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Australia

Australia

Launch of largest ever green power scheme

Australia's struggling renewable energy industry received a major boost last month with the launch of "Green Power," a green pricing programme developed by the New South Wales Sustainable Energy Development Authority (SEDA). Calling it "the world's biggest green electricity scheme" state energy minister Michael Egan said on April 2 that the 2.3 million electricity customers in New South Wales (NSW) can now choose to pay a premium for green electricity "in the same way we choose environmental products like recycled paper or biodegradable washing powder."

In a state that currently generates 95% of its electricity from coal fired power stations, SEDA hopes the programme will attract 25,000 customers before June 1. The authority has already accredited eight electricity retailers under the programme, including two from the neighbouring state of Victoria. Wind is one of a number of technologies that an accredited retailer can invest in. A study by consulting firm, GreenPower Services, estimates the green power market would push A$1.2 billion through to new renewable projects in NSW over the next 13 years, resulting in 400 MW of new capacity.

The interstate accreditation is particularly important as Australia's national electricity market becomes operational on July 1. It will initially pool electricity from the states of NSW, Victoria and South Australia and allow customers with annual bills of A$25,000, or 750 MWh demand, to choose their own distributor. By 2000, all customers regardless of load will be eligible under the national competition policy.

The Green Power scheme comes at a time when the newly liberalised market is already having a dramatic effect on electricity price, with claims that some generators are selling at below cost to ensure market share. One industry source, who declines to be identified, says some businesses are seeing electricity rates, including network charges, that are 50% lower than just a year ago.

Despite this rumoured abundance of cut rate electricity, the Green Power programme has already attracted several major organisations, including shopping centre developer Westfield, the Sydney Water utility, the Body Shop, Greenpeace and the Australian Conservation Authority. The Olympic Co-Ordinating Authority will also participate as part of the 2000 "green" Olympic Games. Green power advocates believe the SEDA scheme offers businesses a means to invest some of the savings from lower electricity prices to improve their environmental performance.

The green sources

To be accredited under the Green Power programme, retailers must invest in small scale hydro, solar, wind and biomass projects to the level of their customer demand. SEDA's chief executive officer, Cathy Zoi, said recently that hydro projects that create significant flooding from new dams would be excluded, although a number of in-situ large scale hydro projects have been qualified.

Commenting on this apparent contradiction, SEDA's Martin Poole says the authority attempted to balance the desires of generators who wanted to sell only cheap large scale hydro power with the demand from environmentalists that such projects be excluded. In addition, he says the Green Power programme demands that by 2000, 60% of capacity must come from new projects. The goal in hydro projects, he adds, is to generate power only from run-of-river projects.

According to Poole, SEDA will monitor and audit the retailers, their renewable energy developments, and the statements of their performance as well as publishing aggregated volumes of renewable energy capacity. The goal, he says, is to provide the market and consumers with relevant and impartial information including the price for each type of renewable energy technology from each retailer.

The programme includes a toll-free telephone number for consumers. According to the operator of the service, green electricity is available "for a few dollars extra a week" but that specific details were dependent on the retailer. The operator can connect callers directly with the relevant retailer.

Why pay more?

According to the office of energy minister Michael Coutts-Trotter, current market forces dictate a premium price for renewable energy. The office adds that the government is bound by market rules and the commercial decisions of retailers, even though many argue that over the long term renewable energy's environmental benefits make it the cheapest option. "If you adopt a relationship with retailers that is hands off then you must remain consistent," comments an energy ministry spokesperson. At the same time he admits the market is not a level playing field and that the government is intervening through SEDA as well as maintaining strict rules mandating greenhouse emission reductions from electricity retailers. Guidelines and targets for greenhouse emission reductions were due to be released by this month. "We would hope to see prices come down substantially in the medium term as retailers become better marketeers," he said.

One retailer who already believes it has a leg-up with a green pricing product is energyAustralia (EA) of Sydney. The retailer has been experimenting with a "Pure Energy" scheme since August. The programme allows customers to purchase 25%, 50%, 75% or 100% of their electricity from green sources at a premium of A$0.04/kWh. The scheme currently has 500 customers -- about 1% of energyAustralia's customer base.

This level of interest in the scheme -- initiated well before SEDA's scheme -- was achieved without extensive marketing, says EA's Neil Gordon. The company plans to use the money from Pure Energy to invest equally in wind, solar, mini-hydro and biomass power generators. Gordon was sceptical of many claims made at the launch of Green Power and some aspects of SEDA's accreditation including the use of large scale hydro projects. "We never believed selling stuff that has been generating for ten years and saying to customers, just trust me, is the way to go," he comments As for SEDA's claims of 25,000 customers before June -- about 1% of NSW customers -- Gordon says it is "a brave number." He adds: "It's easy to come up with a number when you don't have to have a business case."

Catalyst for green projects

Both Gordon and Poole agree, however, that the programme will initiate projects that would not be considered economic in the lower prices of a competitive electricity market. As well as energyAustralia's single Vestas 600 kW turbine, to be installed north of Sydney, Great Southern Energy has reaffirmed its plans for a 4.8 MW wind farm at Crookwell by November (see page 19). GSE's Brian Burton says his company is offering green electrons to under its Earthsaver programme at a premium of A$0.025/kWh above the current tariff. Customers are able to choose half or all of their electricity from the scheme. At the 50% level, Burton says the average customer would pay an extra A$1.50 per week on top of existing electricity bills. GSE will also be marketing the programme to residential customers outside of its current service territory in the hope of capturing those customers when they are free to choose their own supplier.

Although SEDA and retailers believe there is a serious market for green power, there is no way of telling how big the market will be. Green pricing is still considered risky business where investments will need to be made ahead of revenue. The success or failure of the programme will depend on how seriously the retailers market the product. Hanging over the heads of distributors, however, is the sword of government sanctions if its greenhouse gas reductions are not achieved.

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