Green Energy in Europe The surprising green electricity market in UK

Just over six months ago, views of experts on the green

electricity market in the United Kingdom were when not

pessimistic, rather cautious. Then, with the summer of

2001 blew a wind of change. Juice, GreenPlan, Green

Tariff and many more new green energy products flooded

the market supported by massive marketing campaigns

using all possible media in the United Kingdom. Laetitia

Ouillet, www.greenprices.com focuses on the latest

developments of the green electricity markets in the

United Kingdom over the past six months.

In line with the general trend in Europe, UK support for renewables is moving away from pure subsidies to more mar- ket-based incentives. The government has chosen to make these incentives available for business customers and electricity suppliers rather than to place the future of renewables in the hands of domestic customers.

Renewables Obligation Via the Renewables Obligation’, due to be introduced in April 2002, all licensed electricity suppliers in the United Kingdom will be obliged by Law to purchase a proportion of their previous year’s consumption from renewable sources. This share will go from 3% of total electricity sales in 2002-2003 to 10.4% in 2011/2012’.

Climate Change Levy On the corporate market, the uptake of green electricity is also encouraged via the introduction last April of the Climate Change Levy (CCL). The Climate Change Levy is a tax bearing on all energy supplied to industrial and commercial users as well as for the agriculture, public administration and other services.

With a taxation level of 0.47

p/kWh, electricity attracts by far the

highest rate compared to other forms of energy. Parallel to this tax, the gov-

ernment has also introduced possibili-

ties to be exempted from the CCL. Exemption is granted by the con-

sumption of electricity from renewable energy sources. Procter and Gamble UK, NHS Scotland, Co-operative

Bank, the University of Edinburgh, and many other business customers,

local authorities, and public services (health care, public buildings, etc) have all switched to a green electricity

supplier in order to claim exemption

from the Levy. Greenprices’ latest esti-

mates established that, in November 2001, large customers represented 591 million kWh of green electricity con-

sumed.

Enough capacity? Those two measures (CCL and Renewables Obligation) were imple- mented with the objective to reach 10% of the electricity consumption from renewables sources by 2010 with an intermediary target of 5% in 2005. However, implementation of new renewable production capacity is not straightforward, mainly because of the involvement of local authorities for

planning permission, which causes

large delays and problems. Combined with the fact that most

resources of off-shore wind, wave and

tidal sources in the Untied Kingdom are largely untapped, the amount of green electricity available on the market for both the Renewables obligation and the customers wishing to be exempted from the CCL is greatly constrained. If one adds the growing voluntary demand for green electricity, it seems likely that the UK might fall short of its target and fail to cover the demand from domestic customers with inland

production.

Encouraging signals In December 2001, Greenprices pub- lished the results of its latest customer count in the United Kingdom. There are currently 45,150 domestic cus- tomers for green electricity in the United Kingdom, which represents a total of 149 million kWh of green ener-

gy consumed per year. The last count, by Future Energy in April 2001, had shown that only 20,000 customers were receiving green power, or had signed up for a green fund. This indicates that the

market has grown by 125%. There are currently 13 suppliers offer-

ing their customers the possibility to choose green power. While most were already offering a green product in the past few years as well, these new prod- ucts are accompanied by new commu- nication strategies, which have com- pletely changed the face of the green power market in the UK. Products have now dedicated sections on energy com- panies’ websites, marketing teams and mass publicity (metro, direct mailing, telemarketers, etc.. ..). In the fat mov- ing UK electricity market, where

100,000 customers a week are switching electricity supplier according to John

52 January/February 2002 REFOCUS www.re-focus.net

GREEN ENERGY

Widespread adoption of 10% RE target The &ption bv rhe LJK governmenr

of the ch.lllcnging target m source 10% ofthr UK clcctriciry consumption from

~rcncw,ible\ I>\. 7010 ha\ vicldcd 1103

mxlwtin~ inpirdtion. One csample is

Ait ofC;rcen Energy (UK) I’lc kvith irs

(;I-ccn I_ncl-gy 10. which offer-s the po-

sihiliry for customers ro s\virch I O”0 of rhcir cnctsy need\ to gren po~+~r, in

line wirh the governmcnt’~ obiccti~~cs.

