Green Power Down Under

by M Ellis and C Crawford-Smith, GreenPower Services, Australia

Introduction

A rapid expansion of green electricity products in Australia over the past year has seen this country join the United States and parts of Europe as a major innovator in this field. A total of eight Australian electricity retailers are now offering the 2.8 million business and household customers in the state of New South Wales (NSW) the chance to support renewable energy projects through green electricity products.

Background

Less than one year ago, Australian utility interest in green power appeared to be limited to a localised market trial being carried out by a single retailer. Now NSW has the highest concentration of green power products on offer anywhere in the world. While Australian utilities have become increasingly aware of the potential for renewable energy in a general sense, in reviewing the reasons for this rapid expansion, we regard the following factors as the most influential.

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A 150kW turbine installed in Sydney's eastern suburbs

Regulatory Support

In NSW, electricity retailers are regulated by way of a revenue cap, which is set by the Independent Pricing and Regulatory Tribunal (IPART). In 1996, IPART decided that revenues from future green pricing products would be excluded from the retailers' revenue cap. This provided a clear financial incentive and signalled IPART's support.

Perhaps even more importantly, the new Electricity Supply Act 1995 established greenhouse emissions targets and renewable energy development plans as part of the licence compliance conditions for electricity retailers in NSW. Many utilities quickly saw the potential for green electricity products to assist in meeting these conditions at minimum cost.

Government Support

With a three-year budget of $39 million (where $ is the Australian dollar) and a mandate to reduce greenhouse emissions in the state, the NSW government established the Sustainable Energy Development Authority (SEDA) in 1995. From the outset, a high priority for this new organisation has been to stimulate the development of green electricity products. To achieve this, SEDA launched the Green Power Accreditation Program in 1997 which accredits green electricity products offered by retailers with the label 'Green Power Products'. Part of this programme is an intensive marketing campaign to increase awareness of, and consumer confidence in, accredited Green Power Products.

Both of these approaches have had the effect of reducing the financial risks to utilities in making the initial decision to develop and launch a green power product.

Specialist Advice

Simultaneously with the development of green power, Australian utilities are experiencing a period of tremendous change as a result of the introduction of competitive generation and retail markets. In this context, the availability of specialist consultants to provide expertise and labour has been invaluable in helping utilities to ascend a steep learning curve.

Types of Green Power Products

All Green Power Products are voluntary and include 'energy-based' products, where customers pay in direct proportion to their electricity purchases, and 'contribution-based' products, where participants pay a regular, usually annual, payment.

Within these two categories, there are a number of options. For example, in most 'energy-based' products, customers can choose to pay a green power premium on a proportion of their electricity bill: eg 100% or 50%. Payments for 'contribution-based' products may vary according to the size of the customer.

SEDA Accreditation Program

SEDA's Green Power Accreditation Program was launched in April 1997. Green power product retailers voluntarily apply for accreditation and their products are assessed according to a published set of criteria. As of October 1997, these included:

  • the type of supply resources used ('a renewable energy resource which leads to overall environmental benefits');
  • the proportion of new supplies to existing ones (with the target of 60% new supplies by 31 December 1999);
  • the accounting procedures for customer contributions (ring-fencing of accounts and independent auditing);
  • the use of accurate marketing statements;
  • public disclosure of the use of funds and plans for new resources.

The retailer of a Green Power Product agrees to provide SEDA with information on a regular basis to demonstrate that these criteria are being met. In return, SEDA offers accredited products the use of the Green Power Product logo and benefit from the state-wide marketing programme. To date, SEDA have committed to a series of high profile regional launches, and a campaign of press and radio advertisements. A recent survey indicates that public awareness has risen dramatically, with 17% of the state-wide sample indicating that they had heard of green power.

Green Power in the Market

The introduction of a competitive retail market along the eastern seaboard of Australia is underway for customers using more than 750 MWh/year. In 1999, all customers will be able to choose their electricity supplier.

As elsewhere, competitive advantage has tended to focus on contract price and, so far, green power is the only clearly distinguishable example of product differentiation. Nevertheless, one clear benefit has been the inclusion of a proportion of green power within general supply tenders. This enables the green power premium to be more readily accepted in the context of overall cost reductions.

Utility interest in renewable resources has also been given a boost through close examination of the costs of the network, and how these can be reduced through strategically placed distributed generation.

Progress

Six months after the launch of most of the Green Power Products, participation rates in the domestic sector appear to be approaching the target figure of 1 2% of those receiving application forms through direct mail. In the business sector, requests for over 25,000 MWh/year of Green Power Products have been included in energy tender documents. The picture will become clearer once retailers have completed their distribution of publicity material to all customers, and when the first reports to SEDA come in.

Even in its early days, green power has led to significant investments in new renewable energy capacity, including:

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A 10 kW PV system in Sydney which supplies green power for Energy Australia

  • a single 600 kW wind turbine installed at Newcastle;
  • a 5 MW wind farm under construction at Crookwell;
  • an 6 MW bagasse-fired generator installed at Broadwater;
  • a 200 kW PV system at Singleton in the Hunter Valley;
  • 665 kW of PV committed for use in the Olympic Village.

Prior to this scheme, the only grid-connected wind turbine in NSW was a 150 kW turbine installed in 1983, and the largest grid-connected PV system had a capacity of only 10 kW.

As more customers gain the power to choose their electricity supplier, one of the untested issues is to what extent green power will be used by retailers to capture new customers and/or maintain customer loyalty. The answer to this is likely to determine whether green power in Australia continues its early promise and expands to states beyond NSW.

For more information contact the
CADDET Australian National Team in Canberra.

The CADDET Renewable Energy Newsletter is a quarterly magazine published by the CADDET Centre for Renewable Energy at ETSU, UK.

The articles published in the Newsletter reflect the opinions of the authors. They do not necessarily reflect the official view of CADDET.

Enquiries concerning the Newsletter should be addressed to
Pauline Toole, Editor, CADDET Centre for Renewable Energy, ETSU, Harwell, Oxfordshire OX11 0RA, United Kingdom. Tel: +44 1235 432968, Fax: +44 1235 433595.