One of the significant failures of energy regulation in recent years has been the failure to deter or reduce greenwashing by large corporations. Part of the problem has been a lack of focus on embodied greenhouse gas (GHG) emissions associated with building, materials and infrastructure, but probably a bigger issue still is how emissions are attributed. Perhaps this is best understood in terms of cake …

An analogy

It’s your child’s birthday party. (S)he has invited a bunch of friends, all of whom like cake. The majority like two flavours of cake – green and brown – in equal measure. A fussy few only eat green cake.

A public body has kindly sponsored green cake, so you have bought a large one, knowing that it will certainly meet the appetites of the fussy few, with some left over. You have also bought a large brown cake. Overall, there is plenty of cake!

On the day itself, you serve the fussy few first in order to ensure they get green cake. Everyone else then gets either green or brown cake. Of course, they are more likely to eat brown cake as some of the green one has already been served.

To push the analogy a little further, imagine that the day before the party your son or daughter remembers a friend they forgot to invite; and you issue an eleventh-hour invitation, which is accepted. This last-minute friend is another fussy only-green-cake eater. Does the inclusion of this last-minute friend change the size of the green cake? No, because it’s already easily big enough to meet the green-only demand. All it means is that all the non-fussy friends are now a little more likely than they were to end up with brown cake.

… and its application

In just the same way … when someone signs up to a green energy tariff, the impact on the overall supply of green electricity is zero. At least to first order. There may be minor second-order effects: perhaps the new customer influences his or her friends, for instance, or perhaps the supplier is able to advertise an increase in demand for green power and thereby influence other customers … and by some nebulous sequence of events and impact on public attitudes the sales of solar panels or EVs, say, rise as a result. But such effects are certainly minor and very hard, if not impossible, to measure.

Which doesn’t mean it’s a bad thing to sign up to a renewable tariff – but it’s hardly saving the planet! When individuals (like me) sign up to green tariffs for their domestic energy supplies, they are not providing the catalyst that makes those green projects go ahead. Rather the projects are agreed and then the energy supplier, who’s signed an offtake agreement with the generator, finds matching sales, through contracts that customers can end with little notice, providing no ultimate security to the project. This isn’t so difficult for the supplier when the projects are competitively priced due to support mechanisms.

Companies and individuals have been allowed to take credit for signing up to green energy deals – when the renewable energy behind those deals is supported by government-initiated mechanisms (e.g. FiTs, ROCs or more recently Contracts for Difference, CfDs, in the UK), is consequently viable in the marketplace, and either already exists or would most likely be developed anyway. It matters because it confuses what is apparently green with what is really green – and leads to wrong priorities such as ‘green’ build instead of reducing energy demand. The problem is magnified when the opportunity costs of developments are taken into account. Instances include inter alia the development of ‘green’ data centres in places like Ireland and Iceland. In a better world, the limited wind and geothermal resources would be prioritised for things we really need (green steel?), rather than masses of data that we don’t.

In 2022, the Science Based Targets Initiative (SBTi) was alerted by an article in Nature (Bjorn et al, 9 June 2022) to the problem of allowing companies to use renewable energy credits when they calculated their Scope 2 (electricity) emissions. The Nature article recommended using locational grid carbon coefficients. This doesn’t really work either (think Switzerland, where the local coefficient is close to zero but the hydro generates regardless …). I don’t think SBTi has solved the conundrum: my understanding is that it has rather fudged the issue by asking for both ‘locational’ and ‘market’ coefficients to be used.

The Nature article did excuse renewable Power Purchase Agreements (PPAs), maintaining that they at least were green as they support new projects. This seems naive and disproportionate to me. In general, a renewable PPA is but one element supporting a new project – what about the CfD support, say, or policies that support planning and development? Why should the PPA provider be credited with all of the green benefit (i.e. the reduction in carbon emissions vs those from an equivalent amount of grid electricity) – shouldn’t some of it be socialised due to government support (i.e. attributed to consumers in general), and some to the turbine manufacturer or steel producer, say?

PPAs tend to be different in different countries. In the UK and Ireland, the norm is for the price in the PPA to be the variable market price, whereas on the Continent the norm is for the price to be fixed. In the UK and Ireland, the generation project nowadays is likely to have its sales price fixed via a CfD – and the total capacity in CfD auctions is determined by government. PPAs in the UK used to be primarily for existing renewable schemes; now they are usually for new schemes, as they are on the Continent – but if Company A (electricity supplier or corporate) doesn’t come along to sign a PPA for the long-term offtake, it’s highly likely that Company B will … especially when the prices are at market levels without the Company having to pay a premium. One might say “OK, but Company A still got in there first …” but even if this way of thinking is adopted there’s still the point made above that the PPA is just one of several supporting pillars for the new wind or solar farm.

We need to get into the habit of asking this question: how much renewable electricity would be generated if the company/individual taking credit for it didn’t exist, or just took normal power from the grid? In most cases, the answer is: the same amount.

My view is this – at least until someone manages to explain to me where I’m going wrong: When a company calculates its carbon footprint, no credit should be given for renewable power projects, in which it has any sort of involvement, that passed their Completion Dates before the company’s involvement. (Even if an existing project is threatened with bankruptcy, it will probably continue to generate renewable energy as long as physical conditions allow; it would clearly be in the interests of new owners to carry on generating.) For new projects, the onus should be on the company wanting to take credit to demonstrate that the project would not have existed otherwise – i.e. that it is truly additional. The fallback or base case assumption, if such demonstration proves difficult, should be that the carbon coefficient that applies to the company’s energy demand is regional, not local, and generic (e.g. European average carbon coefficient for electricity if the company’s activities are in Europe). If the company makes a persuasive case, perhaps some – but probably not all – of the carbon emissions savings should be attributed to it.

I think these principles should be followed by the likes of SBTi and by companies when they measure their environmental impact. Whether or not it would have any impact on the volume of renewables, adoption of these principles would at least clear from the air some of the fog of greenwashing.