Green energy – Why small can be beautiful

Cynics might say that switching to green power is merely a way of outsourcing the problem of curbing corporate carbon dioxide emissions, but for carbon-conscious companies, green energy can be a quick fix.

Nationwide Building Society, for example, switched to green electricity in October 2005, cutting at a stroke its declared carbon dioxide emissions by three quarters.

Although only 1% of electricity sold to UK households is branded “green”, total UK production from renewable sources is running at around 4% – though this includes some hydro power, which is only grudgingly referred to as renewable because the UK’s hydroelectric plants are old and not necessarily environmentally-friendly. Business soaks up the rest, and a shortage of business supply is looming.

Nicholas McHugh of npower, whose green electricity customers include Marks & Spencer, Ikea, the Ministry of Defence and Norwich City Football Club, estimates that the electricity supplier presently has the capacity for 50,000 new domestic customers on its green tariff. But one or two large corporate clients could quickly absorb this.

“There is a narrowing gap between supply and demand,” he says.

Rajan Lakhani of EDF Energy says green energy shortages are becoming “common across the entire corporate energy market”. He cites a report by research firm Datamonitor that says UK businesses will attempt to buy 34 terawatt hours of green electricity in 2007, nearly three times the 2006 accredited renewable power output in England and Wales of 12 terawatt hours.

Datamonitor surveyed 3,500 of the largest UK companies and found 28% of them have a target for green energy use in 2007, up seven percentage points compared to 2006. “In the short term,” says Lakhani, “buying energy from renewable sources unfortunately won’t be an option open to every business.”

Running to catch up

Electricity generators are therefore playing catch up and the UK fares badly in international league tables of green electricity generation.

The UK government has set electricity producers a target of meeting 10.4% of electricity needs through green sources by 2010, rising to 15.4% by 2015. If generators miss the target, they will pay fines. However, unlike France and Germany, the UK does not offer uniform support to new investments via subsidies.

"The UK has natural assets that should make it a green electricity leader, in particular vast potential access to wave and offshore wind power"

The result has been a lot of onshore wind farms – the lowest cost route to renewable generation. But the UK has natural assets that should make it a green electricity leader, in particular vast potential access to wave and offshore wind power.

“In terms of generation capacity, there is a lot we can do if we diversify out of onshore wind,” says Chris Jardine of Oxford University’s Environmental Change Institute.

Restrictive planning laws and lack of suitable land does mean now that “developers are looking offshore”, Jardine says. The UK has a large number of renewable generation projects in the pipeline, but the time lag in bringing new supply to market means the government’s 10.4% target by 2010 is likely to be missed, and corporate customers demanding green power will feel the squeeze.

Tightening supply lines

As the supply lines from the big generators tighten, companies may look to alternative routes to secure green energy. They may even invest in their own generation projects, combining them with energy efficiency and energy saving measures to cut both bills and emissions.

Ramsay Dunning, director of the small UK supplier Green Energy, says a huge amount of the UK’s electricity need could be met through small-scale generation, including river hydro, biomass, and even from used cooking oil and pig manure.

Green Energy’s power comes from privately owned generation, including local entrepreneurs and farmers. The company signs power purchase agreements with individuals and small businesses that are thinking about installing local generation capacity. This takes the risk out of investment.

He compares large-scale power plant based generation to the “mainframe computers of yesteryear”. Computing power is now localised and interlinked, and this is how power generation could develop. Some power generation, for example from agricultural waste, is “more practical at village scale than large scale”.

Marks sparks

There is no reason why corporations should not contribute to, and participate in, this new approach.

Marks & Spencer is one company moving in this direction. “We’ve made a transparent commitment about climate change,” says the company’s Clare Wilkes. “We need green energy to be able to do that.”

M&S’s Scottish stores are powered by 100% renewable electricity from EDF, while npower delivers enough in England and Wales to supply the retailer’s London head office and 150 M&S wholly owned Simply Food stores.

But this still leaves a significant demand from other stores that needs to be met. M&S is therefore looking at “tactical” steps it can take to meet a goal of carbon neutrality by 2012, Wilkes says. These include schemes such as committing to purchase energy from a Scottish farmer, thus enabling him to secure funding for a wind turbine. The resulting energy is enough to power one Scottish store. “We must be as encouraging as we can to our suppliers,” Wilkes says.

M&S intends to start producing energy from food waste, through anaerobic digestion of biomass. The food waste generates methane, which can provide the power, while the remaining slurry can be used as fertiliser. It is feasible and all a question of planning, Wilkes says. “We know it could work for us, but [anaerobic digestion] is not prominently used in the UK at the moment. There would be onsite production, but it is a complex area because of planning regulations.”

The future of power generation could be local, therefore, though Green Energy’s Dunning says both centralised and distributed generation will be needed. Companies wanting to demonstrate carbon neutrality increasingly need to address where power comes from, and even to start thinking about generating their own.