ESTABLISHING A LOCAL AUTHORITY MARKET FOR GREEN POWER

ETSU/K/BD/00187/REP

Contractor ESD Ltd

Prepared by A Turnbull N Evans

The work described in this report was carried out under contract as part of the New and Renewable Energy Programme, managed by the Energy Technology Support Unit (ETSU) on behalf of the Department of Trade and Industry. The views and judgements expressed in this report are those of the contractor and do not necessarily reflect those of ETSU or the Department of Trade and Industry

First Published 1999 © Crown Copyright 1999 EXECUTIVE SUMMARY

The aim of this project is to establish how to maximise the potential local authority (LA) market for green power by examining the procurement and supply issues, and identifying ways to overcome the potential barriers faced both by LAs (as purchasers) and potential green electricity suppliers. To do this, it is important to understand how LAs normally procure goods and services and how power suppliers normally supply electricity. Once these two processes are understood, it is much easier to understand the issues for a LA wishing to procure green energy and for a power supplier wishing to provide green electricity, instead of buying or supplying conventional electricity.

The first stage of the project was to assess the procurement processes of the LAs. This review of LA energy procurement processes resulted in a report covering the following:

• background to LA structure and how this may influence procurement practices; • the liberalised market opportunities for renewable energy; • current purchasing arrangements, particularly the important role of the Standing Order; • data requirements for LAs preparing tenders; • options for, and barriers to, purchasing green energy; • conclusions, covering how the current procurement practices can be adapted to promote the procurement of green energy.

The key result from this was that current procurement practices are robust and do not require radical change. However, the role of the Standing Order, which generally restricts LAs from purchasing anything other than at the lowest cost, will seriously inhibit the procurement of (potentially) premium priced green energy. [Some LAs have however, purchased green power at a competitive price]. This review was an important starting point for the assessment of the LA purchase practices and highlighted a number of key barriers that needed to be addressed by the project.

The second stage of the project was to review a number of LAs engaged in green electricity procurement. The review produced some interesting, although not entirely unpredictable, results:

• the main barrier to purchasing green is the (perceived) premium price; • the Standing Order prohibits (apart from in exceptional cases) the procurement of goods and services which were not tendered at the lowest price; • LAs in consortia have difficulty in acting independently on behalf of individual sites within their authority area; • the adoption and implementation of key energy and environmental policies is crucial for green procurement to happen; • full support of Council Members is also very important; • there is a strong perception that there is insufficient green generating capacity to meet all LAs requirements; • this therefore leads to problems of green definition and the need for independent auditing of green supplies; • there is a need for central government involvement if the self imposed CO2 targets are to be met.

i Part of this second phase was to develop a series of case studies of LAs who:

• had successfully purchased green electricity; • were currently undergoing green electricity procurement; and, • were unsuccessful in purchasing green electricity.

The purpose of these case studies is to provide valuable information and guidance to other LAs who are interested in procuring green energy. The case studies cover the approach taken by the LAs and how barriers were identified and overcome. It must be noted, however, that the individual circumstances for each of the successful green purchasers had a very important effect on the procurement process.

The third phase of the project was to evaluate the supply of green electricity by the eighteen major electricity suppliers across the UK. This included evaluating the green tariffs or products the suppliers were offering specifically to LAs, that is the above and below 100 kW sites, with and without half hourly metering facilities. The three main supply barriers identified during the survey were:

• the lack of a dedicated green energy account manager for LAs in the supply company; • the relatively poor marketing of green tariff to LAs; and, • the inability to confidently verify that their green product was truly green (where applicable). [This problem should be addressed by the REAS to be launched in 1999].

The main supply issues that need to be addressed are as follows.

• Are there sufficient green electricity suppliers? • Do the suppliers have sufficient green generating capacity? • Do the suppliers and the LAs fully understand the nature of green electricity generation? • How easy is it for new entrants (green suppliers) to enter the electricity supply industry? • Do green suppliers have a licence that allows them to supply green energy nation wide? • Are the LAs fully informed of whom to approach for green supply? • Do the LAs understand the different green supply mechanisms or tariff structures that maybe available to them? • How do LAs obtain a green electricity supply? • Are LAs aware of other (green) energy services that a supplier may be able to offer them?

The results of the three phases are brought together in a set of guidelines. The aim of the guidelines is to assist LAs to purchase green energy and to assist green energy suppliers to target LAs as customers. The guidelines highlight a number of issues that have been identified as possible barriers to the successful procurement of green energy by LAs. The guidelines offer solutions to the barriers for both the LA and the green power supplier. In addition, there is a brief synopsis of the five case studies of LAs who have been engaged in green power procurement. Three of the LA case studies have been successful purchasers of green electricity; Bristol City Council, Gloucestershire County Council and Plymouth City Council. Another LA is currently undergoing a green tender procedure; West Wiltshire District Council. The fifth case study is Carmarthenshire and Ceredigion County Councils, who are an example of a joint Council approach that were unsuccessful in purchasing green energy, despite a wide tender process specifying green electricity.

ii ESTABLISHING A LOCAL AUTHORITY MARKET FOR GREEN POWER

CONTENTS PAGE

EXECUTIVE SUMMARY i GLOSSARY 2 SECTION 1 AIMS AND OBJECTIVES OF THE PROJECT 3

SECTION 2 REVIEW OF THE LOCAL AUTHORITY PROCUREMENT 4 PROCESS 2.1 Key Procurement Issues 4 2.2 The Local Authority Energy Procurement Process 5 SECTION 3 REVIEW OF LOCAL AUTHORITIES ENGAGED IN GREEN 6 PROCUREMENT PROCESS 3.1 Review Structure 6 3.2 First Tier Approach 6 3.3 First Tier Approach Results: Quantitative and Qualitative 9 Assessment of the Broad Questionnaire 3.3.1 LAs Currently Purchasing Green power 11 3.3.2 LAs Currently Undergoing the Green Procurement Process 12 3.3.3 LAs Who Were Unsuccessful in Purchasing Green Power 12 3.3.4 LAs Planning to Purchase Green Power 12 3.3.5 LAs Not Planning to Purchase Green Power 15 3.3.6 Questions Which Received No Score 16 3.4 Second Tier Approach 18 3.5 Second tier Approach Results: The Case Studies 18 SECTION 4 REVIEW OF GREEN POWER SUPPLIERS 19 4.1 Introduction 19 4.2 General Information Obtained from the Survey 19 4.3 Green Power Suppliers 20 4.4 Summary of Supplier Tariffs 31 4.5 Green Energy Supply Issues 33 4.6 Guidelines to Help Establish a LA Market for Green Power 38 4.6.1 Issues Identified by the Project 40 4.6.2 Guidelines for Local Authorities 41 4.6.3 Guidelines for Green Energy Supplies 42 4.6.4 Local Authority Case Studies 43 SECTION 5 PROJECT RESULTS 45 SECTION 6 CONCLUSIONS AND RECOMMENDATIONS 48

APPENDIX A First Tier Questionnaire used with 22 Local Authorities APPENDIX B The Lighthouse Project APPENDIX C Second Tier Questionnaires used with the Five Case Study LAs APPENDIX D The Green Supplier Questionnaire

1 GLOSSARY

Best Value The Best Value Programme addresses the way that LAs purchase goods and services. It supersedes the compulsory competitive tendering (CCT) methodology. Best Value introduces a strong environmental imperative to the way purchases are made, but currently it has not been clearly defined in terms of the sustainability issues surrounding purchases.

The Local Government Bill, published on 30th November 1998, sets out the general duty of Best Value as follows: “a best value authority must make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness.” Best Value is further described in the Government's White Paper (Modern Local Government: In Touch with the People, published on 30th July 1998): “A modern council or authority which puts people first will seek to provide services which bear comparison with the best. Not just with the best that other authorities provide, but with the best that is on offer from both the public and private sectors. Continuous improvements in both the quality and cost of services will therefore be the hallmark of a modern council, and the test of Best Value”.

It is likely to be the single biggest driver to the development of the purchase of green power in the LA sector. The guidance that accompanies the programme must be clear and unambiguous. It is important to understand the basis of Best Value to ensure that any input to the development of the green power market is successful.

Energy Services Company (ESCO) The term energy service company (ESCO) is used to describe organisations which provide a range of services which help consumers to use energy efficiently. This is often, but not necessarily, linked to the supply of energy. It is based on the fact that consumers do not require energy, but rather the services which energy provides (heat, light and power).

Renewable Energy Accreditation Scheme (REAS) The REAS is being developed by the Energy Savings Trust (EST) with DTI funding. It aims to develop an accreditation scheme that will verify the claims made by suppliers offering a green product. The scheme will include an aspect of “electron counting” to demonstrate that contracts to supply customers are backed up by contracts for green generation and an element of green tariff branding. The scheme is in the early stages of development but is vital to the development of the green power market. It is due to be launched before the end of 1999.

Regional Electricity Company (REC) The regional electricity companies were established to provide electricity supply to all consumers across the UK in geographic regions. Prior to the liberalisation of the electricity market, consumers were supplied by their “host” REC by default. The full liberalisation of the electricity market will mean that consumers will be able to choose the supplier of their electricity from electricity suppliers who have a supply licence permitting them to supply electricity outside their traditional REC area.

2 1. AIMS AND OBJECTIVES OF THE PROJECT

The aim of this project is to establish how to maximise the potential local authority (LA) market for green power by examining the procurement and supply issues, and identifying ways to overcome the potential barriers faced both by LAs (as purchasers) and potential green electricity suppliers. To do this, four project objectives were established.

• To identify the mechanisms available to local authorities as active purchasers of green power, including the decision making processes and timetables for power procurement, influencing factors, obstacles to action and means to overcome them. • To develop a coherent plan of action to establish the local authority green power market. • To produce guidance notes for local authority officers on the opportunities for green power purchasing and how to secure authority backing for such procurement. • To produce guidance notes for suppliers on the characteristics and needs of the local authority market.

To meet the four objectives, the project was divided into three distinct, but related activities:

• Activity 1. Review of LA Energy Procurement Processes. This review answered the questions on how procurement is undertaken, who does it and who influences the process. The result of this review was a report covering the key findings.

• Activity 2. Review of Local Authorities Engaged in Green Electricity Procurement. This review obtained green procurement information from a number of LAs, such as Bristol City Council and Gloucestershire County Council, who are widely known to have purchased green power. A number of self selected UK wide LAs were also contacted via a telephone questionnaire to determine their level of interest and understanding of green energy procurement. This included their current purchasing processes and potential barriers to purchasing green energy. The result of this review was five LA case studies to be used in conjunction with the guidelines (see below).

• Activity 3. Review of Green Power Suppliers. This review obtained information on green tariffs and products offered by the major electricity suppliers across the UK. The result of this review (and coupled with the results from Activity 2) were used to produce guidance notes for LAs and suppliers on how best to procure and supply green electricity.