CIc.i~-ly~ this firs pcrftcrly in the “do

hour bit” type 0fmcss.igcs. As cnd-con-

\iimc’r.~ of cleitl-icity, some domcsric

usi’rs xc‘ it .is thcil- t,lrk to contribute to

the 10% consumption target.

Weather conditions l.M Iwr 1101 klbl, the SCVCI’C tloods

2nd hc.iv!, \;forms h.lvc also played d

I-ale on the ni.11~kcr. In&d, a surve!.

c,lrrird our 1,:. rhr RSPB in Scprembcr

,ind Ocrohcr JO0 I rsrablished rhat

“climarc ch.lngc” is .I Limili.il- tc‘l-m for

95”o of C;re;ll lirir.iin (.I \ucli, or d5 “glob.il \\arniing” or “grernhoLlsr

effect”). A~lxl,cting campaigns rcvolv-

ins .II-OII~~ rhc theme of cliin:irz

ch.lll~c drc’ then likeI!. to reccivc .1

liighr~r level of dllenCon.

Conclusion Ir is of COIII-SC too c,lrl!, to dra\v co,,-

elusions ahour the green po\vcr marlicr

in rhe Llnricd Kingdom. Ir needs I0

confil-m the imps-cssion of.icrivit~~ and

gl-o\vrh .ind CYOIYC inro .I more mature

m.lrkcr \vith st,lble structures and

incrc.iscd customer confidence. (;rccn

energy tar domcsric cusromcrs in the

Ilnircd Kingdom also needs to f&r

.iiid live up to two major iliallcngcs:

S.l\ing -l.rus\r decided 10 srop its

Fururc Lncl-gy sihcnie and ro

rcrhink anotlirr formula foi

.iccreditation. hlcanwhilc, the

guideline\ recenrl\ isbued b\-

Ofgrin could serve ds a “guide f01-

Ixst pr-actice” bur it remains thar

dn initiarivc To check all existing

products and their claims indepcn-

denrly is much needed. Ciisromcr’~

confidence is d fragile factor lvhich

could be run down by fraudulent

.lcri\ itic ,ind deals.

The coming inn) play of the long

.i\v.jitcd Kcn~wablcs Obligation

\t.hosc hznitioning might not be \o

srr.iighrforw,lrcii in the carlv stages

.~iid \\hith mighr rhen ct-rare some

confusion on the market.

Should tht. geen energy market sur-

vive rhroiigth horh. ir could grow ro

six3 comparable I0 both its German

and l)urch countc‘rp.ir~s. In any C.ISC,

the UK i$ ‘1 m,lrker ro keep dn eye on!

Footnotes 1 ,A siniil,lr scheme \vill run in

Scotland undcl- rhe name Scottish

Kcncw.~blcs Obligarion.

7 After [Iii\ per-iod rhe level should

Ircni.tin xT dl 10.4 “‘6 until rhc end

of the Ohligarion scheme in

‘0X1202’.

Greenprices is an independent web-

site on green energy in Europe and

abroad, wirh information on suppli-

ers of green energy their products

and prices, policy and news.

Greenprices is an initiative of Ecofys

B.V. Currently the following coun-

ny sections are online: Belgium,

Germany, The Netherlands, United

Kingdom and Sweden. The address

is www.greenprices.com, which is

the general portal and gives informa-

tion on green energy in the

European Union. From here you can

visit the separate counrry sections on

green energy For more information

about Greenprices or to suggest

green energy suppliers or large cus-

tomers currently not mentioned on

the website, please contact Heddeke

Heijnes, editor, or Laetitia Ouillet,

p.0. Box 8408, NL-3503 RK,

Urtechr, The Netherlands, tel.

+31.30.2808300, fax. +3 I .30.

2808301 or send an email to green-

prices@greenprices.com.