Power gets the green light

As ethical consumerism gains popularity, power companies have taken note and are offering customers environmentally friendly options. But with Government calling for 10% of power to come from renewable sources by 2010, both demand and supply must grow. By Nathalie Kilby

With the Government preparing a marketing drive to persuade the public to use environmentally friendly modes of transport, and supermarket giants such as Tesco keen to highlight the ecological aspects of their operations, the green movement is gathering pace faster than at any time since the 1980s.

The debate about green industry and consumerism will be thrown into sharp relief when Whitehall publishes the long-awaited Energy Review next month. It is expected to favour the construction of more nuclear power stations as the best way of dealing with the “energy gap”. Experts warn that the country is heading for a supply crisis, with steepling bills set to increase further, if the problem is not tackled.

In the face of consumer demand for “cleaner” power products, utilities companies are considering boosting their own green energy output. But how easy is it for consumers to do their bit?

Micro-generation, or do-it-yourself energy, is seen by many as an essential element if the UK is to achieve the Government’s long-term target of reducing carbon levels by 60% over 50 years. Yet it is an expensive option for most consumers – despite the incentive of state aid via the Department of Trade and Industry’s low-carbon buildings programme, managed by the Energy Trust. The alternative is to buy sustainable energy from existing power providers.

Return power to the network

Last week, RWE-owned npower announced it is to double capacity for its Juice product. Juice, endorsed by Greenpeace, now offers up to 100,000 customers electricity supplied from renewable sources – mainly wind power. Npower matches every unit of electricity used by a Juice customer and returns the amount, generated from renewable sources, into the electricity network.

The Renewables Obligation, introduced in 2002, requires licensed electricity providers to source a specific and annually increasing percentage from renewable sources. As a result, npower is just one of the mainstream suppliers, along with British Gas, EDF Energy and Powergen, offering a green tariff. The majority of providers, however, charge a subsidy for green schemes. Npower, which does not, claims to have the largest share of the green market.

“The fact we offer Juice with no premium means customers see the benefits of signing up to a renewable energy tariff without being penalised for taking the green route,” says Patrick Harvey, head of propositions at npower (which includes the Juice brand). Launched five years ago (MW August 2, 2001), Juice caters for domestic and business users and counts Sainsbury’s among its customers. Other providers include niche operators such as Ecotricity, which supplies Body Shop and Co-operative Bank and has invested &£7m in wind energy this year.

Harvey says 4% of the electricity npower supplies is renewable; the Government’s target is 10% by 2010. He adds: “We are trying to do everything we can – other providers are doing exactly the same. There’s been a massive uplift in renewable energy and we are hitting targets and want to increase capacity at Juice further.”

Strategic targeting

He explains that while Juice launched with a high-profile marketing campaign, the strategy has since focused on targeting and relevance. “Due to renewables being a limited resource, we’ve been selective about who we target,” Harvey adds. “Consumers tend to have expressed an interest in green energy – people who want to reduce their carbon footprint, or young families with a green conscience. There is growing demand for renewable energy from consumers.”

Reducing carbon emissions is high on everyone’s agenda. Eon announced a greater commitment to greener energy in its corporate social responsibility report last week, saying it is to reduce its carbon intensity by 10% by 2012. Launching the report, Eon chief executive Paul Golby said: “This commitment is both necessary and achievable but it won’t be easy. We have to reduce our emissions, but also engage with our customers to help them become more energy efficient, and so reduce the amount of power and gas they use.”

The company says it is serious about renewable energy generation, having invested &£225m in the past five years and committing to an investment of &£1bn in renewable energy over the next five. Yet while 5% of energy produced in the UK comes from renewable sources, just 1% is sold as green energy.

Greenpeace endorses some of the green tariffs available from the mainstream providers, but it says too little green energy is available. The organisation has just rolled out a national press campaign in the build up to the unveiling of the Energy Review (MW last week), to encourage opinion-formers and decision-makers to look at alternatives to the anticipated nuclear route such as conservation of wasted energy, decentralisation and renewable sources.

Greenpeace communications director John Fauven says: “While we do endorse such products, providers are just not doing enough. They must go further. Green energy options are niche and not sufficient. Marketing campaigns are often confusing and there is little promotion of what is available.”

Edward Reed, strategic development manager at Energywatch, agrees that confusion about green tariffs is hindering take-up. “There is a real need for an accreditation or rating system of green tariffs and we are lobbying government and industry to implement such a system,” he says. “Ofgem produced guidelines on green tariffs in 2001/02, and consulted on the issue last year, but has produced nothing since. Consumers need to know that suppliers are actually giving them what they claim.

“This has to be on top of the legal requirement – not just the 5% they are obliged to produce. People are not convinced and there is not enough information for consumers – domestic and corporate alike.”

Demand will create supply

Reed says green tariffs offer more choice and open up the market, benefiting both consumers and suppliers. But he adds: “Until there is greater demand, there is little incentive for suppliers to increase the amount of green energy they supply above the legal requirement. It’s a chicken and egg scenario: there’s a finite renewable resource, and projects such as constructing windfarms can take as long as ten years to complete due to planning regulations and objections.”

Reed says Energywatch is lobbying the Government to introduce a “green-rating” system and that the idea is welcomed by most providers.

But consumers’ hands appear to be tied. If environmentally friendly power is to become a viable element of the energy mix, prices have to come down, marketing campaigns for green tariffs need be ramped up and the industry must lead by example.