3 2. REVIEW OF LOCAL AUTHORITY ENERGY PROCUREMENT PROCESSES

2.1 Key Procurement Issues

To fully understand whether a LA has the ability to purchase green power, it is important to know the current LA goods and services procurement practices. Before this process can begin however, it was useful to identify some broad issues that may influence the LA decision making process. These broad issues are as follows.

• Because LAs operate individual or groups of sites with a consumption of over 100 kW (although not all sites are over 100 kW or are half hourly metered) they have been able to purchase energy in the open market since 1994. • The procurement practices of LAs normally depend on the size of the LA e.g. medium to large LAs are more structured than small LA who can be more flexible. • The organisation of the LA may have an impact on the procurement process e.g. some LAs have been organised along the lines of directorates which are semi-autonomous in their procurement practices, whilst others are dependent on the sanction of elected committees. Again, the size of the LA will largely dictate it’s organisational structure. • The rules of energy purchase are, however, broadly similar between LAs, and are based on Standing Orders, which have a least cost approach. • As such, the majority of LA procurement is based on a least cost approach to ensure value for money for community charge payers. However, this least cost approach is qualified with a quality clause, whereby any deviation from least cost can be justified on quality grounds. This could be an argument in favour of purchasing premium priced energy, but it would need to be strongly made. • The Best Value approach, which again builds on the overall environmental quality of goods and services the LA is purchasing, will be another driver for green energy purchase. The Best Value approach has not been fully exploited as a mechanism for procuring premium priced green electricity. It is widely recognised, though, that attaching a financial value to environmental benefits is extremely difficult. • There is some concern expressed by LAs in moving away from their traditional host REC supplier. Many LAs see non-pecuniary, intangible benefits in staying with their current supplier, such as familiarity with accounting systems. (This was a reason stated by one of the case study LAs). • LAs will be increasingly aware of energy conservation as RECs are required to supply conservation advice to large users; thus the ESCO package may be an attractive option. • A sense of ownership needs to be introduced in to the green procurement process if it is to be successful. However, difficult decisions, such as high unit cost for green power, are unlikely to be taken by an individual, but rather by a committee. • There is a European dimension with the legal requirement to advertise tenders over a certain value in the Official Journal. Adherence to this requirement is often largely due to the legal position adopted by the individual LA.

4 2.2 The Local Authority Energy Procurement Process

With these issues in mind, a report entitled The Local Authority Energy Procurement Process was prepared, covering all the aspects of energy procurement. Key findings from the report which have a substantial influence on the ability of a LA to purchase green electricity, are listed below.

• The current procurement system is robust and it is not proposed that a completely new system be developed. However, it is recognised that the procurement procedures need to be re-examined to allow for ease of green energy purchase. • Despite the different types of LA, the Standing Order is the common (and often only route) for purchasing goods and services, including electricity. • The Standing Order reflects the local government legislation and is a set of principles to which the LAs must adhere, having originally been established by central government. • However, whilst the Standing Order route is common, each LA has the responsibility for implementing the Standing Order within its own rules. As such, the interpretation of the principles of the Standing Order is within the remit of the LA and is therefore likely to differ between LAs, even those LAs of the same type, eg district councils. This is reflected in the different LA departments and those within the department who are responsible for electricity purchase. • Electricity purchase responsibility ranges from the Chief Executive’s Office, to the Housing Department, Technical Department or Environmental Health Department. Within these departments, Energy Managers, Housing Officers and Environmental Managers all have responsibility for energy purchase for the LA. • Comparing the differences between green and non-green electricity has indicated that although green electricity is often more expensive it has a considerably greater environmental benefit, the cost of which is likely to out weigh the straight cost difference. The principle of Best Value will allow LAs to take the environmental benefits into account. • More work needs to be done to raise the awareness of all elected members to the benefits of green electricity and the possibilities, under Best Value, to introduce more flexibility into Standing Orders, whilst maintaining audit accountability and integrity. • Green electricity purchase can contribute to commitments made under LA21 and HECA and could be applied successfully to an ESCO. Through this vehicle, support could be directed towards the fuel poor. It is important that the links between each of these actions are recognised within a LA. This may increase the possibility of purchasing green electricity. These worthy actions may need some form of legislative backing (which is unlikely) if they are to have ”teeth”. • Green energy suppliers need to raise their profile, to become more proactive, and to seek to enter partnerships with LAs so that the environmental benefits of energy from renewable resources can be made widely available to the community.

5 3. REVIEW OF LOCAL AUTHORITIES ENGAGED IN GREEN ELECTRICITY PROCUREMENT

3.1 Review Structure

To obtain an accurate picture of how green energy procurement has been undertaken, a number of LAs were identified from whom procurement information was sought. It had originally been intended to focus on a number of LAs who were widely known to have purchased green energy (such as Bristol City Council and Gloucestershire County Council) as the main source of information. However, the general procurement questionnaire which was targeted at a number of LAs selected from the Green Government Initiative survey (see below), identified hitherto unknown green purchasers. As such, a combination of well known green purchasers with newly identified purchasers was used as the focus for information.

The review of LAs engaged in green energy procurement had the aim of determining how normal procurement practices had to be adapted to enable the LA to purchase green energy. To make this assessment, the areas of information sought from the LAs included the following:

• the drivers for procuring green power (economic, environmental, socio-economic); • how procurement was undertaken; • who were the key influencers; • what additional information/support was needed; • what was the timescale; • what were the barriers; • how were the barriers overcome; • what lessons can be learned from the experience; • recommendations for future green energy procurement by other local authorities.

The review had a two tier approach. The first tier approach involved selecting twenty two LAs who responded to the Green Government Initiative survey (see Table 1.0 below). These 22 LAs were canvassed for their views on green energy procurement via a broad questionnaire (see Appendix A). The second tier approach involved selecting between 5 LAs who were a combination of well-known LAs who have purchased green energy and some respondents from the broad questionnaire. These 5 LAs have provided useful information and were used as case studies (see the guidelines).

3.2 First Tier Approach

Table 1.0 below contains a list of 22 LAs that were originally selected for inclusion in the broad survey on green energy procurement. They had been selected from the completed returns to the questionnaire which was part of the Green Government Initiative. Within this questionnaire, the question “Which Energy and Environment Solutions are you most interested in Developing?” was posed. All the 22 LAs below had selected “Contract Energy Supply” in response. In addition, they had all selected either one or both of the “Energy Conservation Systems” and “Combined Heat and Power” answers. This is a clear message that these LAs are interested in examining different energy supply options from their traditional energy supplies and suppliers. Naturally, green energy is one important part of

6 this. Choosing these self-selecting LAs ensured a much greater success rate in obtaining valuable green procurement information. Further reasons for choosing these specific self selected LAs included the following:

• variety of LA type and size; • regional diversity; • covering locations within as many REC (Regional Electricity Company) areas as possible; • included Scotland and Wales; • variety of job titles and roles of the contact person who completed the Green Government questionnaire.

Due to the limited number of LAs who were eligible under the project’s selection criteria (a total of 31), there is one REC area that was not covered (Hydro Electric) and often only one LA in certain REC areas (interestingly in the Eastern side of the UK). Table 2.0 shows how many LAs are from the different REC areas, the number of LA types and the number of different job titles of the respondent to the Green Government Initiative questionnaire.

7 Table 1.0. Local Authorities to be Included Under the Broad Questionnaire Survey

Local Authority LA Type REC Area Job Title Department City/Town Southampton City Council City Southern Environmental Services Chief Executive's Office Southampton Committee Policy Manager Tunbridge District Council District SEEBOARD Deputy Chief Executive Chief Executive Oxted City of Edinburgh Council City Scottish Power Acting Director of Property Property Services Edinburgh services Easington District Council District Northern Electrical Engineer/Energy Building Services Unit Peterlee Efficiency Officer West Oxfordshire District Council District Southern Environmental Policy Officer Environmental Services Witney Rotherham Borough Council Borough Yorkshire Acting Land & Property Rotherham Technical Consultancy Rotherham Manager North Lancashire Council Unitary Norweb Director of Construction Department of Construction Bellshill Services Services Amber Valley Borough Council Borough MEB Head of Environmental Borough Services Ripley Plymouth City Council City SWEB Energy Manager Corporate Resources Plymouth Shropshire County Council County MEB Chief Property Officer Environment Department Polegate Halton Borough Council Borough MANWEB Energy Manager Property Services Halton Carmarthenshire County Council County SWALEC Energy Officer Environment Carmarthen Fife Council Unitary Scottish Power Energy Advisor Energy Management - Property Glenrothes Services Cambridgeshire County Council County Eastern Energy & Service Contracts Property Management Services Cambridge Manager West Somerset District Council District SWEB Environmental Co-ordinator Enterprise & Development Taunton Gedling Borough Council Borough East Midlands Head of Technical Services Technical Services Arnold North Devon District Council District SWEB Building Services Manager Building Services Barnstaple Isle of Wight Council Unitary Southern Building Manager Property Services Isle of Wight Chorley Borough Council Borough Norweb Principal Building Officer Technical Services Chorley Glasgow City Council City Scottish Power Chief Housing Officer City Housing Glasgow Wandsworth Borough Council Borough LEB Energy Manager Technical Services London Wirral Borough Council Borough MANWEB Director Property Services Wallasey

8 Table 2.0. Selected Local Authorities by REC Area, by Type and by Job Title of Contact

REC Area/Local Authority Type/Job Title Number of Local Authorities Scottish Power 3 NORWEB 2 Northern 1 Yorkshire 1 MANWEB 2 Midlands 2 East Midlands 1 SWALEC 1 EASTERN 1 SWEB 3 Southern 3 London Electricity Board 1 SEEBOARD 1 TOTAL 22 Unitary 3 City 4 Borough 7 County 3 District 5 TOTAL 22 Environmental Services/Issues 4 Property/Building Services 8 Energy Manager 7 Chief Executive/Director 2 Technical Services 1 TOTAL 22

3.3 First Tier Approach Results: Quantitative and Qualitative Assessment of the Broad Questionnaire Reviews

The majority of these 22 LAs were interviewed via the telephone. However, some minor changes were made to the LAs actually interviewed (see Table 3.0 below). This was due to one “no response”, plus two “additional ” and one “replacement ”. (The replacement was Lanarkshire, which had been mis-registered as Lancashire). The number of LAs who were interviewed was therefore 23.

