Opting for more
We uncover what happens when you buy renewable energy with GreenPower via your electricity provider. Are there smarter options for reducing emissions, saving money and choosing greener power?
When Graham Rollings and his wife decided to pay the extra money for GreenPower they hoped to reduce their greenhouse gas emissions and support new, renewable energy in Queensland. But buying GreenPower can be an abstract and confusing arrangement and after two years, the Rollings weren't sold on the scheme and instead invested their money in energy efficiency.
"At the time our bills indicated that the carbon emissions for our consumption was zero tonnes," says Rollings. "I knew this was somewhat incorrect as Queensland had the vast majority of its power provided by coal and gas fired stations."
In truth, the bulk of the money certainly would have gone to a renewable energy generator, but what type of generator and what state it was in was beyond the Rollings's control.
As for hoping their voluntary contribution would reduce Australia's greenhouse gas emissions, it's unlikely to have had much impact.
What is GreenPower?
GreenPower is a government-accredited scheme that lets individuals and businesses support renewable energy generation.
When you buy a GreenPower product from your electricity retailer, you're paying for electricity produced by renewable power sources that meet a strict set of criteria for accreditation.
But the renewable energy is not fed into your house. Instead, it's added to the grid on your behalf.
GreenPower is quantified and traded through certificates. When you buy GreenPower from your retailer, the retailer registers the sale in their database. At the start of the next year, the retailer must buy certificates representing the same amount of electricity from an approved renewable energy generator. Called Large Scale Generation Certificates or LGCs, each one represents 1MWh of renewable electricity. LGCs can only be 'created' by accredited wind, solar, hydro or biomass generators of more than 100kW in size.
Take the Rollings as an example. If they used 9MW of power over the course of a year, their energy retailer would buy LGCs from a renewable energy generator (e.g. a wind farm) representing 9MW of renewable power. The extra money that the Rollings have paid for 'GreenPower' in turn pays for these certificates.
How much does it cost?
Energy market analyst Bruce Mountain says GreenPower can increase your household electricity bill by 20-50%. The range depends upon the retailer's rates and the proportion of GreenPower that customers buy (i.e. 10%, 50% or 100%).
The average electricity bill in 2016 in Australia was $1902. Buying GreenPower would add between $380.40 and $951 to the average household electricity costs.
GreenPower prices are largely driven by the wholesale electricity market price for LGCs, which is currently around $85. Two years ago it was half that price. The wholesale market price for LGCs has risen in recent years due to a shortage in supply of renewable energy.
We put this question to Professor Chris Reidy from the Institute for Sustainable Futures, UTS.
Professor Reidy led a 2015 review into GreenPower. He told us: "The funds definitely do support new renewable energy generation, which is defined as anything installed after 1997, when the program started."
"The program is so small, however, that it is unlikely to make the difference when a generator is deciding whether to install new renewable energy."
The GreenPower Program Review reports that the program contributed 8.6% of the growth in renewable energy generated over the period 1997-2013.
The rest of the growth was driven by the mandatory requirements under the government's Renewable Energy Target and other incentive programs. GreenPower is 'additional' to the RET, meaning that the renewable energy it contributes is not counted towards the Target.
According to Brian Pate, GreenPower Program manager, around 0.55% of the total electricity demand of the National Electricity Market was provided by GreenPower at the end of 2015.
Pate says the program remains a credible choice for consumers looking to reduce their carbon footprint and is still one of the most popular forms of voluntary renewable energy.
"GreenPower's transparent, robust and independent auditing system ensures renewable energy purchases by customers come from an accredited renewable energy source, are added to the grid on their behalf and are additional to renewables added to the grid under the Renewable Energy Target at any point in time."
"This gives consumers confidence in their purchase," says Pate.
GreenPower's role and size has diminished markedly over the past 10 years. It peaked in 2008 when it had 904,716 customers, 856,892 of whom were residential like the Rollings.
By 2015 it had just 330,000 residential and business customers.
Will buying GreenPower mean Australia’s carbon emissions drop further than our international targets?
People who buy GreenPower do so because they want to see growth in renewable energy and further cuts in emissions.
Market research from 2009 found that 65% of residential customers thought their purchase of GreenPower should cut emissions beyond Australia’s national emissions reduction targets . (Although it also found that only 2% of residential customers would drop their GreenPower purchase if it wasn’t additional.)
Unfortunately, a spokesperson from NSW Department of Industry representing the GreenPower Program told us; “There is no formal arrangement with the Commonwealth Government for GreenPower emissions savings to be additional to Australia’s targets under the Paris Agreement.”
“As the program manager, DRE [Division of Resources and Energy] is continuing negotiations with the Commonwealth Government on behalf of GreenPower customers to confirm the emissions additionality of GreenPower purchases.”
