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Sunday, 9 March 2008

Can't have your solar power cake and eat it too

Let me first give kudos to the people behind Local Power, a community-based buying group which is helping to bring a chunk of new solar electricity generation online. I applaud their initiative, commitment and professionalism. More than that, though, I've paid them a deposit to have a 1kW photovoltaic array installed on my own roof.

Curiously, following on the heels of the high levels of public interest in what this group has done, the Queensland government has announced that it will offer a similar kind of service in order to facilitate the installation of a thousand PV systems on roofs in the "sunshine state" at a reduced price. Note they're not actually providing funds for the gear - just the administrative service that's required to coordinate a bulk purchase and therefore a cheaper per-unit price.

I'll leave my thoughts about the significance and value of PV in the grand scheme of things for another post. For this one I want to focus on a tricky little aspect which green-minded solar panel buyers will need to be aware of. (The particulars are likely to vary in different situations but what I'm writing here is what I understand will apply to me. I'll edit and/or post again if I need to.)

Both the Local Power and Qld government schemes are for "grid-connected" solar photovoltaic electricity generating systems. The systems include an inverter which takes the low-voltage DC power from the panels and transforms it into 240V AC power that gets fed into the electricity grid. There's a dedicated meter which measures how much power your system has supplied to the grid, separate from the one you already have which measures how much power you consume in the running of your home.

Hypothetically, let's say that in some future 3 month period my home consumes 675kWh of energy and my panels supply 360kWh to the grid. As I understand it, when I get my electric utility bill I will see the readings for both meters. Normally Tariff 1 costs about 15.5c per kWh so without the panels I'd be charged about $105 for my energy. But with the panels producing power I get recognition for their contribution with a simple deduction from my Tariff 11 consumption. The nett use would be 315kWh at around $49.

Woohoo! My investment in panels has not only saved me money, but reduced my dependence on fossil fuels by 360kWh this quarter! I can sure feel proud of myself now, having invested in environmental protection and sustainability.

But wait a moment. I might be badly mistaken about my green energy credentials.

You see, most of the time when a PV system like this gets installed, the buyer signs a little bit of paper in return for an extra discount on the up-front cost. The amount of the discount varies but as an example the system I've ordered might be discounted by somewhere between $315 and $819. Neat, huh? How nice of the government to give me a bit of an extra bonus for investing in clean energy.

Listen up: this is not a bonus. This is not free money. The form that you are offered to sign is one which transfers your right to claim the "cleanness" of the energy your panels will produce over their lifetime to another party. You are paid market price for your Renewable Energy Certificates, or "RECs" as they are known. One REC is equivalent to one megawatt-hour (MWh) of renewable power. These RECs represent the legal right of the holder to claim that the power they used (or sold to somebody else) was clean. And if you signed that paper, you don't have them any more.

So in the case of my hypothetical electricity bill, though I do enjoy a financial benefit, every one of the 675kWh of energy that I consumed must have been supplied to the grid by coal-fired power stations! If I wanted to have a clear conscience about my energy use I'd still have to opt in for 675kWh of 100% certified GreenPower. In effect I would have to pay a bit extra each quarter to buy a portion of my own original RECs back again.

I hope that's not too confusing. Just to repeat: by selling my RECs when the system was installed, I gave up the right to claim the cleanliness of the energy my system produces. Though I get a financial benefit for the energy produced by the system over time, I would still have to opt in to GreenPower schemes for the entire amount of my personal energy consumption if I want to eliminate my dependence on dirty power generators.

It's worth pointing out that you're in no way obliged to sell your RECs. You can either hold on to them with a view to eventually selling them (during which time you would have to pay the GreenPower surcharge since you're intending to give up your right to the cleanliness of your panels' energy sometime in the future) or your can ignore the whole scheme entirely and just consider all of that clean energy to be yours for as long as you're using the panels. Whatever you do, there's a bit of a gamble and speculation involved and most of us don't have the time nor skill to track and trade these things to our financial benefit.

So if you do sign up for one of these systems - which I would generally applaud even though I think PV is only a tiny part of the overall solution to our energy and climate crisis - please be aware of the significance of the RECs scheme and what it means to sell those certificates. Otherwise you might end up being more dependent on fossil fuels than you hoped you would be, without even realising it.


Ian said...

FWIW the Queensland State Government just announced it will introduce feed-in tariffs for solar power, which changes the equation a bit.

