12 February 2011, Page: 10
With more than 800,000 residential and nearly 40,000 business customers, the scheme is good value, writes Paddy Manning.There wouldn't be too many green things that hundreds of thousands of people cough up extra for, year in, year out. GreenPower is one. That's probably because most people realise their greatest contribution to climate change is turning on the lights, aircon, TV and every other thingamajig at home.
If you choose, without waiting for the galling politics of a carbon price to play out, you can negate your own personal contribution to climate change and command the energy industry to invest in renewables simply by paying a bit more about 25%, or $500 a year for 100% GreenPower.
And many do. Established in 1997, by June last year GreenPower counted 802,628 residential customers and 39,300 commercial customers. Against the previous year, that represented a 15% fall at the household level but a 22% increase among business customers, who use more power.
There are good reasons why household interest might have waned: retail electricity prices are going up by half; uncertainty about how GreenPower fits in with the government's renewable energy target and proposed emissions trading scheme; and the competition regulator has censured some operators for misleading advertising. It's understandable there is a degree of confusion, even cynicism, about GreenPower. It's unwarranted. GreenPower is a robust scheme that is in limbo and needs some love. Is it good value for money, though?
As a customer I had no idea, until I began researching this article, whether the extra 5.5¢ per kW Origin Energy charges my family for 100% GreenPower at home on top of the 17.35¢ per kW base rate is a fair price. My 5.5¢ per kW is equivalent to $55 per MW well above the market price of Renewable Energy Certificates (RECs), which each represent 1 MW of green electricity and this week traded at about $35 each.
How is the GreenPower price set? Does it reflect the true cost of generating renewable energy? Is it highly profitable for Origin Energy? GreenPower reports on suppliers, customer numbers and the amount of renewable electricity generated. It does not track prices and GreenPower providers don't reveal how much money they're making on the scheme.
Origin Energy, with 396,000 electricity customers, has almost half the market to itself. Origin Energy's executive general manager (policy and sustainability), Carl McGarnish, admits customer interest in GreenPower has dropped but he still sees growth potential. While GreenPower customers are not especially lucrative, he says, they are more loyal they switch utilities less often. Most of Origin Energy's GreenPower customers pay $1 a week extra for 25% renewable energy effectively turning over about $20 million a year. It's still small potatoes.
On rough figures, you'd expect GreenPower to cost between $50-$70 extra per MW. On another calculation, it is twice as expensive as coalfired power. Generation represents half the retail cost (the other half is distribution) so you'd expect a 25% increase. GreenPower needs to be watched, but it doesn't look like they're gouging. For business and government agencies bulk purchasing there is a cheaper way to buy GreenPower from a third party such as Ark Climate, which simply sells RECs plus a margin.
All that is needed to restore confidence in this scheme is for the federal government to stick by its in principle commitment that all GreenPower purchases will be accounted as additional, voluntary abatement, on top of both the renewable energy target and Australia's Kyoto (and post Kyoto) commitments.
Then watch interest surge, paddy.manning@fairfaxmedia.com.au
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