9 Table 3.0. Local Authorities Selected and/or Interviewed Using the Broad Questionnaire

Local Authority Originally Chosen Interviewed? Amber Valley Borough Council V V Cambridgeshire County Council V V Carmarthenshire County Council V V Chorley Borough Council V V Devon North District Council V V Easington District Council V V Edinburgh City Council V V Fife Council V V Gedling Borough Council V V Glasgow City Council V V Halton Borough Council V V Isle of Wight Council V V Lanarkshire North Council X V (replacement) Oxfordshire West District Council V V Plymouth City Council V V Reigate and Banstead Borough Council X V (additional) Rotherham Borough Council V V Shropshire County Council V V Somerset West District Council V V Southampton City Council V X (no response) Tanbridge District Council V V Wandsworth Borough Council V V Wiltshire West District Council X V (additional) Wirral Borough Council V V TOTAL 24 21 23

The telephone interviews were undertaken over a number of days using the broad questionnaire (see Appendix A). The quantitative responses are shown in Table 4.0 below. The responses were predictably mixed, with some LAs very keen to discuss green energy procurement matters, whilst others less so. This was largely due to the level of understanding of green energy and the role it can play in helping LAs meet their energy and environmental commitments. The responses were far more qualitative than quantitative and as such, the questionnaire was a useful starting point, but did not elicit the type of measured response that was initially predicted. The message from this is that the local authority green energy market is not well established. As such, it was sometimes difficult to clearly identify and define the drivers to and the barriers against green energy procurement. There were, however, a number of consistent messages that are outlined below. The “type of response” is grouped as follows: • LAs currently purchasing green power; • LAs currently undergoing the green procurement process; • LAs who were unsuccessful in purchasing green power; • LAs planning to purchase green power in the short term; • LAs not planning to purchase green power; • questions which received no score.

10 11 3.3.1 LAs Currently Purchasing Green Power

Three out of the 23 LAs questioned, were actively currently purchasing or recently had purchased green power. The majority of all LAs interviewed were aware that their total energy purchase would contain an element of green power via the NFFO mechanism, although this was not counted as “active” green energy purchase. a) Drivers and Influencers For Purchasing Green

All of the three LAs purchased green energy via a competitive process and not surprisingly, the main drivers were environmental and political. Interestingly, socio-economic, Best Value and LA21 were not cited as drivers. The other drivers are peculiar to the LA in question and are as follows.

• Glasgow City Council has purchased green energy for it’s Lighthouse Project (see Appendix B). When the Strathclyde Consortium tendered for bids for energy, green power was not part of the tender specification. However, Scottish Power won the contract, and only later did they offer a green tariff which was selected for the Lighthouse Project only. • Halton Borough Council has a special arrangement for purchasing green energy under a night time tariff from Manweb. The Council understand that their tariff is supporting green power generated from hydro and wind sites in Wales. The reason for choosing the night tariff was that the day tariff was too expensive. • Plymouth City Council recently tendered for their energy supplies, specifying a green tariff in the bid and requesting energy efficiency measures. SWEB (the existing supplier) won the contract and offered a tariff with 20% green electricity element, costing in total less then their previous contract. (This is probably due to competition rather than any indication that green energy would cost less than fossil generated electricity).

In all three cases, an individual officer was the key influencer for the green energy procurement. In two cases it was the energy manager, and in the case of Glasgow, it was the Deputy Director of Property Services. In all cases, member support was given to the purchasing strategy. b) The Procurement Process

The procurement process in each case was straightforward. The tenders simply included a specification for green energy, or in the case of Glasgow, was offered by the supplier after the contract had been awarded. Because the process did not incur any fundamental changes to the existing procurement procedures, the procurement did not take any longer than normal procurement practice. A list of green suppliers appears to be the only additional information sought by the LAs to assist them to purchase green energy, although they all acknowledged that the guidelines to be produced as part of this project would help in future negotiations. c) Barriers to Procurement

Not surprisingly, the main procurement barrier cited by these three LAs was the relatively high price for renewable energy compared with fossil fuel generated electricity (although Plymouth City Council did reduce it’s total energy bill when it purchased green energy as a component of the total electricity package). The key driver for overcoming this price barrier

12 was the strong environmental policy or strategy that each of the council’s had in place. Without these policies, it would have been very hard for the LAs to demonstrate “best value” as dictated by the normal Standing Order requirements for the procurement of goods and services. However, an additional driver to help overcome barriers to green energy procurement would be greater evidence or proof that the electricity purchased was truly green. If green energy suppliers offered a green audit this would go some way to alleviating council members concerns of obtaining “green value for money”. d) Lessons Learned

Lessons learned and recommendations from Plymouth City Council are included in the guidelines case study, along with more detailed information.

3.3.2 LAs Currently Undergoing the Green Procurement Process

There are two LAs who are currently undergoing the green procurement process - Wirral Borough Council (WBC) and West Wiltshire District Council (WWDC). WWDC’s experiences form a guidelines case study.

3.3.3 LAs Who Were Unsuccessful in Purchasing Green Power

Only one LA (jointly Carmarthenshire and Ceredigion County Councils) tried but were unsuccessful in purchasing green electricity; this example is used as a guidelines case study.

3.3.4 LAs Planning to Purchase Green Power

The majority of LAs (who had not already purchased or were undergoing procurement) stated they had an intention to do so. Only Cambridgeshire, Chorley, Gedling and Lanarkshire stated that there was no current intention of purchasing green power (see below). Therefore, only four out of the 23 LAs contacted, had no involvement or no intention of involvement in green energy procurement. This indicates the favourable climate for the purchase of green power by local government. However, the strong intention by the energy managers or other council officers to purchase green maybe be eroded by overriding council member views, such as meeting the Standing Order requirement of cheapest option, or by the restrictive nature of consortia buying. Approximately half of the LAs were involved in a consortium, which played a major role in their ability to act independently and purchase green energy for specific sites within their authority area. a) Key Factors to Consider When Purchasing Green Power

Key factors that need to be addressed when considering procuring green were largely common across the LAs and include the following:

• a premium price for green energy is likely to be the single biggest barrier to renewable power purchase because it does not comply with the Standing Order principle of value for money in it’s simplest sense; • supporting environmental policy (eg LA21) or sustainable development policy is crucial as a justification for paying a premium price for green energy, if required;

13 • purchasing consortia (established to benefit from economies of scale through purchasing power) weaken the ability of individual LA members to purchase green goods and services for specific sites inside the consortia; • some LAs have used energy consultants to help them procure energy products, which may mean that the individual within the LA who is pushing for green power is weakened; • energy contracts have focused on reduced electricity prices because of competition rather than a wider range of energy services linked to electricity supply; • budgets devolved to different departments mean it is harder to co-ordinate a green energy procurement “push” across the LA.

b) Requests for Assistance to Purchase Green Power

Interestingly, eighteen out of those who had expressed an intention to purchase green were interested in receiving an in depth explanation for purchasing green power. This was the biggest request for support. Again, this upholds the argument that many of the council officers who have environmental and or energy responsibilities are keen to buy green power, but require supplementary information. The guidelines produced from this project will clearly go a long way to meet this gap in knowledge. Since green energy is largely regarded as more expensive than fossil generated electricity, the second biggest request was for justification for the possible greater expenditure. This linked up with the third biggest response, which was linking the purchase of green power with other LA initiatives, such as LA21 and Best Value. Surprisingly, the lowest response rate was for assistance in identifying green power suppliers. This last point could be for a number of different reasons:

• the two-thirds majority of LAs who did not request this assistance already have a comprehensive knowledge of green products and tariffs on offer to them; • the LAs assumed that their host Regional Electricity Company (REC) would be able to offer a green product/tariff so did not bother examining other possibilities; • the LAs were unaware of the ability to purchase competitively (although this would be unlikely); • they assumed their tendering process could bring forward green suppliers.

It is most likely that the LA assumed that the host REC would be able to offer a green tariff. It was widely regarded that the host REC would be the cheapest supplier and that it would be difficult for an out of area supplier to compete (on price) with the incumbent supplier. This was probably more to do with transmission charges (TUoS) charges. Most were keen to remain with the existing supplier for administrative reasons.

The rest of the requests for assistance with purchasing green energy were qualitative in nature and are grouped into the following 5 (i-v) categories.

i) A Truly Green Product?

Obtaining assurances or checks that the product is truly green was extremely important. Many LAs were very concerned about this because it will go a considerable way in reassuring the council that the LA is obtaining “green value”. The REAS which is due to be launched by the end of 1999 will go along way to address concerns of the provenance of electricity supplies. Coupled with the necessity for green audits, many of the LAs simply did not believe there was enough green energy to supply their own needs, without taking into

14 account all the other possible outlets for green energy. This then becomes an issue of credibility and many felt that green tariffs were the result of “clever marketing ” with very little substance behind the product. A suggested way round this was for the LA to have some renewable energy generating plant within its boundary, such as a small wind farm or mini hydro plant, which would demonstrate to both the councillors and public the role of local renewable energy in meeting local energy demands. In this case, it would be likely that the renewable energy plant would be supplying green electricity to the LA. However, it must be stressed that even if a LA does not have renewable generating plant within its boundary, it can still purchase green power. The potential problems with this are securing finance to establish the generating plant and the possible conflicts with the planning officers in the same LA. ii) Types of Green Product

In conjunction with the need for proof of what the LA is actually purchasing (see above) some LAs also expressed the need to understand what constitutes green energy and what the differences are between green products being offered. Forexample, some suppliers were reputedly classifying nuclear power and gas as “green products”. A standard set of definitions, with independent sanction and approval, would be very helpful. This would also help to raise the profile of green electricity and to prevent any possible future discrediting of the products. iii) How to Purchase in the Competitive Market

Despite the fact that the above 100 kW market has been competitive since 1994, there were some LAs who were extremely unsure of how to access and enter this open market. This links with (b) above, in that both purchasing routes and goods on offer are not widely known to those who have procurement responsibility. iv) Leading by Example

A number of LAs mentioned the need to have case study LAs who had already negotiated and justified green energy procurement which could act as a “template” for other LAs wishing to purchase green energy. As such, the case studies produced by this project will be extremely beneficial. v) The ESCO Route

The role of an ESCO was seen as an important route to help promote green energy purchase as one of a “suite” of energy (and environmental) services and practices. This is an area that needs much more attention. c) Barriers to Procurement

A significant barrier is the generally high cost of generating green power compared with fossil generated power. The second biggest barrier was poor supporting environmental policy. Needless-to-say, these two barriers coincide with the first two key issues that any LA must address when opting to explore the green energy procurement route. Other barriers are:

15 • insufficient number of green energy suppliers; • lack of a green audit to prove that the energy purchased is green; • poor definition of the green products available; • limited influence in purchasing consortia; • need for the personal support of key influencers; • need a long term cost:benefit analysis; • conflicts with planning office if the energy procurement officer is too supportive of renewable energy generating plant. d) Overcoming the Barriers

The main suggestion for overcoming the barriers was a change in policy. If strong support could be obtained for environmental and sustainable development issues, then the other barriers, such as addressing the lowest price principle of the Standing Order, would be easier to overcome. Other suggestions for overcoming barriers include the following:

• use renewable energy plant to demonstrate good practice and sustainable development; • support decommissioning fossil and nuclear fuel power stations; • reinvest energy savings from energy efficiency in to green power generation via energy partnerships; • use the ESCO route; • obtain further purchasing justification; • introduce competition amongst green suppliers to reduce the price; • enlist key council member support - environmental issues are normally “vote winners ”; • remove environmental targets which can be limiting, but it was also suggested that greater central government intervention to set local government targets was necessary; • improve the subsidies for renewables via NFFO and SRO; • highlight the profile and load of energy consumption to key influencers to see whether renewables can have a role in meeting the LAs energy demand. e) Recommendations

A few recommendations that came from this batch of LA interviews are as follows:

• keep the NFFO and SRO subsidy framework; • introduce a carbon tax on fossil fuel generated power; • introduce targets set by central government; • enforce environmental foot-print costs for those LAs who do not purchase green energy; • enlist a stronger involvement of the Energy Savings Trust to encourage energy efficiency measures.

