The Australian GreenPower price is very high at the moment and it is scaring big buyers. This $75+ price point has been in place for a while, long enough to have businesses to realise that maybe they should reconsider GreenPower altogether for a while. In the latter months of my role at Climate Friendly, I was working with clients on all the case studies described here. I thought to collate these into a practical advice post for all those facing the same difficulties around budgets and GreenPower. I wrote this article while I was at Climate Friendly for its blog and newsletter. It was published a week or two ago so I am excited to share it for you now.
A funny thing has happened to the price of GreenPower in the last 12-18 months. From record lows (~$35 per MWh) to record highs (~$80 per MWh), corporate buyers of renewable energy now struggle with having to spend at least double their budgeted allocation. How do you keep supporting a clean economy and reducing greenhouse gas emissions without blowing your budget? This article looks at the different approaches being taken by clients of Climate Friendly. As a global leader and pioneer in Renewable Energy Certificates, the first non-utility retailer of GreenPower, Climate Friendly is working first hand with these case studies. However with respect to these clients the organisations are anonymised.
OPTION 1: STOP BUYING GREENPOWER
One client had a long-standing policy to procure a proportion of renewable energy for its electricity footprint. This initiative was relied upon by the organisation as its only environmental or carbon initiative in Australia. However, it baulked and walked away from continued support due to a prohibitive price. GreenPower was too expensive for them.
Crazily enough this was about three months ago and the price of GreenPower has risen another $10-20 per MWh since. It is always sad to see a good client stop but it is understandable financially.
But there are many more options out there…
OPTION 2: WAIT IT OUT
One of our clients chose to hold off on purchasing until the price comes back down. There is merit to this approach given the significant uncertainty with GreenPower pricing over the last 12-18 months. Climate Friendly’s suppliers even had no idea on future pricing as the Abbott Government swung its axe, the Warburton Review tortured with words and the Renewable Energy Target saga killed off certainty and therefore investment.
This approach seems to be backfiring now, as suppliers now report to us a consistent message – that with investment dried up long-term supply is low. Basic supply and demand pulls the price way up. Our suppliers do not expect this to change in the near future, so these price levels appear to be the new normal.
OPTION 3: SWITCH TO GOLDPOWER
At about half the price of GreenPower, this option is great for the budget. Given the GreenPower price has doubled in the past year, organisations should be able to buy as much if not slightly more GoldPower than GreenPower. In fact, GoldPower was still cheaper when GreenPower was in its record lows.
What is GoldPower? It is an international renewable energy label with a greater emphasis on the projects. First, the power plants, mostly wind farms, would not exist without the support of GoldPower finance. Second, the projects have additional social, economic and environmental benefits beyond renewable energy generation. The GoldPower website shows case studies from organisations like Tetra Pak, PwC, Baker & McKenzie.
Climate Friendly has seen at least one corporation switch over from Green to Gold in the last few years, with the above-mentioned organisations all part of our portfolio.
OPTION 4: SUPPORT AUSTRALIAN CARBON REDUCTION PROJECTS INSTEAD
A very savvy client of ours saw an opportunity to tell a bigger story. Instead of a GreenPower purchase covering its entire electricity footprint, it purchased a portion. It diverted the remaining funds to Non-Kyoto Australian Carbon Credit Units. It was therefore able to maintain the same budget, so as not to risk losing it next year, whilst achieving the same environmental/carbon impact!
What are Non-Kyoto Australian Carbon Credit Units? As part of the Australian Government’s policy to reduce Australia’s greenhouse gas emissions there is a policy called the Emissions Reduction Fund. It is effectively a subsidy program, where Australian carbon projects prepare applications for funding. If granted, the projects commence and abate tens of thousand of tonnes of carbon dioxide equivalent emissions for the country’s targets. Some of these projects generate carbon credits that are classified as “Non-Kyoto” because they cannot be allocated towards Australia’s target. These are available for purchase by corporate buyers at less than $20 per tonne, depending on project and volume (with 1 tonne equal to approximately 1 MWh in Australia).
Our client was not only able to tell a story about supporting renewable energy through GreenPower, but also a story of ecosystem regeneration, biological diversity improvements and species conservation. The project it supported was a project similar to south Bourke project called Lenroy. It faced little objection internally because it is clearly understood nowadays that the greater goal of renewable energy support is to reduce emissions.
OPTION 5: SUPPORT INTERNATIONAL CARBON OFFSET PROJECTS INSTEAD
A similar alternative, another one of our clients is in the process of considering a switch to international carbon offsets. These are much, much cheaper than GreenPower, at <$5-25 per tonne depending on project, volume and time of purchase. It is safe to say that GreenPower’s price will never get as low.
This client of ours is a large GreenPower buyer, and on a back-of-the-envelope calculation stands to gain a few million dollars from switching! As their reason for purchasing GreenPower ultimately comes down to carbon emissions, it is not important whether it is GreenPower or carbon credits. The effect is the same. And imagine how many energy efficiency projects it now has the opportunity to kick off with all the surplus funds – it could take its building off-grid by installing solar!
OPTION 6: CORPORATE RENEWABLE ENERGY POWER PURCHASE AGREEMENTS
The market for long-term corporate purchases of renewable energy has boomed in the US over the last couple of years. In de-regulated states companies as diverse as General Motors, HP and Cisco have entered into contracts for electricity that span 12-20 years, locking in a fixed price for the energy consumers and enabling the developers to access finance for their solar and wind projects.
According to the Business Renewables Center, of which Climate Friendly is a founding partner and Advisory Board member, more than 2 GW of power purchase agreements (PPAs) for large-scale, off-site renewable energy had been signed in 2015 by mid-November.
Opportunities also exist in markets such as India and Singapore. Climate Friendly can assist with facilitating deals in all of these markets.
This is an underdeveloped market in Australia due to several factors such as regulatory and policy risk outlined above, as well as a recalcitrant energy industry, but there is movement at the station. Several companies are now looking seriously at overcoming the challenges this market presents and both WWF and City of Melbourne are active in bringing potential buyers to the table. Market participants will need to display innovation and an appetite for some risk, but the environmental, economic and PR benefits are clear.
GreenPower is still an important product, it is the only way to buy 100% Australian renewable energy and it can boost your NABERS ratings quite handsomely. It is also something that everyone in Australia knows and understands. But the new GreenPower price has put panic and fear into energy, sustainability and finance professionals Australia-wide, so with these options you can feel empowered, in control and free to keep supporting a clean economy while not blowing your budget.