How clean is your electricity?

The Conversation

In Europe and America, electricity retailers let their customers know whether their electricity is coming from renewable energy or fossil fuels. In Australia, your retailer has no such obligation.

The Institute for Sustainable Futures (ISF) at University of Technology Sydney and The Total Environment Centre recently decided to test the status of energy source disclosure by electricity retailers in Australia.

The study looked at the 36 licensed retailers in the National Electricity Market (NEM). We found it is not currently possible to find the actual energy source of electricity sold by any of them. Nor are they required to give this information to customers.

Australia’s electricity retailers do not hesitate to advertise how “green” their electricity is. But in the absence of any real facts about the source of their power, customers have no way of really knowing where the power they purchase is from.

With a lack of available data on the retail market, we analysed data on the wholesale market (or energy generation). Only 38% of retailers also owned or operated electricity generation assets. But there is no way to link electricity generated to what is sold to the customer. This is because there are several ways that retailers can buy electricity from the wholesale market. So while the wholesale market provides transparency to retailers, the retail market falls down on providing the same transparency to the end user.

Of the 38% of retailers with generation assets, it is safe to say energy from renewable sources is a minority. The three retailers that offered 100% renewable energy represented only 7% of the total generation capacity. But the data we used was the most recent available and different generation assets may have been acquired by retailers since then.

If retailers know the energy sources of their retail sales, why not require such information be available to the consumer? This has been done by retailers in California since 1998 using a Power Content Label and by UK and European retailers since 2005.

California’s Power Content Label

In Europe last week a network of 21 European environmental NGOs promoting the use of renewable electricity approved criteria for the first (and only) pan-European ecolabel for electricity. This was in response to European consumers questions: “what’s the use of choosing an electricity product, knowing that we are all getting electricity from the same grid?” “Which supplier and what products should I choose?” “And if I have a green contract, how does this affect my personal CO2-emissions?”.

For Australian customers who wish to be sure the electricity they are purchasing is from renewable energy, options are few and must be initiated by the customer. First, they can choose GreenPower, which the Australian Government formally accredits to be renewable energy only. In 2007 the Green Electricity Watch prompted retailers to disclose the GreenPower-accredited portion of electricity products which now make this an transparent option for consumers. Interestingly in our study only 47% of the retailers had GreenPower product sales. We were able to find total sales of only four retailers in annual reports and of these, the highest percentage of GreenPower sold is 3.2%. So where does the rest of the power they sell come from?

Second, customers can generate their own renewable energy. We looked at which retailers offered customers money for the solar power they produce. Some states have a mandated cost (or feed-in-tariff) to be paid to customers. Retailers can then choose if they would like to offer more than the mandated tariff. Approximately 33% of retailers in the study provided a solar feed-in-tariff above the mandated tariff. Only 19% publicly offered the mandated tariff. This leaves over half (58%) who did not provide consumers with information on feed-in-tariffs at all.

There are various campaign efforts by environmental NGOs that strive to help customers switch to cleaner and greener retailers. However, these may have the unintended consequence of further confusing messages. Mandatory disclosure would clear up such confusion. Or at least a ecolabel, like the one offered in Europe, that retailers are driven to meet.

But do consumers really care about long term environmental and social impacts of their electricity? McKinsey and Company recently provided significant insight into the “socially conscious consumer” including a tool to measure a consumer’s socially conscious quotient. The largest global study of consumer and brand behaviour in 18 countries found 63% of respondents make a point to buy from “companies whose values are similar to their own”. But they also discovered consumer trust in corporations has declined by 50% since the global financial crisis.

Regardless, environmental and social impact disclosure seems to happen. For years the Australian Government’s Green Vehicle Guide has helped consumers by rating new Australian vehicles based on greenhouse and air pollution emissions. The Carbon Offset Guide helps consumers find and choose offsets that are formally accredited. The Carbon Disclosure Project requests data on the carbon performance of the largest 200 corporations on Australia’s Securities Exchange. Last year’s request had a 50% response rate. Certified Organic and FairTrade standards are becoming household names for everyday products. The American Good Guide provides consumers with sustainability information for 145,000 household products via an Iphone app. The rise of Collaborative Consumption and Crowdfunding also show a shift in the social conscious of consumers.

But when it comes to our power, until the Australian Energy Regulator makes disclosure of the source of electricity mandatory in the NEM, Australia consumers will remain ill-informed and we will continue to fall behind other parts of the world.

Fiona Berry is a Senior Research Consultant, Institute for Sustainable Futures at University of Technology, Sydney

ISF recieved funding from The Total Environment Centre to conduct the study of electricity retailers in 2012.