3.3.5 LAs Not Planning to Purchase Green Power

There were four LAs who had no intention of purchasing green power. The main reasons for this are as follows:

• energy contracts have already recently been awarded (which didn ’t contain a green energy element) and it will be some time (up to 2 years) before the contract will need to be negotiated; it is therefore not a short term intention to purchase green energy;

16 • more interested in price competition and budget savings than increasing costs by purchasing premium priced energy; • operating within a consortium restricts LAs from acting individually; • the process of moving council members away from the principle of least cost will take time, and in these situations green procurement cannot be a short term strategy; • because energy budgets are devolved to individual managers who have a responsibility to purchase at the most economic unit price, it will be very difficult to instruct the purchase of higher priced green energy across the LA; • other budget pressures, such as staff resources, repairs and maintenance, all took precedent over premium priced energy purchase; • not fully understand all energy management issues and greater awareness of green products is required.

Measures that need to be in place for these LAs to consider purchasing green include:

• price subsidy for green energy to make it more attractive to LA consumers by making it compete (albeit artificially) with fossil generated electricity; • green energy purchasing demonstration from neighbouring LA; • better energy management policy required to enable the introduction of energy procurement options; • strengthen links with environmental policies and activities, such as LA21.

3.3.6 Questions Which Received No Score

A number of questions on the broad questionnaire did not receive any score. These are most interesting for the LAs who have successfully purchased green power and cover questions 1­ 6 inclusive. As such, these no-score questions will be covered in more depth in the case studies. It is however, worth noting the low scores for some of the multiple choice answers (see Table 4.0) for all the other non-case study LAs. In particular, a barrier to green energy procurement was not lack of individual or group support, and quite rightly, overcoming barriers was therefore not to enlist the support of individuals or groups. The message here reinforces the point made above that a change in policy would be the single greatest measure to promote the uptake of green energy by LAs. Since many of the key influencers in the LAs are already signed up the idea of purchasing green, then it would appear that they do not have any direct influence over the LA policy. This assumes that the LAs hands are somewhat tied in the policies they have to implement. However, a number of LAs would probably counter this, suggesting that they have complete, or near complete, autonomy over the policies they introduce and how they implement them. This could suggest that a more central government approach is required to help shape the policies (both environmental and sustainable development) that the LAs need to adopt. Perhaps more pertinent, is the way in which the LAs can implement the policies. The method of policy implementation that needs the greatest attention is the Standing Order and the principle of least cost. Once this is addressed, the potential for green energy procurement will be greatly enhanced.

17 Local Authority 1 1b 2b 2c 2g 3a 3b 4a 5a 5c 6d 6e 7a 7d 8a 8b 8c 8d 8e 9a 9b 9c 9d 9f 10a 10b 10c 10d 10e

Amber Valley BC N Y Y Y Y Y Y Y Cambridgeshire CC N N N Y Y Y Y Y Y Y Y Y Carmarthenshire CC N Y Y Y Y Y Y Y Y Y Chorley BC N N Y Y Y Y Y Y Y Y Y Y Devon North DC N Y Y Y Y Y Y Y Easington DC N Y Y Y Y Y Y Y Edinburgh City C N Y Y Y Y Y Y Y Y Fife C N Y Y Y Y Y Y Y Y Y Y Gedling BC N N Y Y Y Glasgow City C Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Halton BC Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Isle of Wight C N Y N Y Y Y Y Y Y Y Y Lanarkshire North C N N Y Y Y Y Y Y Oxfordshire West N Y Y Y Y Y Y Y DC Plymouth City C Y Y Y Y Y Y Y Y Y Y Y Reigate & Banstead N Y N Y Y Y Y Y Y Y Y BC Rotherham BC N Y Y Y Y Y Y Y Shropshire CC N Y Y Y Y Y Y Y Y Somerset West DC N Y Y Y Y Y Y Y Y Y Y Tanbridge DC N Y Y Y Y Y Wandsworth BC N Y Y Y Y Y Y Y Wiltshire West DC N Y Y Y Y Y Y Y Y Y Wirral BC N Y Y Y Y Y TOTAL 23 3 3 3 2 3 3 1 3 1 1 1 1 18 1 17 13 11 8 20 16 1 8 2 17 9 6 3 2 17

Table 4.0. Quantitative Results From the Broad Questionnaire Notes BC - Borough Council CC - County Council DC - District Council C - Council NOTE Zero score questions or the responses to questions 11 and 12 (qualitative answers) have not been included in Table 4.0 above.

18 3.4 Second Tier Approach

The aim of the second tier approach was to obtain more information from the selected LAs who would provide material for the case studies. To do this, three questionnaires were prepared (see Appendix C) to cover the three types of LAs that had been identified. They include those LAs who have:

• successfully purchased green power, with reasons for success; • are in the process of procuring green power, with reasons why the process is progressing as it is; • who tried, but were unsuccessful in procuring green power, with reasons for non-success.

The following LAs were selected for the case studies.

• Those who have successfully purchased green power: • Plymouth City Council; • Gloucester County Council (not interviewed under the first tier approach); • Bristol City Council (not interviewed under the first tier approach).

• Those who are going through the process of purchasing green power: • West Wilts District Council.

• One who has tried, but was unsuccessful in purchasing green power: • Carmarthenshire and Ceredigion County Councils.

3.5 Second Tier Approach Results: The Case Studies

All the above LAs were interviewed using one of the in-depth questionnaires (see Appendix C). The guidelines contain case studies for Bristol City Council, Gloucester County Council, Plymouth City Council, West Wiltshire District Council, and Carmarthenshire and Ceredigion County Councils.

19 4. REVIEW OF GREEN POWER SUPPLIERS

The review of green power suppliers included identifying all those companies who are planning to supply green power in the new liberalised electricity market. This involved contacting all the major electricity suppliers across Great Britain, but specifically focussed on companies who are actively promoting their green products e.g. the Renewable Energy Company (RECo), PowerGen, Green Electron. These electricity suppliers were interviewed using an information template (see Appendix D).

4.1 Introduction

The survey of electricity suppliers in the UK covered the 14 regional electricity companies (RECs) or public electricity suppliers (PESs), plus three major market entrants - PowerGen (now merged with East Midlands), the Renewable Energy Company (RECo) and WRE. Of these seventeen electricity suppliers, nine are able to offer a green tariff to local authorities; see Table 9.0 below. The survey did not include the small and specialist suppliers who have a supply contract for the commercial (above 100 kW) market. This was because these small suppliers may not be in a position to supply nationally (as defined by their supply licence) and were regarded as unlikely to be able to provide a green product to LAs. However, it is recognised that the green electricity market is developing very quickly and that new suppliers may come forward, particularly when the market is fully liberalised.

4.2 General Information Obtained from the Survey

The survey was conducted via telephone, using a carefully prepared template (see Appendix D) to ensure consistency with the information sought and gained. The following are a few key points resulting from the survey and are important to note.

• Generally, the first point of contact with the supplier was via the general customer telephone number. It took some time and many points of contact before the correct person to discuss green tariffs was found. This would be very frustrating for a customer, who would be disinclined to pursue the difficult route of finding the correct person with whom they could discuss green electricity. • The contact for green tariffs could not discuss supply options for LAs. This meant being passed to yet another contact. • Often, a key account manager for LAs did not exist. • The information was often inconsistent e.g. the LA account manager provided different information on the green tariff on offer to that provided by the green tariff expert. Clearly, this inconsistency needs to be rectified or otherwise customers will be confused and the supplier will be poorly represented. • Not all of the suppliers who had green tariffs also had promotional literature. Those that did, did not always automatically offer to mail the literature on their products. A follow­ up mailing of information or brochures on the green tariffs would be very beneficial in reinforcing the product to the customer. • Only one supplier (SWEB) had a very good web site advertising its green tariff. One other supplier did mention its green tariff on its web site, butonly to a limited extent. This is an obvious gap in the suppliers’ marketing and promotional activities. • Many of the suppliers did not appear convincing in their ability to track the green product sold to the customer. This is particularly important for LAs who may pay a premium

20 price for the green electricity and it is imperative that the premium product can be clearly verified and tracked.

4.3 Green Power Suppliers

The following provides a brief over view of the seventeen companies green tariffs and their policy towards LAs as a key customer based on their responses to the telephone interview. All suppliers offer energy efficiency advise as part of their Standards of Performance. The energy efficiency measures mentioned below are examples of where an electricity supplier has gone beyond its statutory duty.

Eastern Energy

Eastern Energy plans to extend its domestic EcoPower tariff to small business customers below 100 kW post April 1999. It is likely that there will be some LA sites that will qualify. This business version will initially be available in the traditional supply area of Eastern only. The promotion of this tariff will be via a specially designed leaflet available from April. As with many commercial tariffs, they will be published and are likely to be in the order of 5% (EcoPower tariff) and 10% (EcoPower Plus) higher than conventional tariffs. The business version of the tariff will operate in the same way as the current domestic tariff. This means that Eastern Energy do not directly supply the customer with green electricity which can be matched to the generation of that green electricity, but supply the customer with conventional electricity at a “green ” premium, used to fund renewables.

Table 5.0 below shows both the EcoPower and EcoPower Plus tariffs for domestic general and Economy 7 pricing schemes. Whilst these are for the domestic customer, the small business version of the EcoPower tariffs to be launched in April 1999 are likely to be formulated along similar lines. It is stressed though, that the small business EcoPower tariffs will be available for below 100 kW in area sites only, which are billed on a quarterly basis.

