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SEM Chart of the Week

2019

99 green balloons – 2018 fuel mix disclosure

Tom Andrews
Tom Andrews

On 19 September, Utility Regulator Northern Ireland (UREGNI) issued its 2018 fuel mix disclosure report. This document sets out the calendar year fuel mix and carbon dioxide emissions for each electricity supplier. Suppliers are then required to publish this information on customer bills within two months of the report being issued.

Ahead of the disclosure report, suppliers inform UREGNI of their fuel mix for the year; those that fail to do so are allocated the residual mix – the proportion of generation which has not been claimed by suppliers.

Our SEM Chart of the Week shows the 2018 generation split between renewable and conventional fuels, average All-Island fuel mix, residual fuel mix, and fuel mix for each supplier that reported data. The data highlights an interesting mismatch in supply and generation volumes for various generators.

Don’t step on my green suede shoes

Despite an average provision of nearly half of all electricity from renewables resources, Irish generators only produced about a third of the island’s power from renewables.

So, where has this extra renewable electricity come from?

The answer is Renewable Energy Guarantees of Origin (REGOs and GOOs). These are EU-inspired certificates that are awarded to generators every time a MWh of electricity has been produced from a renewables source. They can be traded separately from the power or alongside it, which allows suppliers to buy REGO or GOO certificates for their fuel mix disclosures.

I see a red door and I want it painted green

Thanks to the Guarantee of Origin scheme, REGOs and GOOs can be traded across EU borders, irrespective of where electricity is being produced and where the electricity actually flows. This means that fuel mix disclosures can differ substantially from metered generation, depending on the trade flows of REGOs or GOOs to Ireland – apparently a significant volume in 2018, as well as in previous years.

Use of REGOs to provide green credentials has led to accusations of “greenwashing”. The Irish agricultural sector was accused of this earlier in the year, with a debate on whether the sector’s claims to be delivering environmental benefits were justified.

The greenwashing debate in the electricity sector is beginning to intensify globally, due to greater scrutiny driven by climate change concerns. Suppliers are buying REGOs and GOOs to claim green credentials, which critics say is misleading customers and reducing investment in new renewables generation assets.

Mr Green Sky

The primary reason is cost suppliers opt for this route is cost. Acquiring REGOs to match a typical domestic customer’s demand in GB costs around €1.10-1.20. This is a fraction of the cost of building renewables generation capacity to provide the same amount of annual power. In addition, the REGO or GOO is not time-sensitive beyond the year of issue, which makes it easier for a supplier to purchase its requirement across its annual supply volume after the fact, rather than matching generation volumes to demand in each trading period.

With such a low value to REGOs and local producers being undercut by importing them, critics argue that the scheme is failing to provide sufficient support to renewables generators to allow developers to bring additional capacity to market. This argument suggests that REGOs and GOOs are therefore doing little to reduce carbon emissions, even though consumers looking at fuel mix disclosures might think that they are making the green choice of electricity supplier.

Painting the town green

Appetite for green energy is increasing with more and more consumers choosing a tariff including at least some green credentials. This increased demand for REGOs has driven up prices. REGO values have increased in GB by a factor of two in the current market, with some technologies (wind and solar) achieving even higher values compared to biomass certificates. With more large suppliers switching to green, this trend is likely to continue over the next few years.

We will note one potential solution is already being employed – the Power Purchase Agreement (PPA) and Corporate PPA. These deals, which see suppliers or end-users buy power (and usually certificates) directly from generators, are considered to give much more credibility to green claims as they allow a purchaser to point directly to the generation assets being supported by purchases. They are proving increasingly popular in Ireland and internationally.

You may also be interested in…

Insight Paper | The dawn of corporate PPAs in Ireland?

Training | Green Island: Investing in Renewables 

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