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Greenwashing tariffs can be stopped by tracking carbon from generator to consumer, finds new report

Carbon should be tracked through the electricity system in real time and space from generator to consumer to rid the market of greenwashing energy tariffs and accelerate decarbonisation of the power system by 2035, according to a new report by Energy Systems Catapult and Elexon.

The carbon content of electricity is currently only accounted for on an annual basis (with around 40% still coming from fossil fuels) using the Renewable Energy Guarantees of Origin (REGOs)[i] certification system – devised almost 20 years ago – to encourage the growth of renewable energy.

This means many consumers choose tariffs that claim to deliver 100% green electricity; however, this is not always the case.

A new report – Accurately Tracking Carbon in Electricity Markets – by Net Zero innovation centre Energy Systems Catapult and electricity market Balancing and Settlement Code (BSC) manager Elexon, has set out how the industry could create the common rules, standards and processes to measure, track, report and verify the carbon content of electricity within the power system.

Energy Systems Catapult, Senior Policy and Regulation Advisor, Sarah Keay-Bright, said: “At the moment without being able to track carbon it is impossible to advise consumers of the environmental benefit of their energy choices.

“Currently the industry is not accurately tracking any given unit of electricity from the generator to the consumer. For example, energy suppliers can claim they are supplying green electricity to customers on a windless winter’s day because they hold a certificate for wind energy produced in the previous summer.

“However the British energy market can now harness the power of digitalisation to accurately track carbon across the system at a granular level in time and space. This could open up significant opportunities to align power market reform with the implementation of ambitious Net Zero carbon policy, as well as responding to increasing consumer demand for zero carbon electricity – ridding the market of greenwashing tariffs.

“The challenge is to ensure that carbon is fully accounted for across the electricity system, right from generation to consumption. And while there are some voluntary initiatives, there still remains no whole system coordinated effort in Great Britain.

“The Government’s commitment to decarbonise the electricity system by 2035 will require a range of interventions – be they incentives or regulations – to shape the behaviour and choices of buyers and sellers of electricity to deliver Net Zero.

“These mechanisms will be much more effective in reducing emissions and attracting both the innovators and investors needed if they are based on accurate data about the actual carbon content of the electricity in real time in real locations.”

The power of granular data in time and space

When renewable energy generation is plentiful, the current system sometimes has difficulty in absorbing the electricity due to grid congestion and a lack of flexibility that can be provided by cross-border trading, demand-side response and storage. The situation is exacerbated by the fact that the price signals emanating from our current market design are not as cost-reflective and granular by time and space as they could be. This significantly increases the need to use high-carbon energy resources at times of system stress (both excess demand or excess generation) through the Balancing Mechanism and Ancillary Services.

By increasing the granularity of market signals in time and space, combined with equally granular measurement of the actual carbon intensity, the market would be enabled to identify and reward the types and scale of technology needed to reduce carbon emissions and cost effectively integrate weather-dependent generation, heat pumps and electric vehicles.

These technologies will be most beneficial if consumers are encouraged to take up tariffs, incentives or contracts that provide demand-side flexibility of genuine value by helping to reduce carbon emissions and balance the electricity system.

And with all consumers getting access to a smart meter by 2025, this opens up the opportunity to measure the carbon intensity of electricity consumed on a half-hourly basis, providing consumers with accurate information about their carbon consumption along with energy services that can help them minimise their carbon emissions.

Such improvements would simultaneously deliver more efficient dispatch and system operation, as well as investment in the low carbon resources with the right blend of capabilities needed by the system.

Creating a carbon tracking system

Currently wholesale and retail electricity markets operate within a well-established regulatory framework – legislation, licences, and industry codes – with systems and processes ensuring the accurate and timely processing of large volumes of data for balancing and billing on a daily basis at 30-minute granularity.

But the rules that govern the operation of the wholesale and retail electricity markets do not require the collection and sharing of any data on the carbon intensity of the electricity produced or consumed.

Angela Love, Director of Future Markets and Engagement at Elexon said: “Elexon is fully committed to supporting the industry in its efforts to achieve net zero targets and to decarbonise the power system. That’s why we are working with Energy Systems Catapult to explore the case for more detailed and frequent carbon emissions tracking.