21 Table 5.0. Eastern Energy’s EcoPower and EcoPower plus Tariffs for Domestic and Economy 7 Customers

Tariff Type Monthly Quarterly Standard Amount Direct Direct Debit Price Transferred Debit Payers & to EcoPower Payers Prompt Payers Fund EcoPower: Domestic General Standing charge/quarter £6.69 £6.96 £7.23 26p Unit charge up to 702 7.05p 7.20p 7.41p 0.33p units/quarter Unit charge over 702 6.60p 6.76p 6.97p 0.31p units/quarter EcoPower: Economy 7 Standing charge/quarter £10.10 £10.37 £10.78 39p Day time unit charge up to 7.26p 7.41p 7.64p 0.34p 702 units/quarter Day time unit charge over 6.98p 7.14p 7.37p 0.33p 702 units/quarter Night-time unit charge 2.96p 3.02p 3.12p 0.14p EcoPower Plus: Domestic General Standing charge/quarter £6.96 £7.23 £7.64 52p Unit charge up to 702 7.38p 7.55p 7.77p 0.66p units/quarter Unit charge over 702 6.92p 7.09p 7.31p 0.62p units/quarter EcoPower Plus: Economy 7 Standing charge/quarter £10.65 £10.92 £11.33 91p Day time unit charge up to 7.60p 7.77p 8.01p 0.68p 702 units/quarter Day time unit charge over 7.32p 7.48p 7.72p 0.65p 702 units/quarter Night-time unit charge 3.10p 3.17p 3.27p 0.28p Prices include VAT at 5%.

Table 6.0 below shows Eastern Energy’s domestic general and Economy 7 tariffs without EcoPower premium for comparison purposes.

22 Table 6.0. Eastern Energy’s Domestic and Economy 7 Tariffs without EcoPower

Monthly Direct Quarterly Direct Standard Price Debit Payers Debit Payers & Prompt Payers Domestic General Standing £6.42 £6.69 £6.96 charge/quarter Unit charge up to 6.71p 6.86p 7.06p 702 units/quarter Unit charge over 6.29p 6.44p 6.64p 702 units/quarter Economy 7 Standing £9.69 £9.96 £10.37 charge/quarter Day time unit 6.91p 7.06p 7.28p charge up to 702 units/quarter Day time unit 6.65p 6.79p 7.01p charge over 702 units/quarter Night-time unit 2.81p 2.88p 2.96p charge Prices include VAT at 5%.

The EcoPower premium is invested in an independent trust (the EcoPower Trust) which will oversee the investment of accumulated premiums into independent small scale renewable generating capacity, such as small scale wind turbines, solar panels and biomass schemes. Eastern Energy agreed to match the domestic customer contributions up to £1,000,000 over the first two years of EcoPower’s availability, in the domestic market (to October 1999) and are currently reviewing whether this option will also be applied to the small business version of the scheme

The EcoPower Trust has identified two schemes that are likely to receive some investment funds from the EcoPower premium. These are:

• Carters vineyard in Essex which has outgrown its existing energy provisions from wind power and photovoltaic panels and wishes to extend the wind generated capacity; and, • Brill primary school in Oxfordshire who wish to expand its environmental education programme to include a wind turbine in the school grounds and a photovoltaic panel on the library roof.

These are all very small scale and specific applications. They will clearly meet the self- imposed qualifying criteria that the EcoPower Trust has developed for investment of the premium. The directors of EcoPower Trust Ltd have asked that schemes be small scale, community based, renewable generation projects. Specifically, they wish to avoid funding research projects at this stage, preferring to stimulate new generating capacity to demonstrate that the structure of the EcoPower pricing scheme can make an impact.

23 Specific qualifying criteria stipulate that the project must:

• be a viable venture; • have wider visibility to aid replication; • have a long term future in terms of fuel use and technology type; • minimise road transport; • ideally be wind, solar or biomass.

Taking these criteria it can be seen that a school project fits the purpose of the scheme. To make a significant impact on the development of renewable energy, then the EcoPower premium needs to be invested in larger projects where the benefits can be enjoyed by a wider audience. However, the £1 million matching fund from Eastern Energy could present a severe limit on the scale of scheme that can be pursued. A review is underway to address this.

Eastern Generation is also interested in increasing its portfolio of renewable generating capacity to meet Eastern Group’s self-imposed target of 10% renewables generation by 2010. This is likely to include off shore wind to supplement the recent development of three on shore wind farms in Devon and one in Northern Ireland. Eastern Energy is also interested in CHP (combined heat and power) schemes which it feels would be particularly suited to LA sites, such as leisure centres where any excess capacity could be used in neighbouring buildings. Eastern wish to accumulate a good green generating portfolio before offering a green product to commercial customers. To date though, Eastern has had little interest from LAs in its green products.

Eastern Energy offers energy efficiency advice to all customers and is very interested in pursuing a pro-active stance with the ESCO route.

The recommendations Eastern Energy has for a LA preparing a tender document for green energy is as follows.

• The LA must be clear on its policy for purchasing green electricity. • The LA needs to state whether it is prepared to consider a mix of green and conventional energy, or whether 100% green energy is the only option. • The LA needs to be clear as to what it considers to be a green energy source. • Any price or policy restrictions must be made very clear in the tender documentation.

EME Electricity

EME Electricity (EME) - now part of the PowerGen group - do not have a published green tariff for LAs but it is able to provide a green energy supply to LAs via the green generating resource offered by PowerGen (see below for more information). EME is planning to publish a green tariff in the future.

EME have a considerable amount of installed CHP, much of which has been developed in partnership with LAs. It is considering extending this capacity in the future.

24 EME provides energy efficiency advice via its energy services group, Lincoln Green Energy Services (LGES), who is using the ESCO route. LGES can provide energy auditing for both domestic and commercial properties. The group will also help the customer to interpret consumption profiles and make recommendations where savings could be made. The System Link 2000 software that LGES use will enable the customer to undertake multi-site electronic billing and can calculate the CO2 savings made from reducing energy consumption. Clearly, this software should be extended to cover the CO2 savings from switching from conventional to green energy. LGES already provides comprehensive energy services to the retail sector, which could be easily extended to cover LAs.

The recommendations EME has for LAs preparing tender documentation are as follows.

• Consider reducing energy consumption measures in conjunction with purchasing renewable energy. • Be aware that the LA is likely to be required to pay a premium for the green energy.

London Electricity

London Electricity is keen to form partnerships with LAs to supply electricity from sources defined by the Government as “new and renewable ”. The company is also currently conducting a review of the demand for a published green power tariff for smaller users.

Energy efficiency measures are an important part of London Electricity’s portfolio and Energy Advisory Services are available to all commercial (as well as residential) customers. London Electricity continues to support LA CHP community heating schemes along the lines of that developed for the London Borough of Tower Hamlets.

Manweb

Manweb, which is now part of the Scottish Power group, currently provide a Green Energy offer (on both tariff and contract terms) to LAs across Great Britain. The offer, which includes a small renewable charge of up to 5%, provides support to existing green energy sources as its sales are backed by renewables generation contracts. The Scottish Power Group has extensive interests in sensitively sited wind energy and small scale hydro electricity.

More importantly, the offer plans for the future as well. It ring fences the customer premium for funding new renewable energy developments which would otherwise not have taken place. The projects will attract additional funding from renewables developers and will be chosen by an independent Trust established by the company consisting of environmental experts, customer groups and energy professionals. The Company is familiar with the procurement procedures LAs need to comply with, including the Standing Order and the need to advertise in the EU’s Official Journal. The company considers itself to be flexible enough to meet any requirements the LAs may make. It is very interested in REAS which it feels is valuable in building consumer confidence.

MEB - Midlands Electricity

MEB, the supply business of Midlands Electricity, does not have a green tariff available to LAs at the moment. Plans exist to develop a commercial package that will allow commercial

25 customers, including LAs, to offset their demand against purchases from green generation sources. No date has been established for the introduction of such a package and will depend upon the purchase of MEB’s supply business by National Power.

MEB is currently putting together a domestic green package that will seek to develop new, renewable and sustainable generation projects. The package will be presented to OFFER shortly for their approval and will be published shortly afterwards. This will build upon the work undertaken by the MEB in the promotion of energy efficiency.

Midlands Electricity, through its subsidiary Powerline Energy Services Limited, is currently liasing with LAs to help them reduce their energy consumption. In addition they are very interested in exploring the ESCO route and have also been working closely with a number of LAs on their HECA obligations.

Northern Electric

Northern Electric would welcome the opportunity to discuss with LAs their specific requirements for green power. Northern Electric would work with a LA and discuss the possible options and if possible develop a suitable energy proposal.

During 1999, Northern Electric will be launching an “environmental contract”, initially to domestic customers, with the view to extending this to other sectors. They have recently negotiated energy purchase agreements with three renewable energy generators, which operate outside of the Non Fossil Fuel Obligation (NFFO); this capacity will be provided as part of their environmental energy package. Northern Electric believes it is important that any environmental contract must genuinely result in the creation of extra renewable generation or environmental improvements. As a result, their environmental contract will involve an additional levy being applied which will be used, in full, to support renewable generation projects, or projects which include a “Climate Care” element e.g. carbon offset projects (such as re-afforestation) which neutralise the effects of burning fossil fuels.

Northern Electric is part sponsors of a 50kW wind turbine with Durham City Council for a local school. They also intend to fund a small scale turbine at the Business Innovation Centre in Sunderland, demonstrating renewable energy in a business context. It will also help to raise public awareness of renewable energy, in particular wind energy.

Norweb

Norweb does not offer a green tariff to its domestic customers. Research indicates a very low expected uptake from householders which makes such a scheme commercially unattractive. In respect of those domestic customers Norweb’s resources have been directed at providing an extensive energy efficiency advisory service, and undertaking innovative schemes under the Energy Efficiency Standards and Performance programme.

United Utilities Group, Norweb’s parent company, has extensive experience in the generation of renewable energy, resulting in over 11% of its internal consumption (65GWh) being generated from renewable sources - mainly from waste water treatment CHP plants.

26 Building on that experience, Norweb is presently investigating the demand for green energy from its larger commercial customers with a view to exploring potential partnerships for the creation of new renewable generation capacity.

27 PowerGen

PowerGen has a nation wide green tariff called “Green Energy” which can be supplied to LAs. The premium is negotiable and is levied on the energy element rather than on the total bill. PowerGen can offer percentage supply if the customer does not want 100% green energy. The green energy supplied is matched to that generated, to ensure that the green energy is only sold once. This certification process also shows the calculated savings in CO2 emissions from purchasing green energy instead of conventional energy. The renewable energy is generated from the post NFFO 1 and 2 schemes and includes hydro, wind, landfill gas and municipal solid waste incineration. Dependent upon the style of contract, many generators are offered a stake in the success of PowerGen’s Green Energy offering, with the majority of the premium returned to these generators on a percentage sharing basis.

