Telcos can help to decarbonise and dematerialise the rest of the economy en route to becoming heroes of climate change. Before doing so, they will need the moral authority that comes from cleaning up their own carbon footprints. But the best intentions of the telco can be undone by a pen stroke from an energy policy maker. In this commentary, Stephen Andrews explains what can happen to the best laid plans….

Green Power, Way to Go?

On one level it is straightforward. You are a CEO of an international telco, concerned about your environmental image, corporate social responsibility, and carbon reporting - but you have not got a nasty process to clear up, even though you consume a large amount of electricity. Offsetting is discredited, but buying green power sounds good - you do your research, pay slightly over the odds, and someone else generates some renewable power for you, or you even do it yourself and make some money in the process. Hey presto, your company carbon footprint disappears - or does it?

Green electricity in the UK

Unfortunately these sort of laudable activities have become caught up in a typical drawn out UK debate about domestic green tariffs, and an obscure departmental ruling. The electricity regulator Ofgem has been trying to cut confusion in the green domestic electricity marketplace, by suggesting that suppliers offering a green tariff have to demonstrate additional environmental benefit over and above what would have been created under their normal legal obligation to provide a quantity of electricity from renewable sources under the Renewables Obligation(RO).

The RO requires electricity suppliers to secure a portion of the power from renewable resources or to purchase Renewables Obligation Certificates, or ROCs. Ofgem has long been concerned about double counting and possible multiple offerings of these certificates in the murky world of green energy, and they want to clean up the market.

In addition, and this is the killer for the larger companies, the UK Department for Energy, Food and Rural Affairs (DEFRA) has quietly updated its best practice guidelines so that green tariff electricity (and even the renewable power from own generation), will be treated as 'grid average' emissions when reporting company greenhouse gas emissions unless significant 'additionality' is demonstrated (in other words, results that wouldn't otherwise have happened.

The combination of these two measures threaten to drive a coach and horses through the adopted telco company strategy of reducing GHGs through the use of "green electricity." As such, it is being fiercely resisted by the telco. Moreover, it threatens to kill the green energy supply market stone dead.

Green electricity in the EU

The European treatment of this issue appears little better. The other EU member states may not have the complexity of trading that is evident in the UK, but unfortunately simplicity does not equal clarity. A recent interim report on a long term EU project to 'track' electricity[1] indicates a wide variety of adopted systems, differing compliance with EU law and incompatible operational progress.

The EU requirements for Electricity Disclosure currently only require suppliers to disclose certain power generation attributes of the electricity they deliver to consumers. This includes the fuel mix of the electricity delivered by the supplier the previous year, and the average CO2 emissions and nuclear waste per kWh based on that fuel mix. Critically, if suppliers differentiate products, e.g. green power offerings, the disclosure obligation only regards the company's overall fuel mix, not the actual fuel mix of the selected tariff or contract.

Domestic customers often go for the cheapest supplier or product, and either do not care or expect the government to legislate for environment matters. Some want to buy green energy as cheaply as possible (and may not bother about how green it really is) and some want to buy green to make the electricity sector greener but do not want to pay much extra. Few, supposedly, want to buy "green" to contribute to a better environment, even at a (high) premium price.

As already identified, industrial users are far more discerning, and have carbon disclosure issues of their own at stake, which may not be compatible with systems required to encourage green generation.

What is common to both parties is the need for transparency, trust and for those that are paying or doing more, knowledge that what they are doing is making a difference, and being able to quantify that effect.[2]

Right now, there is a heightened debate and the prospect of impending legislation on the adoption of aggressive European renewable and carbon targets. Also contentious is the permitted amount of trading between member states in meeting their in-country targets. These developments should be watched closely by international companies. An internal country approach which is at odds with that adopted at an international level, could produce some interesting commercial behaviour for those businesses which have activities in a number of European states. And it won't just be the telcos who will need to keep a close watch on what happens next.