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The truth about Green Power


There are around 700,000 Australians who want a percentage of their electricity to be sourced from clean sources. But how can they be sure they are getting clean energy? How does Green Power work? And is there enough clean energy in the National Electricity Market (NEM) to supply the 3% of Australia that pays for it?

The majority of energy in Australia is produced from fossil fuels. This mix has changed slightly since the introduction of the carbon pricing mechanism of the 1 July 2012, but the split remains similar. Black coal is Australia’s fuel producing around 50% of total electricity. Its elementary brother, Brown Coal ranks second at around 25%. Gas ranks third with around 12%. Renewables follow, driven largely by historic hydroelectric assets in the Snowy Hydro Scheme and the numerous hydro assets in Tasmania. Hydro supplies around 10%; Wind follows with 2%.

So with only a maximum of 12% of renewable energy in the NEM, how can this be consumed by those that want it. And can a consumer be sure that the flow of energy from a generator to a light switch is green and not the product of coal?  

When a consumer buys Green Power they are instructing their retailer to buy an allotment of energy from clean energy sources: hydroelectric generators, wind farms, solar or bio sources. But they are not actually being supplied with clean energy, they are being supplied with whatever generation is currently being dispatched within the NEM. Confused yet? A bit of context on the NEM with assist here.

The National Electricity Market is a complex mix of generators, transmitters, distributors and retailers. The main generators are made up of black and brown coal fired generators, gas-fired generators and wind farms. These compete with each other to produce energy by offering their generation at a price per megawatt hour (MWh). The generators that can supply the cheapest are usually the ones that are told to generate and supply the country with electricity. Retailers then buy the energy from the generators and utilize the transmission and distribution assets, the poles and wires, to ferry it to consumers. For more information in the NEM follow this link.

The truth is that customers are paying for both: they are being ferried dirty energy, from coal and gas predominantly, but they are also investing in clean energy. This is done in the form of Renewable Energy Certificates (RECs). Because of the uncertain generation capacity of renewable energy generators (still weather means no wind power and no sun means no solar power), they do not make money from selling their MWhs. Unlike coal and gas plants, renewable can’t choose when to generate (except pumped hydro and bio-gas), so when the wind is blowing and the sun is shining, renewable energy enters the NEM irrespective of demand for Green Power. Because supply is uncertain and electricity must be dispatched immediately renewable energy offers its generation for free, that is $0 per MWh. So in order to be financially compensated, renewable energy generators earn RECs for each MWh they produce. And here is where it is all about to make sense: purchasers of Green Power are actually buying RECs from wind farms, hydro electrical plants and solar farms. For a full list of generators follow this link  

This means that the extra money paid for Green Power goes to purchase RECs from renewable sources, thereby investing in operating costs and additional construction, but they are also being supplied with dirty energy. But here’s the kicker: even if you don’t choose to buy Green Power, part of the money you pay for energy goes to buy RECs. What? That’s right. As part of the Renewable Energy Target (RET), the Federal initiative to see 20% of energy sourced from renewable sources by 2020, energy retailers are liable to purchase a specified amount of certificates, these are then passed on to consumers as part of their electricity pricing bundle. So you were buying Green Power and you didn’t even know it!