You've seen the ads: For a reasonable price, you can now switch to using an electricity provider that guarantees your electricity will be green or renewable. I used to be a client of one of those businesses a few years ago before it went bankrupt. I'm now looking for another provider and was curious to better understand what green electricity actually is. Is it really helpful? And how much?
What buying green electricity even means
When a provider guarantees that you are receiving 100% green electricity, what does it mean? They are not building a dedicated energy grid to which you will connect your home. You are still plugged into the standard grid. Your provider actually does two things:
- They purchase electricity on the market. The amount will depend on the number of customers, time of year, etc. The electricity grid is a mix of various types of sources of electricity. When buying wholesale, you do not usually know what the source of the electricity is or how green it actually is, which is why another purchase is made.
- Guarantees of Origin (GOs): For every unit of green electricity generated, a corresponding certificate can be provided to guarantee the origin of the electricity. This allows green electricity providers to claim that they have "purchased" the production of a specific green power plant, ensuring that their electricity is 100% renewable.
Although fine on the surface, problems emerge as soon as you start digging. Let's get into it.
What economics say about purchasing green electricity
What is undeniable is that purchasing Guarantees of Origin is an incentive for the market to build more green power plants. Indeed, they will be able to sell those certificates, increasing their revenues in a way that other sources of electricity can't achieve.
But it's easy to find the limit to this system; let's consider a basic example. Customer A and Customer B are each buying 50% of the electricity grid capacity. This grid is a mix of 50% gas and 50% solar (let's ignore fluctuations for now). They do not know or care what is the precise source of their electricity. Let's now make a change: Customer A wants green electricity, but Customer B still doesn't care. Customer A will now pay extra to have certificates from the solar power plant. Yet, nothing has changed on the grid as the electricity mix will be the same. The only difference is Customer A is paying for some paperwork. The impact on the environment is exactly the same.
For a change in the production of electricity to occur, we need to reach a point where there are not enough Guarantees of Origin (GOs) to be sold, driving up their cost significantly to the point of motivating the building of new green power plants. This can only happen if a very significant number of households and corporations decide to purchase green electricity. However, I find this hard to believe: most people look for the cheapest electricity prices, and we should keep in mind that as the share of green electricity purchased increases, the price of GOs will increase as well.
The mind-blowing definition of green electricity
While researching the topic, I came across the definition what green energy is. From the European Environment Agency: "Electricity produced from resources such as solar, wind, geothermal, biomass, and low-impact hydro facilities is often referred to as 'green electricity'."
So basically, burning wood counts as green electricity. Only someone interested in making the numbers look good would actually add biomass to the definition. This is the case in practice, as in 2019, biomass was still the main source of renewable energy in the EU.
It's interesting to note that nuclear energy isn't considered green according to this definition. How burning trash or wood is more renewable than CO2-free nuclear energy is beyond me.
Dark windless days and the problem of energy storage
Let's delve into Guarantees of Origin (GOs). Imagine a dark, cold, windless evening in the middle of winter at 7 PM. Neither solar nor wind is generating energy, yet electricity consumption is at a peak. How can your green electricity provider guarantee that your electricity is clean? Well, they don't.
GOs operate on a monthly basis. This means if the clients of an electricity provider consume a total of 1 MWh per month and a wind farm generates 1 MWh in the same month, the provider can purchase these GOs and claim the electricity is green. However, reverting to our example, it's clear that some of the consumption will derive from non-green electricity generation. Indeed, if most of the sources of green electricity are offline during a peak of consumption, the electricity still needs to be generated somewhere.
This aspect is particularly misleading as consumers might not expect that their usage would still necessitate the use of non-green energy sources.
Can energy storage provide a solution? Sadly, not at the moment. Although capacity is increasing rapidly, during winter, wind and solar can have minimal production for days at a time, and we are incredibly far from being able to bridge that gap.
They are projects to use smaller production periods, up to the quarter-hour, which would be ideal and much more accurate. However, my skepticism leads me to doubt such implementation will occur soon. After all, the current system suits many as it stands, being incredibly easy and cheap to claim to provide green electricity—the downside being that it's effectively meaningless.
To summarize, Guarantees of Origin (GOs) most likely do not impact the market and fail to help create new green electricity generation capacity. Additionally, GOs use a misleading timeframe, therefore not guaranteeing that your consumption was offset by green energy. Furthermore, the definition of green energy itself is questionable, as wood burning is considered green, but nuclear isn't.
For the time being, I'll stick to buying the cheapest electricity I can find... which turns out to be "green" according to my provider. That should tell you everything you need to know about the usefulness of this system.
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