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UK eyes carbon standards for suppliers of "green electricity," flexibility

18 August 2021 Cristina Brooks

The UK is revising the regulatory framework for suppliers of "green electricity" to promote new kinds of renewable and low-carbon energy contracts.

The proposal by the Department for Business, Energy, and Industrial Strategy (BEIS) came after consumer and price comparison groups raised concerns about "greenwashing" and transparency regarding green energy supply contracts, known in the UK as tariffs.

Renewables in August 2021 made up nearly half, or 46.52%, of the electricity generated in the UK. This came from a combination of wind, biomass, and ocean power generation, IHS Markit data shows.

In the past three years as the UK grew its renewable electricity capacity, green energy supply deals have become one of the most common deals offered to domestic consumers in much of the UK.

This is why the UK wants to start publishing the carbon content of renewable energy supply deals or tariffs under a framework which was revealed in a consultation on 16 August.

This framework, which has still to be written, could pave the way for a future in which more homes and business will use what the government calls "100% renewable electricity-backed tariffs" as the UK targets net-zero emissions by 2050.

The UK's electricity use may double in that timeframe, driven by growing demand from electric cars and electric heating, said BEIS.

Green tariffs becoming standard

More consumers are choosing green tariffs to cut their carbon footprints—9 million households in the UK excluding Northern Ireland—and green tariffs comprise over half of all new electricity tariffs launched, BEIS said.

Increasingly, global companies that operate in the UK have pledged to use 100% renewable energy, for example through the RE 100 initiative.

Green tariffs have also become cheaper. They were previously available for either premium or standard prices, but now they are available for the same price as regular tariffs.

One factor enabling this trend involved the UK reforming the electricity market and adding new subsidies for renewable and conventional generators in 2013. This was intended to boost electricity sector investments and aid price stability amid policy changes, such as EU directives to deliver more industrial decarbonization and renewable energy.

Small suppliers took advantage of the ability to respond to electricity market changes quickly, according to UK consultancy Cornwall Insight.

Small energy suppliers then became major green energy supply deal providers, gaining market share from the traditional "big six" energy suppliers that own and operate many conventional generation sources.

Framework for addressing greenwashing

Under current electricity licensing standards, marketing green electricity is permitted so long as suppliers "match" conventional energy from the grid with energy generated from renewable sources.

The electricity sold to consumers—whether those supplies are from in-house assets, through power purchase agreements (PPAs), or wholesale market trading—must be matched with renewable energy supplies awarded government-issued certificates called Renewable Energy Guarantees of Origin (REGOs).

Generators obtain REGOs from operators of onshore and offshore wind, solar, hydro and biomass generation sources.

Suppliers of green energy must also prove their REGOs make a genuine impact on overall carbon reduction, or additionality, with details on the assumed environmental benefit in terms of CO2 equivalent savings.

But under the current system, there is no way to track the renewable generation source attributed to a single green tariff consumer and the REGO supplies allocated are too small to increase demand for renewables.

What's more, the practice of matching REGOS to wholesale energy including fossil fuel generation has been called greenwashing, BEIS said.

What was needed was a framework that allows consumers to easily grasp the carbon and cost consequences of contract offers.

BEIS noted consumers soon will start using more smart meters and Time of Use (TOU) tariffs that reward them for switching lights or appliances off or using electricity flexibly to support use of renewable generation sources. As a result, they will expect a wider variety of pricing options and more cost flexibility alongside more green or low-carbon energy tariffs.

While the current matching system is based on annualized renewable energy supplies, a matching system with more granular time-related data about renewable energy availability will be needed to implement demand-response activity.

BEIS suggested the energy supply deals with the most net-zero potential of the future will be renewables-backed TOU tariffs, which would allow the charging of EVs at a time when renewables are running at high capacity. The first such TOU tariff was launched in 2017, and half-hour settlement systems enabling TOU tariffs will be implemented in the mid-2020s.

Such a system could also help to ensure the climate friendliness of new low-carbon energy like electrolysis powered by renewables to make green hydrogen, as the "versatility of hydrogen also increases the need to track primary energy sources all the way to applications."

Transparency

In other sectors, the UK is also seeking to require more transparency on climate issues as it pursues its targets.

The UK plans to be one of the first countries to compel its largest companies to report climate risk data, aligned with recommendations by the Task Force on Climate-related Financial Disclosures (TCFD).

The UK has multiplied its decarbonization commitments in the past two years as it prepares to co-host the upcoming 26th United Nations Conference of Parties to the Paris Agreement, for example by increasing its mid-term, 2035 target on the net-zero path to 78% at the April Leaders Summit on Climate.

Posted 18 August 2021 by Cristina Brooks, Senior Journalist, Climate & Sustainability, IHS Markit

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