Shades of green in firms’ renewables purchases

Barclays, BT and John Lewis have announced new renewable energy contracts in recent weeks, but only BT’s appears to stand up to closer scrutiny. The complexity in buying renewables is forcing some to reconsider fossil fuel sources.

Companies signing up to clean energy tariffs often make bold, well-intentioned statements about the CO2 emissions their purchases will avoid. Barclays is no exception: it claims to be saving 126,000 tonnes of CO2, equivalent to emissions from 19,000 households.

But the contracts it and John Lewis have signed with electricity supplier EDF Energy allow EDF to keep the renewables obligation certificates (ROCs) which prove the energy is from a renewable source. EDF can use these to meet its statutory target under the government’s renewables obligation or sell them to another firm, which means the CO2 savings are being double-counted and do not provide an incentive for renewable power development.

But BT, one of the UK’s largest energy consumers, appears to have learnt from previous criticism (ENDS Report 357, p 12 ). It recently renewed green energy deals established with British Gas and RWE Npower in 2004 to meet 98% of its total demand. Spokesmen for the two, which together supply 1 terawatt-hour a year of renewable electricity and 1.2TWh/year of electricity from combined heat and power, say they will hand the ROCs over to BT.

If BT retires the ROCs, this will have an indirect benefit on the UK’s renewable energy capacity by introducing scarcity into the ROC market and increasing the price generators receive for ROCs.

BT cannot confirm that the ROCs are being retired rather than sold because it wants to keep the deal confidential.

Earlier this year, the National Consumer Council concluded that only those green tariffs which retire ROCs and climate change levy exemption certificates associated with the electricity can claim to deliver environmental benefits beyond a supplier’s legal obligation (ENDS Report 384, p 11 ). But these requirements increase a contract’s costs and are not currently a possibility for Barclays, says environmental manager Kathryn Mintoft.

The bank announced it had gone carbon neutral in mid-March. Part of this commitment is being met through the purchase of about 0.3TWh/year of renewable energy over three years - enough to supply half of its UK operations and up from just 3%. It is eventually aiming for 100% and will replace the rest of its power contracts as they come up for renewal, says Ms Mintoft.

Buying green energy wins it an exemption from the climate change levy, but the saving is not quite enough to cancel out the extra cost, she adds.

John Lewis will be buying 0.7TWh/year of wind, hydro and biomass power from October to meet all its energy needs and those of the Waitrose chain. It says it is aware of the ROCs issue but stresses the deal is "just the latest step" in an ongoing process.

In the meantime, the company believes its purchase still sends a signal to the market about the premium it is prepared to pay for green power, says a spokesman.

Magazine publisher Haymarket, which owns ENDS, recently signed a green energy deal with CarbonAqua. Again, the supplier is allowed to keep the ROCs to make the contract more affordable.

One of the few firms to have publicly grappled with the ROCs question is HSBC (ENDS Report 369, pp 24-26 ). It also buys green power without the ROCs, but will be reviewing the situation before the end of the year.

"So confused is the green power market in the UK, we will have to consider whether it is simpler to buy brown power and offset the emissions," says the bank’s environmental advisor Francis Sullivan. The firm is also looking at investing in new renewable power development onsite and through larger projects.

Mr Sullivan doubts the rigour of the ROCs system and calls on the government to provide more clarity to green power buyers. He says the current market is biased towards sellers, making it difficult for buyers to know what they are getting.

BSkyB, which claimed carbon-neutrality last summer, says its renewable power purchasing is audited to ensure the ROCs and climate change levy exemptions are not double-counted (ENDS Report 377, p 4 ).