PowerGen is looking to increase and diversify its contracted renewable energy portfolio to include newer technologies such as biomass. PowerGen has only been supplying renewable energy from the post NFFO 1 and 2 schemes since January 1999, and is keen to develop a leading position within the renewable energy supply market. PowerGen feels that independent auditing of green supply is a key issue, along with providing the correct price for the product. PowerGen is very keen to participate in the national accreditation scheme when it is launched later this year. PowerGen also has an accredited energy efficiency programme that it automatically offers to commercial customers called Profiler Plus. Profiler Plus is a software tool which is provided free of charge as an on line service for monitoring and analysing energy consumption.

PowerGen is currently supplying up to 10 LAs with its Green Energy tariff. PowerGen is very aware of the tendering processes LAs are required to adhere to. In particular, PowerGen is familiar with the role of the purchasing consortia that LAs often use. Whilst it can be seen that a consortia could hamper an individual LA from procuring green energy, it is attractive to a supplier who has its tendering process immediately simplified and avoids the costs of preparing many tender submissions. PowerGen invites LAs to specify which renewable energy sources are of interest and how much supply they would be interested in within their tender documents.

The Renewable Energy Company

Based in Stroud, Gloucestershire, The Renewable Energy Company was formed in 1995 and is one of Europe’s main supplier of electricity generated from environmentally friendly sources. The company are committed to providing Ecotricity at market prices and achieve this by using economical trading methods and local sources of generation. Customers include several local authorities. Catering exclusively to the commercial sector at present, The Renewable Energy Company plan to offer a domestic tariff early next year.

Examples of technologies supported are wind power, solar power, hydro power, landfill gas and sewage gas.

The Company’s advice to LAs is to:

• be certain that a green tariff is sought after to avoid an unnecessary and costly tendering process;

28 • provide, at the outset, the consumption profiles and metering details for each specific site to be supplied with Ecotricity.

29 Scottish Hydro Electric

Scottish Hydro Electric is the largest generator for renewables in the UK, accounting for over 40% of the market. It is in the advanced stages of piloting a number of green products which will be launched when appropriate.

Scottish Power

Scottish Power currently provide a Green Energy offer (on both tariff and contract terms) to LAs across Great Britain.

The offer, which includes a small renewable charge of up to 5%, provides support to existing green energy sources as its sales are backed by renewables generation contracts. The Scottish Power Group has extensive interests in sensitively sited wind energy and small scale hydro electricity.

More importantly, the offer plans for the future as well. It ring fences the customer premium for funding new renewable energy developments which would otherwise not have taken place. The projects will attract additional funding from renewables developers and will be chosen by an independent Trust established by the company consisting of environmental experts, customer groups and energy professionals.

The Company is familiar with the procurement procedures LAs need to comply with, including the Standing Order and the need to advertise in the EU’s Official Journal. The company considers itself to be flexible enough to meet any requirements the LAs may make. It is very interested in REAS which it feels is valuable in building consumer confidence.

Seeboard

Seeboard are currently investigating options for a green tariff having employed a consultant to evaluate the market and tariff offers currently available. It has also worked closely with LAs on trials for energy efficiency improvement offers linked to dual fuel contracts in the residential market.

Southern Electric

Southern Electric do not currently have a green tariff to offer to LAs. Southern Electric do have a domestic tariff called Acorn that has a 5% premium on current domestic tariffs. To ensure that the domestic customers are getting a truly green supply, the Acorn tariff has been restricted to 47,000 customers. This is equivalent to Southern Electric’s current renewable energy generating portfolio. It is anticipated that the Acorn tariff will be available to commercial customers in the near future when Southern Electric has secured more renewable energy generating capacity.

SWALEC

SWALEC do not currently have a green tariff it can offer to LAs. SWALEC is now able to offer a green tariff to domestic customers, which will be sourced from wind, hydro and landfill gas. SWALEC prefers to start supplying the domestic sector first because it was felt that there could be a problem with the likely premium price for commercial customers. In

30 addition, limitations on renewable energy capacity restricted the company from offering a green tariff to all customer sectors from the start.

SWEB

SWEB has a green tariff called Green Electron which is available to LAs nation wide. Assuming the LA is billed monthly, the premium for Green Electron customers is quoted as a pence per kWh (see Table 7.0 below). The tariff is negotiable dependent upon the amount of green energy the customer wishes to match and is calculated to cover the additional generating costs plus a proportion of the administrative costs of the Green Electron scheme.

Table 7.0. SWEB’s Schedule of Charges for Green Electron

Green Electron Charges (p/kWh) Percentage of Green Electricity Supplied per Green Electron Charge (%) 0.1 20 0.2 40 0.3 60 0.4 80 0.5 100

The sources of green energy used for Green Electron are wind, hydro and landfill gas. SWEB has contracts for this power until the end of 1999. It will be reviewing its power mix in 2000, but it is likely that it would be interested in acquiring other sources of renewable generation, such as biomass. SWEB can match the supply of Green Electron to the customers with that generated by its renewable energy generators. The Green Electron scheme is independently audited by Arthur Andersen. This will continue until the national audit scheme is introduced later this year.

Each Green Electron customer receives a free of charge energy efficiency survey of the premises to be supplied with green electricity. The service is tailored to the customer’s needs. SWEB does not currently operate an ESCO, but is looking into how they can join forces in the future.

SWEB is currently supplying one LA with Green Electron. The SWEB Green Electron team has the specialist knowledge for liaising with LA customers e.g. they have full knowledge of the Standing Order requirements. To deal with the least cost principle of the Standing Orders, Green Electron offer supply options including different percentages of green electricity.

WRE

WRE is a new entrant into electricity supply and will very shortly be able to provide green electricity to LAs. The supply arrangements will be on a case by case basis. It does not have a published green tariff specifically for LAs. The sources of renewable energy are wind, hydro and biomass. WRE intends to be flexible as far as possible by offering the LA customer green supply from the technologies the LA is interested in. WRE is interested in many renewable energy technologies and would consider increasing its portfolio in the future with economically available generation. WRE is working closely with environmental NGOs

31 to ensure that it uses acceptable renewable energy technologies. The company is however, reluctant to include some renewable energy technologies that it considers are not truly green, such as landfill gas and municipal solid waste incineration.

WRE is keen to explore the green ESCO route, particularly in partnership with a number of LAs. WRE will provide energy efficiency advice and may provide energy audits for all commercial customers. WRE feels that the ESCO route is particularly appropriate for supplying energy services to LAs. WRE is aware of the circumstances in which LAs prepare tender documentation i.e. the criteria of the Standing Order. WRE aims to present an overall energy package to LAs which includes reducing consumption so that the savings made can be used to pay for any possible green electricity premium.

To enable WRE to provide the best possible green electricity and energy package to LAs, the LA needs to include the following in their tender documentation:

• all load profiles; • existing energy procurement costs.

WRE do not intend to dilute its green product with conventional supplies. If a LA customer is interested in a percentage of green supply, WRE would prefer to supply the green element and contract the conventional supply to another supplier. WRE feels that proper pricing mechanisms should reduce the costs of preparing tenders. In this way, WRE would like to be flexible in meeting LAs green energy requirements.

Yorkshire Electricity

Yorkshire Electricity has now extended its Green Electricity product to LAs and commercial customers, available nation wide. The Green Electricity takes the form of contract rates for both the above and below 100 kW market. The premium rate per unit for the LAs will be in the order of 8% as per the domestic premium. Yorkshire Electricity will match the supply of green electricity to customers with the generation from their renewable generators. The green energy is supplied from and biomass and wind power. Yorkshire Electricity is examining other sources of renewable energy and its current capacity is sufficient for the equivalent of approximately 30,000 domestic homes. It is working closely with advisors from the WWF and the Open University to identify suitable renewable energy technologies and sources for the future.

Yorkshire Electricity’s Green Electricity tariff is available nation wide for domestic customers. However, the Green Electricity tariff varies between REC areas. Yorkshire Electricity say that this is because it is charged differing DUoS charges by the RECs. Table 8.0 below shows the Green Electricity tariff per REC area, including within the Yorkshire Electricity area, from 1.1.99.

Forall of Yorkshire Electricity’s out of area standard domestic and Economy 7 customers there is a quarterly prompt payment rebate of £2.00; a monthly direct debit annual rebate of £14.00; and, an additional daily fixed charge for pre-payment options of 8.11p. All these prices exclude VAT at 5%. For Yorkshire Electricity’s standard domestic and Economy 7 customers within area only, there is a quarterly prompt payment rebate of £2.50; a monthly direct debit annual rebate of £12.00; and, an additional daily fixed charge for pre-payment options of 6.47p. All these prices exclude VAT at 5%.

32 33 Table 8.0 Yorkshire Electricity’s Green Electricity Tariff for Domestic and Economy 7 Customers by REC Area

REC Area Daily Fixed Day Units Night Units Charge Standard Domestic Eastern Electricity region 10.76p 6.27p East Midlands region 12.93p 6.23p - London Electricity region 15.53p 6.33p - Manweb region 15.26p 6.70p - Midlands Electricity region 14.51p 6.15p - Northern Electric region 12.26p 6.71p - Norweb Electricity region 15.74p 6.12p - Scottish Hydro Electric region 13.35p 7.07p - Scottish Power region 13.12p 7.37p - Seeboard region 11.62p 6.34p - Southern Electricity region 14.07p 6.29p - SWALEC region 18.01p 7.08p - SWEB region 14.49p 6.90p - Yorkshire Electricity region 10.96p 6.63p - Economy 7 Eastern Electricity region 13.22p 6.81p 2.83p East Midlands region 16.74p 6.69p 2.53p London Electricity region 19.19p 6.97p 2.62p Manweb region 18.87p 7.59p 2.79p Midlands Electricity region 17.26p 6.96p 2.57p Northern Electric region 16.42p 7.40p 2.61p Norweb Electricity region 19.73p 6.79p 2.48p Scottish Hydro Electric region N/A N/A N/A Scottish Power region N/A N/A N/A Seeboard region 15.67p 6.76p 2.60p Southern Electricity region 17.52p 7.07p 2.57p SWALEC region 21.38p 7.62p 2.84p SWEB region 17.42p 7.59p 2.84p Yorkshire Electricity region 14.25p 6.99p 2.69p Prices exclude VAT at 5%.

All customers (in and out of area) who buy gas as well as electricity from Yorkshire Electricity will qualify for the dual fuel discount worth £10.50 (inclusive of VAT) a year.

Yorkshire Electricity has recognised that LAS are a unique customer and as such, has developed a special sales team to deal with them. The special sales team is very familiar with the Standing Order and it is clearly recognised that LAs are not best placed to pay a premium on electricity purchases. To help reduce costs, Yorkshire Electricity provides energy efficiency measures as part of their tender submission to LAs. Yorkshire Electricity recommends LAs to provide the following information in its tender documentation.

