotten.

Firstly when folk talk about higher green prices due to demand, we need to remember that the wholesale price of leccy is on average around £50/MWh, or 5p/kWh, so a 20% rise or fall, which is big for the suppliers and may be the difference between viability and failure, is 'just' a 1p/kWh difference to us. Not irrelevant, but far less important.

Secondly, we shouldn't think that a change in the price/income of green generation will start a company thinking about deploying renewables, they are already thinking about it, and (as with most countries around the World) there will be a pipeline (so to speak) of schemes already some way down the development route, just waiting for the right economics, to pull the trigger, this may even mean planning permissions already granted. I'm not, of course, suggesting anything like an instant response to higher green tariff takeup, but it may be faster than we might think.

mmmmikey

Martyn1981 wrote: »

Yep, I agree that a switch today does not instantly change the energy mix, it can't obviously, but it will lead to change. An increase in demand for 'green' energy will drive a greater, and faster supply of green energy. It's really as simple as that.

We probably agree on more than we differ, so lets not overdo this. But I still think you're overstating the benefits and in doing so encouraging people who are switching to green tariffs into thinking they're doing far more than they really are to combat climate change, leading to a very real risk of complacency.

You're presenting a theoretical argument about something that may or may not happen in the future, based on (in my view) somewhat questionable theory.

At the moment, some people buy green energy and some people buy a mix of everything else that is left. If more people buy green energy then this has to come from somewhere and it comes out of the mix of everything else that is left. So the direct consequence of you using more green energy is that someone else (on the everything else tariff) uses less green energy, so being on a green tariff doesn't make a blind bit of difference in the immediate term to overall greenhouse gas emissions.

All the tariffs lead with a headline to the effect of "100% of the electricity we buy is green" and my point is simply that, given the above, this is meaningless and misleading as I expect that most consumers would think that they were doing something beneficial here and now to reduce emissions.

It's clear now from your recent posts that you understand and accept this point, and as you say most people who stop and think about this, will after a bit of head scratching, realise this too. But the marketing is convincing, well meaning people want to do their bit and this sounds good, so how many people actually stop and think? I wouldn't mind betting there are a fair number of people on this forum for whom this point has only just registered - not because they're daft but simply because they haven't thought about it. And that's just on this forum - how many people out there in the real world haven't changed their energy provider at all, let alone to a green provider?

As far as your theory that at some stage in the future increased demand will lead to increased supply, your view appears to me to be massively over simplified. It really isn't anything like as simple as you perceive it to be.

Firstly, there are all kinds of other restrictions to RE growth, such as planning constraints, the need to maintain a balance of energy sources so we can keep the lights on even when the wind isn't blowing and the capacity in the industry to actully build these things. So if they're going as fast as they can anyway, what difference does a bit of extra demand make? And in any event, the way the market is regulated means that they can already sell as much as they can build, so what difference does increased demand make if you're already scaling up as quickly as you can?

Secondly, your theory is based on the simple rules of supply and demand in a free market and doesn't consider how this is effected by market regulation or factors such as elasticity of supply.

You can dismiss these things as negative comments or skepticism, but they are very real factors in the cold, hard world of practicalities. Increase demand could theoretically lead to some amount of increased supply, but that's not a given, and even if it does will it lead to a meaningful increase?

If you see switching to a green tariff as a vote in favour of green energy, then great, I'm all in favour of that.

But if you switch to a green tariff thinking that in doing so you've done your bit to save the planet, I'm thinking "whoa, it's great to see you thinking about this, but hold on a bit, it's really not as simple as the energy salesman told you".

1961Nick

We have a market at the moment where (so called) green energy tariffs are equal, and in many cases cheaper, than regular tariffs. This begs the question as to whether those choosing 'green' did it because of environmental or economic considerations? I suspect it's the latter.

I'm with Octopus & they would have you believe that 100% of their energy is green! They may be better than most of the greenwashing suppliers, but I'm not going to kid myself that my energy usage doesn't result in any carbon - I doubt they planted 2 acres of woodland to offset my gas?

The problem I see with expanding RE too quickly is the increasing frequency of curtailment & particularly how you apportion that cost. If the cost is solely allocated to green energy the price will inevitably rise. Adding more supply will result in a higher overall percentage of curtailment & even higher prices. The solution is obviously storage ... but that's just too expensive at the moment. Another option to mitigate the problem is GA's beloved interconnections.

Martyn1981

mmmmikey wrote: »

We probably agree on more than we differ, so lets not overdo this. But I still think you're overstating the benefits and in doing so encouraging people who are switching to green tariffs into thinking they're doing far more than they really are to combat climate change, leading to a very real risk of complacency.