“As it stands, the existing industry rules that govern the retail and wholesale electricity markets do not require consistent and widespread carbon emissions tracking and reporting. However, we believe that established rules, processes, and systems that support the power system may be easily extended to support carbon tracking. This is likely to be more cost effective than building entirely new processes and systems.

“Furthermore, Elexon is already working with Ofgem and industry to deliver Market-wide Half Hourly Settlement and is investing in upgrading its systems – Elexon Kinnect which is a flexible and scalable digital platform that is built on modern architecture. It will give market participants more flexible ways to manage their accounts and access data and will enable us to reduce the time and cost to industry of changing BSC processes and systems.”

Real life trials

There is also strong demand for low and zero carbon electricity from consumers, both domestic and corporate. Many corporations pursue carbon emissions reductions through their environmental, Social and Corporate Governance (ESG) or Corporate Social Responsibility (CSR) initiatives and objectives.

Progress has already been made with tracking carbon at more granular timescales through voluntary initiatives such as EnergyTag, which is seeking to establish principles that can be used to complement existing schemes by developing a market for hourly energy certificates While demonstrators and voluntary initiatives are needed to demonstrate that it is possible to accurately track the carbon content of electricity across the system, legislation or regulation is likely needed to deliver the UK’s commitment to Net Zero power by 2035.

Government Consultation

The Government does recognise these opportunities and issues, including the ‘greenwashing’ associated with REGOs. To inform its response, it has published a Call for Evidence, ‘Designing a Framework for Transparency of Carbon Content in Energy Products’ with the purpose of informing whether a more transparent framework for carbon content of energy services to be communicated to consumers is needed and how such a framework could be designed.

In this joint paper, Accurately Tracking Carbon in Electricity Markets, between Energy Systems Catapult and Elexon submitted to the consultation, we have explained:

  1. Explain the importance and opportunities that could arise from accurate tracking of carbon in electricity markets,
  2. Provide a preliminary exploration of the current state of the art and options for improvement, and
  3. Identify recommended next steps.

Recommendations for policymakers

  1. Carry out a study to assess the feasibility for measuring and reporting carbon emissions across the electricity system, exploring options for measurement (e.g. direct emissions measurement, proxy via carbon content of fuel, etc.) and approaches for reporting between actors and associated parties.
  2. Carry out a detailed assessment of the current electricity system to understand pathways to granular carbon data measurement and reporting that build on existing rules and processes for electricity markets as well as options for implementing new approaches. This could involve learning from international best practice within a UK context.
  3. Seek to establish a coordinated approach to granular carbon data tracking, working with innovative initiatives that are already developing options on a voluntary basis.
  4. Ensure data development, management, and governance follows best practice, building on the principles recommended by the Energy Data Task Force.

Carbon Regulator

Energy Systems Catapult has previously proposed the introduction of a ‘Carbon Monitoring, Reporting, and Verification (MRV) and Accounting Regulator’. Such a body (or set of bodies) would be charged with overseeing accurate and coherent MRV of carbon emissions reduction and removal across the economy. Given the interactions between the electricity sector and other sectors, a Carbon Regulator could assist in the broader data governance of carbon tracking, ensuring it is appropriately accounted for within Carbon Budgets and decision making.

Renewable Energy Guarantees of Origin (REGOs) [i]

The UK’s REGO scheme, established in 2003 is an accounting and disclosure mechanism for renewable electricity generation across the European Union. In the UK, REGO certificates are issued per MWh of eligible renewable output to generators of renewable electricity, which can then be sold to electricity suppliers or offtakers to prove that a given share of energy was produced from renewable sources.

The REGO scheme has been relatively successful as there is strong demand for renewable electricity and many green tariffs are available in the retail market. The scheme is attracting criticism, however, as the certificates are not accurately tracking the attributes of a given unit of renewable energy from the generator to the consumer.

About Elexon

Elexon is the Code Manager for the Balancing and Settlement Code (BSC), which facilitates the effective operation of the electricity market. We are responsible for managing and delivering the end-to-end services set out in the BSC and accompanying systems that support the BSC. This includes responsibility for the delivery of balancing and imbalance settlement and the provision of assurance services to the BSC Panel and BSC Parties (energy Suppliers, generators, and network companies).

Read the Report

Accurately Tracking Carbon in Electricity Markets

Markets, Policy & Regulation

Independent thought leadership that combines expertise in clean technology, economics, and energy policy design, informed by cutting-edge modelling and evidence-based analysis.

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