34 • All the standard consumption data for each site to be supplied with green electricity. In this way, Yorkshire Electricity may be able to block the green premium to certain times of the day to correspond to certain consumption patterns. • The reasons for the procurement of green energy. If it is for promotional purposes, then Yorkshire Electricity may be able to assist with this.

Yorkshire Electricity also provides an electronic billing service called Relay. The benefits of this include automatic validation of bills, timely bills and greater control and flexibility over consumption.

4.4 Summary of Supplier Tariffs

It is important to note that commercial tariffs are normally negotiable and this is likely to be the case for green tariffs. It is also worth noting that suppliers may vary the unit prices for green power in different REC areas. Generally, there are clearly two main types of green tariff on offer to LAs: the tariff for actual green energy supply and the “eco-tariff’ which doesn’t attempt to match green generation with green supply. The eco-tariff may not be attractive to LAs for a number of reasons:

• LAs are likely to prefer the actual purchase of green energy because it immediately reduces their CO2 emissions; • the LA purchasing site can be used as an example or flagship for other LAs to fully understand the benefits of procuring green energy; it also has greater public relations benefits; • it would be very difficult for the LA to invest council tax payers money in a scheme over which they had limited or no control.

It is therefore more likely that a LA would be interested in a tariff that related to the actual supply of green electricity from well defined renewable energy technologies.

35 Table 9.0. Green Electricity Suppliers in the UK No Supplier Green Premium RE Alter Increase Decrease Energy ESCO Supply to Recommendations to LA Tariff to LA level sources mix? efficiency LA now 1 Eastern y* Neg. [H, W, V PV, S, X V V X Clear policy position; CL, PV] OFW State which RE sources; How much RE % required. 2 East Midlands V Neg. LFG, V CHP X V V V Need to address energy MSW, efficiency first, before purchase W, CHP RE. 3 London X - - - CHP - V V - - 4 Manweb ✓ 5% H, W V V X V V - Be flexible 5 Midlands X - - - - - V V - - 6 Northern X - - - - - V - - - 7 Norweb X ------8 Powergen ✓ Neg. LFG, W, V B; All X V X V State which RE sources; 5-10% H, MSW How much RE % required. 9 RECo V Neg. ? ? ? ? V V V Location and monthly data. 10 Scottish Hydro X ------11 Scottish Power s Neg. [W, H] V W, H, WA X V - - - 12 Seeboard X ------13 Southern X ------14 SWALEC X ------15 SWEB s Neg. H, W, ✓ All W ✓ X ✓ How much RE % required LFG 16 WRE V Neg. W, H, S, V V - V V X Only for LA who require 100% B RE 17 Yorkshire V Neg. CL, W V LFG X V V X What is motive for purchasing 8% RE - PR? TOTAL 9 Key H = Hydro; W = Wind; B = Biomass; LFG = Landfill Gas; MSW = Municipal Solid Waste Incineration; CL = Chicken Litter Incineration; PV = Photovoltaics; S = Solar; OFW = Offshore Wind; WA = Wave; CHP = Combined Heat and power; Neg. = negotiable; = unknown; “-/” = yes; “x” = no “RE” = renewable energy; “PR” = public relations * Eastern offers a tariff that is NOT based on green generation, but the premium is used to invest in specific RE generation.

36 4.5 Green Energy Supply Issues

The supply of green energy to LAs involves a number of issues, both from the suppliers and buyers perspectives. The following is a list of pertinent questions.

• Are there sufficient green electricity suppliers? • Do the suppliers have sufficient green generating capacity? • Do the suppliers and the LAs fully understand the nature of green electricity generation? • How easy is it for new entrants, particularly green suppliers, to enter the electricity supply industry? • Do the green suppliers have a supply licence that allows them to supply green energy nation wide? • Are the LAs fully informed of whom to approach for green supply? • Do the LAs understand the different green supply mechanisms or tariff structures that maybe available to them? • How do LAs obtain a green electricity supply? • Are LAs aware of other services that a new (preferably green) supplier may be able to offer them?

Are There Sufficient Green Electricity Suppliers?

From the analysis of suppliers, half of the major electricity suppliers were able to offer a green electricity product to LAs (see Table 9.0). The nature of the green product on offer varied from the supply of conventional generated electricity with a green premium, to the actual supply of green electricity (matching supply with that generated). The large number of green suppliers (nine) and the potential for many more to offer a green product, would indicate that there is sufficient choice. However, the choice is often limited by a number of factors, such as the ability to supply nation wide and the type of green tariff that is available (see below). The large number of suppliers may also indicate competition in the green supply market. Again, there are a number of factors that are likely to impede full competition for some time (see below).

Do The Suppliers Have Sufficient Green Generating Capacity?

One of the key issues is the availability of green generating capacity. Many suppliers will refer to their commitments to source green power, but do not further stress that this commitment was largely driven by regulation under the Non Fossil Fuel Obligation (NFFO) scheme. Many of the suppliers also mentioned that they currently supply green power as part of their normal tariffs to both domestic and commercial customers. Again, this is power generated under the NFFO scheme and is not part of the supplier’s own drive to offer a different product. By far the greatest amount of green generation that is available to be sold as a clearly identified green product is from the NFFO 1 and 2 schemes that were released from their contracts with the RECs (via the Non Fossil Purchasing Agency) at the end of 1998. Indeed, the majority of the renewable generators formed a consortium - the Renewable Generators Consortium (RGC) see below - to negotiate contracts with interested suppliers. There is a very small amount of renewable energy generation that has been developed outside the NFFO mechanism that is available as a separate green product on the electricity market. Suppliers cannot clearly offer the green energy generated under subsequent NFFO schemes as a separate product and at a premium to customers. Both

37 domestic and commercial customers are already meeting the generation prices for this green electricity via the fossil fuel levy.

The number of suppliers who are able to offer a truly green product (the supply of which can be matched to its generation) is therefore limited. Some of the “green suppliers” have stated that the premium paid for the green product (whether actual or not) will be used to invest in future green generating capacity. The investment decisions are likely to be taken by independent bodies who will guide the supplier as to which technologies have the greatest potential, on economic and or environmental grounds. This process is however, likely to be rather slow, since accumulating the capital from the premium is likely to take some time and will more than likely be inadequate for investing in capital intensive technologies such as wind or biomass plants of any significant scale.

The Renewable Generators’ Consortium (RGC)

RGC was formed in Autumn 1997. It was initiated by a number of NFFO 1 and 2 contract holders who were concerned about the prices that would be offered for their generation post 1998, when the NFFO contracts ceased. The NFFO 1 and 2 contract holders tendered the 312 MW available generation “on block” to potential green suppliers. This allowed for a green premium to be identified (between 10-20%) which in turn, helps to ensure the survival of the generating projects. The green tariffs being offered by suppliers at the moment are very largely based on the generating capacity tendered by RGC. In this way, green electricity consumers are directly contributing to the continuation of these generating plants.

Because of the regionalised bidding of some suppliers, the generation capacity was contracted to a range of existing REC suppliers, existing non-REC supply companies and new entrants to the supply business. The suppliers took varying strategies when bidding for capacity, some bidding only for generation within their distribution network i.e. REC bidders, others bid for generation on a national basis. This will influence the ability of the supplier to offer its green product nation wide unless the supplier is prepared to trade the green electricity via the Electricity Pool.

Do The Suppliers and The LAs Fully Understand The Nature of Green Electricity Generation?

Renewable energy is often unique in its generation process. It cannot be easily turned on or off. Suppliers and buyers need to fully appreciate the intermittency of some renewably generated electricity to understand how green energy can contribute to energy demands. This is particularly important for those suppliers who are only offering a green product and who do not have the ability to supplement supply with conventional energy. Suppliers therefore need to organise a green energy portfolio of technologies that ensure a continuous supply. Customers, such as LAs need to understand the consumption profiles of the sites to supplied with green energy. Not only will this identify where and when green energy can contribute to site demands, but will also allow the LA to better manage the electricity consumption at each of those sites. Sites that may be better placed to enjoy green electricity are those which operate at outside peak load time, such as leisure centres.

How Easy is it to Enter the Electricity Supply Industry?

38 To facilitate choice and competition, new market entrants who are able to offer a green electricity tariff, should be assisted to trade in the liberalised market. OFFER has rather belatedly provided a new entrants information pack to assist new suppliers. However, the information pack does not stress the difficulty that the new entrant will face with the regulatory procedures. One of the most difficult market entry barriers is obtaining the correct software to enable the supplier to electronically communicate with all the obligatory bodies, such the Electricity Pool and all the settlement agents.

The list below provides a number of key actions the new entrant needs to do. The list is by no means exhaustive.

• Obtain a Supply Licence from OFFER. This requires submitting a five year business plan with proof of financial security when there are negative cash flows. • Obtain generating capacity from renewable generators. Since the majority of green generation has been secured under contracts negotiated by the RGC, it will be difficult to obtain sufficient capacity to supply green electricity in the short run. • Liaise with the PESs to sign DUoS (distribution use of system) agreements and arrange meter operation, data collection and data aggregation services. • Establish Codes of Practice, which are a statutory requirement which govern what a customer should expect from an electricity supplier. • Establish supply contracts that will need to be signed by each customer. • Register with all the relevant agencies and develop software that will enable the new entrant to electronically communicate with all the relevant bodies and agencies such as the Electricity Pool.

Do the Green Suppliers Have a Nationwide Supply Licence?

To provide LAs with complete choice, the green electricity supplier needs to operate on a nation wide basis. The liberalisation of the above 100kW market has enabled many suppliers to do this. However, a number of LAs sites which could be suitable for the purchase of green energy are below 100kW and as such, are part of the current market liberalisation process. Until this market is fully opened (due by the Summer of 1999) green suppliers may be restricted to supplying in area only. Some suppliers are known to prefer supplying in area only and as such, will not offer their green product nation wide. A further problem with the ability to supply nation wide is the comparative advantage the traditional host supplier has in reduced TUoS (transmission use of system) charges. This may provide the traditional host supplier with an advantage when supplying its green product in area.

A new market entrant will also face the problem of which areas to apply for its supply licence. It would be preferable to acquire a licence that allows the supplier to supply across the UK, thus meeting the needs of a range of customers. However, to do this is costly since a great deal more effort is required to prepare an application for a full across area supply licence than for an area specific supply licence.

Are the LAs Fully Informed of Whom to Approach for Green Supply?

Some of the electricity suppliers have promoted their green products widely, such as SWEB, Eastern Energy and PowerGen. Others have promoted their products to a limited extent. Only SWEB has a green energy web site and only Yorkshire Electricity has a separate web page for LAs and Housing Associations. Only SWEB, Yorkshire Electricity and PowerGen

39 automatically offered to provide promotional literature for further information. None of the green suppliers have promotional literature that has been tailored to the LA as a special customer. Some did have account managers who specifically dealt with LAs, but these did not necessarily know about green tariffs. This is an historic feature designed to assist LAs to purchase conventional energy and was not introduced as a measure to assist LAs to procure green energy.