You're presenting a theoretical argument about something that may or may not happen in the future, based on (in my view) somewhat questionable theory.

At the moment, some people buy green energy and some people buy a mix of everything else that is left. If more people buy green energy then this has to come from somewhere and it comes out of the mix of everything else that is left. So the direct consequence of you using more green energy is that someone else (on the everything else tariff) uses less green energy, so being on a green tariff doesn't make a blind bit of difference in the immediate term to overall greenhouse gas emissions.

All the tariffs lead with a headline to the effect of "100% of the electricity we buy is green" and my point is simply that, given the above, this is meaningless and misleading as I expect that most consumers would think that they were doing something beneficial here and now to reduce emissions.

It's clear now from your recent posts that you understand and accept this point, and as you say most people who stop and think about this, will after a bit of head scratching, realise this too. But the marketing is convincing, well meaning people want to do their bit and this sounds good, so how many people actually stop and think? I wouldn't mind betting there are a fair number of people on this forum for whom this point has only just registered - not because they're daft but simply because they haven't thought about it. And that's just on this forum - how many people out there in the real world haven't changed their energy provider at all, let alone to a green provider?

As far as your theory that at some stage in the future increased demand will lead to increased supply, your view appears to me to be massively over simplified. It really isn't anything like as simple as you perceive it to be.

Firstly, there are all kinds of other restrictions to RE growth, such as planning constraints, the need to maintain a balance of energy sources so we can keep the lights on even when the wind isn't blowing and the capacity in the industry to actully build these things. So if they're going as fast as they can anyway, what difference does a bit of extra demand make? And in any event, the way the market is regulated means that they can already sell as much as they can build, so what difference does increased demand make if you're already scaling up as quickly as you can?

Secondly, your theory is based on the simple rules of supply and demand in a free market and doesn't consider how this is effected by market regulation or factors such as elasticity of supply.

You can dismiss these things as negative comments or skepticism, but they are very real factors in the cold, hard world of practicalities. Increase demand could theoretically lead to some amount of increased supply, but that's not a given, and even if it does will it lead to a meaningful increase?

If you see switching to a green tariff as a vote in favour of green energy, then great, I'm all in favour of that.

But if you switch to a green tariff thinking that in doing so you've done your bit to save the planet, I'm thinking "whoa, it's great to see you thinking about this, but hold on a bit, it's really not as simple as the energy salesman told you".

I think you are overthinking this.

We both have opinions and that's fine, mine shouldn't concern you at all. And I don't see how I'm influencing anyone, neither are you. We are just chatting on a sub board that gets very little footfall.

I'm sorry you think I've oversimplified the economics, but they really aren't that complicated, more demand for green energy will require the suppliers to source more green energy, that in turn will support the rollout of more green energy by establishing a demand side push to go with the supply side.

I have actually addressed in-elastic demand, and regulations, with reference to the UK pipeline. I'm not sure what the problem here is, I've never said that RE will be deployed instantly, I think you may be reading too much into this, when it's really simple, more demand, more economic viability will mean more on-shore wind, PV, and even off-shore wind.

I don't for one second think the UK is rolling out renewables as fast as we could, we could do more but the government won't subsidise/support PV and on-shore wind, so any deals that lead to more being contracted and developed is good news, shirley?

Like you say, I really don't think we disagree about much at all, I think your concerns are about what you think I think, not what I think, nor what I'm saying - you say you agree with green tariffs as a 'vote', perfect, I feel the same, then you say doing so won't mean you've done your bit to save the planet, again perfect, I've no idea why you think I think differently?

I'm looking at this entirely from cold 'heartless' economics, and more demand means more supply, and dare I say further cost reductions as costs keep falling.

Mikey, it's Saul Goodman, there really is no issue here, just confusion.

Given a choice, can we both agree that choosing a green tariff is better than not, and at the very, very least, won't make anything worse?

All the best mate.

Martyn1981

Martyn1981 wrote: »

I'm looking at this entirely from cold 'heartless' economics, and more demand means more supply, and dare I say further cost reductions as costs keep falling.

@mmmmikey - Oops! I've just realised I'm operating under a 'fact' (hopefully) that I've failed to share/explain.

In the UK both supply side PV and on-shore wind are just about, almost, kinda, within spitting distance ..... and so on .... of being subsidy free viable. In fact they already are in the case of many PPA's.

So, therefore ..... that's why I have little to no doubt about more demand leading to more supply as we are now in the position (lucky position?) of the technologies being marginal.

Perhaps I should have made that point, but I lose track of my waffle, and what I have, or haven't said/repeated recently, and assume everyone is keeping track (obsessed like me).

