What makes an electricity retailer “green”?

Italian utility giant Enel launched its Australian retail electricity business last week, promising to be “a one-stop shop ‘greentailer’ delivering energy from Australia’s abundant renewable resources for the country’s clean energy future”, according to its country manager. Meanwhile, Shell’s takeover of Powershop has sparked an activist campaign for Powershop customers to switch away from what was previously deemed to be a “green” retailer. This prompts the question: what makes an electricity retailer “green”?

The laws of physics determine the flow of electrons on our grid. Choosing a greener retailer doesn’t make any difference to where your electrons come from. Even financially speaking, the NEM is a gross pool, which means generators sell into the pool and retailers buy out of it. So retailers can’t claim they are buying directly from one generator rather than another.

Accordingly, retailers have tried different strategies over the years to demonstrate their green credentials. Some years back, Momentum Energy leveraged off its ownership by Hydro Tasmania to claim it was supplying its customers with clean renewable energy. The ACCC disagreed, arguing “purchasing electricity from Momentum had no direct effect upon the amount of renewable electricity which Hydro Tasmania supplied in the NEM”. Momentum was fined for misleading consumers and had to change its advertising campaign accordingly. Although when one looks at some of the other claims by retailers, Momentum may feel they were hard done by.

Some retailers automatically offset all emissions associated with their customers’ electricity. EnergyAustralia is the largest retailer in the NEM to do this as a matter of course.  But as last week’s bulletin explained, they do so using cheap CDM credits, which may cease to be a viable offset source as the Paris agreement carbon trading rules come into effect.

Amber Electric calls itself “The fastest way to shift Australia to 100% renewables” based on its combination of real-time energy pricing and informational tools, both about price and about the renewables mix in the grid at any given time. The logic is that in doing so they are empowering and incentivising their customers to orient their consumption to times when there are higher levels of renewables. As a small retailer, though Amber is not building any renewables itself.

Powershop, however, has a track record of being presented as the greenest retailer in the NEM. It was top of the ratings on Greenpeace’s Green Electricity guide (last published 2018), due to its combination of: being owned by a New Zealand hydro-based business, Meridian Energy, its investments in Australian wind farms, its reasonable (but not market-leading) rates for GreenPower and for solar exports; and its public statements about climate policy. Like any such ranking exercise, the more one delves into the methodology, the more questions one has.

For example, some smaller retailers were marked down for deciding to pay the penalty charge instead of buying certificates to meet their RET liabilities when the spot price was north of $80. This is a legitimate compliance strategy for a small retailer that in the long run results in the same amount of renewable energy.

Similarly, it’s hard to know what one should make of the fact that some retailers have legacy fossil fuel generation assets. Is AGL “good” because it can claim to be Australia’s largest renewables investor, or “bad” because it still owns some coal plants? Will it magically become a greener retailer when it demerges from the fossil fuel generation arm? Enel has a massive renewables investment pipeline but still own coal and gas plants in Italy and elsewhere (though not in Australia). So can it call itself a “greentailer”? Meridian Australia has two wind farms, but the newer one was built seven years ago. Meanwhile Shell Australia is building a wind farm in Queensland, and has a 10GW portfolio of wind and solar globally, including pioneering floating wind technology. Of course its renewables business is still dwarfed by its oil and gas business. A lot of it depends what metrics one chooses to focus on.

If customers really want to buy clean power, then choosing one retailer over another is irrelevant. Certified Greenpower purchases provide some guarantee of additionality (i.e. that your electricity purchases are helping to underwrite new renewables). Or, for large users, they can underwrite a whole new project by buying a power purchase agreement (PPA) from them. Either way customers’ electricity supply will still be partially dependent on the firming capabilities of fossil fuelled plant. Beyond that, it is just a case of buying into a brand. Which is a choice customers are entitled to make of course.