TB said...

Wow. Thanks for the heads-up, Ian. New post coming shortly to discuss.

Ian said...

This double dipping has concerned me ever since you pointed it out here, but I believe I've now discovered that it's not double dipping after all. Specifically, GreenPower and MRET (from which RECs come) are two separate schemes.

Selling your RECs to a coal-fired power station only allows that power station to fulfil its obligations under the MRET scheme. It does not allow it to pass its energy off as green, and certainly not to sell GreenPower back to your neighbour.

In order to sell power as GreenPower an entity must surrender the corresponding RECs. The GreenPower Program Rules have more details, but section 1.3 says "In short, the Renewable Energy purchased to make GreenPower sales will not be able to be used by energy suppliers to meet their MRET obligations".

Of course, you could still hang on to your RECs (or voluntarily surrender them yourself), which would make for slightly fewer RECs available on the market, push the price up ever so slightly, and make it a little more financially attractive for others to invest in renewable energy. However, doing so would be beyond any ethical obligation of making (or calling) your own power green. It would be largely equivalent to going out and buying a few MWh worth of GreenPower above what you consume yourself.

TB said...

Hey mate, great to hear from you.

I interpret the RECS situation quite differently.

RECS originated under the MRET program, but that program was amended to permit the voluntary surrender of RECS in order to make GreenPower possible. Ultimately, the RECS I sold will end up in one of those two places - as part of somebody's mandatory target or as proof that an energy retailer could back up the "GreenPower" they sold a consumer with an additional contribution of renewable energy to the grid.

Either way, all of the energy produced on my roof is now accounted for as part of the grid. It's no longer mine - even if flows straight from the roof to my air conditioner without passing through the meter (as is the case with the import/export meter configuration that's been installed here).

If I use a kWh of energy but don't pony up to ensure that it's covered by a kWh worth of RECS under GreenPower, then that kWh is accounted for on the (cheaper) MRET side of the ledger - that kWh comes predominantly from dirty sources like coal.

The only way for me to ensure that 100% of my consumption is backed by renewable generation is to buy GreenPower credits for every kWh I use, regardless of how much my panels produce.

This means I have to read three meter values: my inverter output, my grid import and grid export. Total consumption equals inverter output + grid import - grid export.

AGL will only bill me for grid import, but I need to use GreenSwitch or similar to get my entire consumption recorded in the 100% clean column of the books.

Ian said...

I think MRET and GreenPower are more separate in my understanding than in yours. My understanding is that MRET deals in RECs, and GreenPower deals in "GreenPower Rights", and that the two are not convertible. Voluntary surrender of RECs under MRET is necessary in order to prevent double dipping of renewable power generation i.e. if you sell some renewable power under GreenPower you can't also claim it under MRET. However, I do not believe this means that by selling your RECs you are also selling your GreenPower Rights; the RECs you sell are useful only under MRET, and cannot end up being used by a GreenPower retailer to back a GreenPower package.

In order to sell your power as GreenPower (or let somebody else do so) you would need to sign over your GreenPower Rights in addition to your RECs. For this to happen your provider would "need to advise the owner that the system’s generation will be sold under GreenPower and that the GreenPower Provider will be receiving a premium for it." It would also "be required to demonstrate that the GreenPower Customer understands this."

So, with GreenPower out of the picture, the real issue is whether it's acceptable for you to sell your RECs to (say) a coal fired power station in order for it to meet its mandatory target. I had been of the opinion that it is, on the basis that the power station is not paying for the right to call its power renewable but instead to fulfil its obligation to subsidise some renewable power. In other words your power is still green and theirs is still dirty, but they've paid a bit extra for the privilege of generating theirs and you've been paid a bit extra for the service of generating yours.

However, I think that opinion is debatable on a number of fronts. For example, although GreenPower Rights and RECs are not directly convertible, they are indirectly convertible through the bulk of renewable generators out there that are eligible for both GreenPower Rights and RECs. If you sell your RECs to a coal fired power station then it needs to buy fewer RECs from the wind farm down the road, so the wind farm instead surrenders its RECs and sells GreenPower instead. In other words, although there are separate MRET and GreenPower ledgers, they still do interact and balance together. So perhaps you're right after all...

Ian said...

FWIW this recent article in ATA's ReNew magazine takes your point of view, and the ATA is running a survey on the issue.