From there, hopefully you understand better my positivity about how the demand side can drive the deployment of RE too.

mmmmikey

Martyn1981 wrote: »

Like you say, I really don't think we disagree about much at all, I think your concerns are about what you think I think, not what I think, nor what I'm saying

No, no, no......

You may think that the problem is that I what I think you think isn't actually what you think you think, but what I think you think about what I think you think is what I thought you thought earlier before we had the discussion where I thought you thought that we were in agreement about our thinking.

So, having cleared that up, and to use some EU jargon, is this the point at which we go into the tunnel and work out the final text of the agreement before next week's summit?

If we can sort this out, I really don't see why everyone seems to be making such a big thing about Brexit......
:beer:

JKenH

Martyn1981 wrote: »

From there, hopefully you understand better my positivity about how the demand side can drive the deployment of RE too.

One could presumably extend the same argument to electric cars so if you go out and buy one it might tempt the industry to open a new factory - but buying an EV is more likely to drive EV manufacture than opting for a green energy tariff is to drive wind farm construction. The development of the electric car industry is totally dependent on customers choosing EVs over ICEs. That is not the case with wind farm development which would still go ahead even if no customers opted for green tariffs. RE investment, specifically wind, has been driven by government support (not consumer demand) but will soon stand on its own feet and compete toe to toe with fossil fuels and nuclear on cost and it will matter not one jot if you are on a renewable tariff or not.

So I still think you are wrong to believe an individual signing up for renewably generated electricity has any impact on commercial decisions to build wind farms or any other renewable energy.

1961Nick

JKenH wrote: »

One could presumably extend the same argument to electric cars so if you go out and buy one it might tempt the industry to open a new factory - but buying an EV is more likely to drive EV manufacture than opting for a green energy tariff is to drive wind farm construction. The development of the electric car industry is totally dependent on customers choosing EVs over ICEs. That is not the case with wind farm development which would still go ahead even if no customers opted for green tariffs. RE investment, specifically wind, has been driven by government support (not consumer demand) but will soon stand on its own feet and compete toe to toe with fossil fuels and nuclear on cost and it will matter not one jot if you are on a renewable tariff or not.

So I still think you are wrong to believe an individual signing up for renewably generated electricity has any impact on commercial decisions to build wind farms or any other renewable energy.

The only exception to the above are those energy suppliers that install their own RE generation rather than just buying in existing RE.

This is a typical green energy claim:

We're proud to be the UK's biggest green supplier. We provide our members with 100% renewable electricity from solar, wind and hydro. Plus, our gas is 100% carbon neutral. 10% is green gas produced from renewable sources like food or farm waste. And we offset the rest of the gas we supply by supporting carbon reduction projects around the world.

I'm sure that over 99% of people reading that would conclude that the energy they were buying had no environmental impact whatsoever. That's a long way from the truth even we include nuclear on the green side of the equation. At best it's 50/50 for electricity & gas is probably 80/20 (10% bio gas + 10%(?) carbon offset).

Buying green energy is very similar to buying a Volkswagen prior to 2015. Both produce a lot more carbon than you were lead to believe!!

JKenH

1961Nick wrote: »

The only exception to the above are those energy suppliers that install their own RE generation rather than just buying in existing RE.

This is a typical green energy claim:



I'm sure that over 99% of people reading that would conclude that the energy they were buying had no environmental impact whatsoever. That's a long way from the truth even we include nuclear on the green side of the equation. At best it's 50/50 for electricity & gas is probably 80/20 (10% bio gas + 10%(?) carbon offset).

Buying green energy is very similar to buying a Volkswagen prior to 2015. Both produce a lot more carbon than you were lead to believe!!

One would still have to ask what was the driver for a green energy supplier to make the commercial decision to invest in a wind farm. Is it because they believed there would be sufficient demand from green tariff customers to be able to sell the wind generated energy at a sufficiently high price to make a profit or is it because of government policy - guaranteed price and Renewable Obligations?

A green energy company may say it is investing the profits made in new wind farms but so are other commercial operators so having an ethical customer base is not the driver. A green energy company is like any other - it has shareholders who want to see a profit and they can see that in building wind farms which they can use as a marketing tool and charge a higher price.

An individual switching to a green producer makes no difference as this article posted by Mikey said

The reason that green tariffs are currently so cheap is precisely because only 0.5% of the population are signed up. As nearly a quarter of our grid is powered by renewables, it is easy to funnel electricity to supply the 0.5% through a few specialist green suppliers. But, as it comes from capacity that was built almost entirely as a result of the RO, if the specialist green suppliers all disappeared tomorrow, pretty much the exact same electricity would be sold on standard tariffs instead.