25 March 1998

Dale Vince, Managing Director, The Renewable Energy Company

The purpose of our company is to bring about significant environmental improvements through the creation and stimulation of a market for green electricity which we sell. We basically provide users of electricity with the opportunity – the first opportunity they have ever had – to choose the source of their electricity and hence the environmental impact.

Green electricity, we define as that which comes from source that is either none or less polluting, and from a sustainable source. And there is also a sort of grey or pale green fringe to our activity, beyond the generally accepted definition, and this tends to be around landfill gas and energy from waste. Nobody would, I would hope anyway, try to justify waste as a renewable stream of energy; our wasteful habits are not at all sustainable. But there are good reasons for using landfill gas, for instance, so we use it in our general description of green electricity.

Landfill gas is derived from the accumulation of methane gas in landfill sites when the rubbish decomposes. The waste stream itself is not sustainable. It is not renewable and we would not advocate it, except for the fact that in landfill sites the methane is produced by decomposition and is thirty times more potent as a greenhouse gas than CO2 is. It leaks into the atmosphere so we harvest it by a system of pipes and pumps across the sites. In most new landfill sites these are put in at the beginning. Five years ago the methane was collected and burned on some sites, dealing with it as a problem. We have taken this one step further and burn it for electricity, turning it into a very useful by-product.

The simple sources of green electricity would be wind, hydro, solar, and biomass which comes from energy crops. We do not have our own generating at the moment but we hope to put up our first wind turbines later this year or early next year. We have been operating for about two years in what is known as the 100KW market, and we supply companies with 100KWs or more -- typically a small business. We have our own unique method of trading which we pioneered since the beginning. We take renewable energy or electricity and sell it to local users, and we bypass the National Grid system and avoid a lot of cost. That has enabled us to sell green electricity for the same price as brown. That has been one of the keys to our successes. There is really no shortage of customers who will buy green electricity at that price.

We turn over about 4m a year at the moment. We achieved that from a standing start. We are small by the standards of the big electricity companies but I think we are quite big by the standards of many smaller start-up companies. We have about eight employees.

There are a number of things that the government could do to support green electricity. First is a range of fiscal measures. We have all seen the taxes on leaded petrol and how we they have incentivised us all to use unleaded petrol, along, I think with legislation on manufacturing, but nonetheless the tax differential between leaded and non-leaded petrol is huge and we would like to see some kind of tax on "leaded" electricity. But in order to build green power stations it costs more money than it costs to run existing brown ones, and what we are trying to achieve is a mass market for green power so that everyone can take up the choice without having to worry about paying more. We can have a demand-led switch from brown to green sources.

We are very close with some technologies and some locations. We can do that without government assistance, but were the Government to level the playing field just a little bit in favour of green energy, by some kind of tax on brown energy, it would help us to close the gap. Likewise, tax breaks for companies investing in wind turbines and other renewable technologies would improve their economics. We are doing a lot of work with businesses at the moment, that install wind turbines to offset their own electricity consumption, and some of these are major UK plc’s. But what we do need are some tax investment incentives. There is a tax in force at the moment called the fossil fuel levy that currently runs at about 0.9% of all our electricity bills per year. We all pay it and it goes to the Government to support the renewable energy programme. This time last year, the levy stood at 0.7% and it supported the nuclear industry. While that levy was in place, it was effectively a CO2 tax, or a tax on leaded electricity, because us sellers of green power, we don’t need to pay it, and this time last year it was worth .7 of a pence per year to us which was enormous. That alone would enable us to build considerable amounts of new power and match the price of existing brown electricity.

I had a meeting with John Battle MP (Energy Minister) in December to talk about all of this. It was at his request. He is quite interested in what we are doing. We spent an hour talking about this. In January we were asked to give evidence to the DTI Select Committee who’s report is called "Aspects of Energy Policy". They have just published their report. I submitted a paper that contained these suggestions for the leaded electricity tax, including the fiscal measures with reference to the fossil fuel levy. The other thing the Government can do is to ensure that the electricity trading mechanisms in this country, the "pool" and all the other mechanisms, are fair to embedded generation. All these systems came about with privatisation, they were designed with large-scale centralised generators in mind. Renewable energy projects do not fit that bill, they tend to be local power stations providing power to local people. As such, they avoid a lot of the costs and the losses that larger power stations incur, and that is environmentally and economically beneficial. But the mechanisms do not exist to achieve that fully. So we have lobbied for a range of tweaks to the trading system to enable that to happen. Basically, what we are saying is that with a range of market measures we can bring green electricity to the market and make a substantial impact, effectively without government subsidy.

We are in competition at the moment with a couple of the large electricity companies. They really came along after we began trading. I think another half dozen or so will probably announce green tariffs in the next twelve months. I guess we are in competition, and we take different views of the market. The electricity companies that are in it so far, and those that have said they will be in it or are looking at it, all intend to charge a premium of between 10 and 15%. In some cases it’s 30%. What they are saying to their customers is, it’s green, it costs more, you have to pay more. We differ with them fundamentally on that issue. We feel that they will only create a niche market, as some of the electricity companies have shown, that some 2% of people may take up the offer. Our response to that is, we already have 2% of our energy from renewable energy sources. The object of us selling green electricity is to build new capacity. We cannot build new capacity unless people participate, it’s not going to happen. But the companies are doing that for reasons of their own. Really for them it is a defensive measure in response to competition in the market place. It is a customer services kind of issue -- to say to the customers, look you know we are environmentally sound and we also offer green electricity if you want it. And they do not really want anything other than a niche market.

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