The Government would have to buy and retire (remove from the market) international carbon credits matching the emission reductions that result from GreenPower purchases to make it ‘additional’. It did this in 2010 but it hasn’t done so since then.
Peter Shuey, technical director of the Voluntary Carbon Markets Association, says, "I believe the government thinks this stuff is too esoteric for the average punter to worry about."
Back in 2009, CHOICE complained to the ACCC about misleading GreenPower claims in relation to emissions reductions that were in breach of Australian Consumer Law. After consultation with the ACCC, GreenPower directed electricity companies to change their marketing language – they could no longer say that buying GreenPower lowered emissions or had an 'environmental' impact.
Is buying GreenPower right for you?
Every customer will have a different expectation of GreenPower. If supporting renewable energy is your primary driver then GreenPower is a viable option.
But if you're hoping for an environmental benefit in the form of cutting Australia's emissions, beyond what the government has already committed to deliver, it's not.
Intangible and 'disempowering'
For the average consumer, much like carbon offsets, buying GreenPower is an abstract concept and there's little to show for your investment.
A choice.community member who lives in a suburban house on the Gold Coast told us that without information or choice about where that money was spent, "giving green money to a utility is really disempowering".
He questioned if the generator was chosen for the benefit of the consumer, the environment or the utility, as well as how much of the money is diverted to administrative and other costs.
The 2015 review of GreenPower acknowledged, "A GreenPower purchase supports an unknown renewable energy power station at an unknown location, and nobody else in the community knows you are doing it, so there is little social esteem accruing from the purchase."
What are the alternatives?
The Rollings took the path of spending the money they saved on GreenPower on a more energy efficient fridge and washing machine. In doing so they cut their energy use, household emissions and bills.
The choice.community member who spoke to us installed a 5kW solar PV system, as well as rainwater tanks and hydroponic vegetable gardens. He feels the household has retained control of their renewable energy investment.
Investing in solar PV
Since GreenPower began in 1997, the cost of solar PV and battery storage has plummeted and systems are now within the reach of many more household budgets.
The upfront purchase costs are greater but solar PV is a tangible investment in renewable energy that will pay for itself over time. It insulates households from the rising cost of electricity, reduces emissions by reducing power consumption from the grid and adds renewable energy to the grid.
Energy market analyst Bruce Mountain argues that, for those who can invest in it, PV is the better financial choice: "PV on a rooftop will produce electricity at around six cents per kilowatt-hour, compared to current GreenPower cost prices of around 9-10c/ kWh. So, the starting point should be solar."
Solar Choice publishes an update of average retail PV costs for systems in capital cities across Australia, including incentives and GST.
Find the available rebates and assistance in your state at Your Energy Savings.
What about community energy projects?
Tom Knockolds from Community Power Agency says another way to support renewable energy is donating to local community energy projects.
CORENA is the Citizen's Own Renewable Energy Network Australia. The group coordinates donation-based crowdfunding projects all over Australia.
Individuals can choose a project to support via a donation that provides interest-free loans to community organisations to pay for solar installations and energy efficiency measures. The loan is repaid through savings on power bills, and the repayments are reinvested by CORENA into another community energy project. It's a revolving fund.
Another option is buying the equivalent of GreenPower directly from a generator. Hepburn Wind Community Power allows individuals to do this by selling LGCs directly to customers. The LGCs are generated by its two community-owned wind turbines at Leonards Hill, 100 kilometres north of Melbourne. These LGCs are cheaper than buying GreenPower and consumers know exactly where they come from.
The future: Peer to peer trading
LocalVolts is an Australian start-up with the vision of opening up the wholesale and retail electricity market so individuals can make their own decisions about buying and selling energy.
While it's only in development stage at the moment, LocalVolts' founder Jitendra Tomar says they plan on allowing individuals to participate in the marketplace as a buyer or seller. People can specify who they buy electricity from, at what price, how much and when.
Tomar likened it to buying milk directly from the farmer instead of through the supermarkets and the dairy corporations like Pauls.
He told CHOICE, "LocalVolts does away with the certificate market and puts the power back in the hands of the consumer."
"We want to kill all this paper shuffling."
Renewable Energy Target (RET)
A domestic policy to encourage investment in green energy. The current target is for large-scale renewable energy generation to be 33,000GWh by 2020 – or about 23.5% of Australia's electricity generation.
GreenPower is certified renewable energy. Paying extra for GreenPower means that your retailer sources renewable energy to be added to the grid on your behalf.
Emissions reduction target
Separate to the Renewable Energy Target, Australia's emissions reduction target is our international commitment (as part of the Paris Agreement) to reduce carbon emissions to 26-28% on 2005 levels by 2030.