The process for identifying and contacting a suitable green supplier is not straightforward. Most LAs will contact their traditional host PES or REC or their current supplier (who may not be the host PES). In doing so, the LA is likely to limit the choice of green energy that is available to them. At the moment, LAs can contact OFFER to obtain a list of UK wide licensed electricity suppliers. However, what would be of more use is an OFFER held list of which companies are licensed to supply electricity across the UK to both below and above 100kW sites and also those that are able to provide a green tariff. It is recognised that the market for green energy is quickly developing and changing, but a central point of information on green suppliers would be very beneficial to LAs.

Do the LAs Know How is the Green Tariff Calculated?

The suppliers need to very clearly state how their green tariffs have been calculated and what flexibility exists to meet the LAs requirements. Most energy managers and those responsible for energy purchase within a LA will be familiar with different tariff structures and the negotiating process to determine an acceptable rate. Green tariffs are mostly assumed to be up to 10% higher than conventional electricity tariffs. This however, may not always be the case. Forexample, a LA was able to procure a percentage of its supplies from green energy at no extra cost than its previous conventional supply. Indeed, some suppliers have stated that their green product may not attract a premium when compared with an incumbent supplier’s charges.

If a greater expenditure is to be incurred, then the LA needs to have as much information as possible on what the premium price “buys” for the LA. It is unlikely that LAs will be interested in an eco-tariff where the premium is paid for conventional supplies since the LA will not be able to directly influence how its Council Tax payers money is invested in green generating capacity. LAs are more likely to be interested in paying a premium for actual green supply because:

• procuring green electricity will directly contribute to the LA’s environmental targets eg cutting CO2 emissions; • the purchase will demonstrate to other LAs, businesses and the public the merits of procuring green energy; • the LA may chose to promote a particular green supplier to domestic and small business customers within its district; • if the purchase is independently audited, will provide a clear justification for purchasing a premium priced product.

How do LAs Obtain a Green Electricity Supply?

Assuming the LA has chosen a suitable green supplier from a successful competitive tender process, the LA needs to undertake a number of actions. The actions are as follows.

40 • The LA needs to appoint a meter operator as soon as possible by contacting any PES. Meter operation services have been competitive for the above 100kW market for some time. However, the below 100kW market for non-half hourly metered sites is still subject to regulation that requires the host PES to provide meter operation, data collection and data aggregation services until April 2000. It is very likely that the LA would have non­ half hourly metered sites, such as sports pavilions and small public buildings. The LA is therefore not free to choose the meter operator, data collector and data aggregator. In reality, most LAs will probably chose the host PES. Installing half hourly meters, whilst initially costly, will provide the LA with flexibility in the choice of meter operator and will enable the LA to better manage its electricity consumption at those sites.

The LA needs to enter into the required contractual agreements including:

• a Connection agreement with the local PES, which enables the LA to be legally connected to the local distribution network; • a use of system agreement which enables the chosen green supplier to rent the local network to distribute the green electricity to the LA; • a supply contract with the LA’s chosen supplier which covers all agreed tariffs and charges for distribution; • a meter operator contract with the appointed meter operator to enable half hourly data collection to be undertaken (if appropriate).

The LA needs to provide the green supplier with load profile details and maximum consumption figures for the previous 12 month period for all the sites (if the LA hasn ’t already done so in the tender documents). The green supplier will be responsible for the following payments:

• the green electricity it purchases from the green generators; • the local PES for rental of the local distribution system (DUoS); • the National Grid Company (NGC) for rental of the transmission network (TUoS); • settlement charges.

The LA will be responsible for the following payments:

• the supplier combined invoice for supply of green electricity, its transmission and distribution, and settlement charges; • the meter operator for maintaining the half hourly metering service (if appropriate).

Are LAs Aware of Other Supplier Services?

The majority of electricity suppliers, whether supplying green or conventional energy, have facilities to assist multi-site or special commercial customers, such as flexible billing arrangements. Traditionally, these services were supplied by the host PES in a non­ competitive market. Since the commercial above 100kW market has been open since 1994, all suppliers have been able to compete with each other, not only in the supply of electricity, but also in the supply of related services. When considering purchasing green electricity, the LA should also consider what other services the supplier can provide, particularly those which may assist the LA to better manage its electricity consumption. This is particularly important for multi-sites, which may have different load profiles. This is quite probable with LAs who will be operating leisure centres and other facilities with unusual consumption

41 patterns. Tracking the consumption at all these sites will better enable the LA to reduce its electricity consumption and help introduce energy efficiency measures.

Billing services are often now supplied via the internet which allows for speedier settlements and reduced administrative burdens. For this type of service to be of most benefit to the LA, the LA needs to have access to the appropriate software. This type of software is becoming more common and it should not pose a significant problem to a LA.

The ESCO Route for LAs

Many LAs have for many years, some dating back to Victorian times, been responsible for some measure of local power supply. In recent times, this has mainly been through district heating projects or combined heat and power plants providing power and heat to individual buildings. The gradual liberalisation of the electricity and gas supply markets since 1989 has provided an opportunity to develop some of these concepts to a wider market.

Many LAs now have specific targets to reduce CO2 emissions from their areas. These have been imposed by government eg HECA, or self imposed through environmental and LA21 policy development. These drivers have meant that some LAs have looked at new ways to address their environmental footprint. The development of Energy Service Companies, ESCOs, has seen considerable interest as a vehicle to bring about environmental aims.

The ESCO concept would see LAs linking with a power supplier to provide electricity, gas, heat and cooling to LA controlled properties. This process might be developed into a company that provides these services to local residents. The competitive advantage of the LAs involvement in the ESCO is that they have a local remit, can therefore make use of reduced local distribution costs, and do not need to make large profits ie they can promote energy efficiency at the same time as providing power supplier. The need for existing suppliers to make profits for shareholders means that they are reluctant to promote energy efficiency with the concomitant reduction in supply base. It is recognised though, that through the Standards of Performance, the suppliers are required to promote and implement energy efficiency measures.

A number of LAs are currently looking at joint venture opportunities to develop ESCOs and it is likely that they will become widespread over the next 10 years. The environmental imperative for LAs is also likely to mean that there will be a distinct move towards green ESCOs where renewable generation is used to provide both electricity and heat.

4.6 Guidelines to Help Establish a Local Authority Market for Green Power

Green power has recently become an environmentally important tradable commodity brought about by the liberalisation of the electricity market in the UK. The government has a target to generate 10% of electricity from renewables by 2010. To meet this target, strong drivers for the promotion of renewables need to be established. The full liberalisation of the electricity market is just one mechanism that could assist with reaching this target. This is because if a clear demand for green energy is established, then there will be commercial, as well as environmental drivers for suppliers to offer green electricity. LAs are nation wide customers who can be presented as a well defined market sector. For the trade in green power to really have an impact, it needs to be promoted.

42 The reasons why LAs and electricity suppliers should be interested in green power go beyond global environmental concerns. Along with the general environmental drivers, these particular reasons are listed below:

• buying green power will help LAs meet their environmental, particularly CO2 reduction, targets; • buying green power publicly demonstrates LAs commitment to their environmental policies and aims; • buying green power may help to support the continuation of a renewable generator within the LA’s area and as such, is helping to maintain local employment; • buying green electricity from a generator within a LA’s area will also demonstrate the LA commitment to the sustainable use of limited resources or the efficient use of recycled resources eg landfill gas; • selling green power will publicly demonstrate suppliers commitment to environmental issues, both generically and in company terms; • selling green power may result in increased investment in renewable generating plant thus increasing capacity in the future; • selling green power will help electricity suppliers to diversify their product base and increase choice and competition in the electricity market.

Despite the fact that green power is able to satisfy the requirements of both the customer and the supplier (as listed above) the LA market for green power is currently not very large. To promote the smooth purchase of green electricity, this project has developed a set of guidelines (see below). The aim of the guidelines is to assist LAs to purchase green energy and to assist green energy suppliers to target LAs as customers.

These guidelines highlight a number of issues that have been identified as part of this project. Some of the issues pose serious barriers to the successful procurement of green energy by LAs, whilst others can be more readily addressed. The guidelines attempt to offer a solution to each of the identified issues for both the LA and the green power supplier.

The guidelines also contain information on a number of LAs who have been involved with the purchase of green energy. These LA case studies are examples of the procedures that were undertaken to procure green energy and how any barriers were overcome, or not. They will be extremely useful to other LAs who are considering procuring green energy. There are five case studies in total; three represent successful purchasers of green electricity - Bristol City Council, Gloucestershire County Council and Plymouth City Council; one represents a LA currently undergoing a green tender procedure - West Wiltshire District Council; and, one represents a two LAs who jointlytried but were unsuccessful in purchasing green electricity - Carmarthenshire and Ceredigion County Councils.

43 4.6.1 Issues Identified by the Project The Tendering Process LAs are normally governed by the Standing Order when procuring any goods or services. The Standing Order is a document combining both a policy statement for the conduct of LA business and a set of rules based upon relevant Local Government Acts. It is within the Local Government Acts that the concept of ensuring value for money for Council Tax payers is embodied, thereby driving a least cost approach. Because of this and their overall importance, Standing Orders can be a significant barrier to purchases when factors other than price might be driving the decision making process. However, the Best Value approach goes some way to address this although to date, this mechanism has not been fully explored. Green Energy Purchasing and Supply Policies The lack of a strong energy and or environmental policy will impede the LA from purchasing green energy at a possible premium. Suppliers not providing a green product will limit their market potential. Buying Green Energy via a Consortium A number of LAs procure goods and services via a purchasing consortium. The consortium is likely to be at least County wide, encompassing a number of councils. The consortium may even be much larger than one unitary Council. Purchasing via a consortium may severely restrict an individual LA from procuring green energy for its own sites. Key Individuals A motivated and enthusiastic energy or environment officer in a LA will present a better case to Council Members for renewable energy purchase than one who is unconvinced of the environmental benefits. Similarly, an individual who is tasked with the responsibility of selling green power to LAs within a supply company will be a better focus for all LA enquiries. Verification and Accreditation An independent green energy accreditation process will go a long way to reassure LAs that their purchase of energy is truly green, particularly if a premium price is levied. Technology Mix Not all green suppliers are able to offer all green generating technologies. Some LAs may not wish to purchase electricity that has been generated from certain technologies they regard as not truly green. Energy Services The availability of a full energy services package will be more appealing to LAs that may be considering an ESCO route. A full suite of energy services will provide the opportunity for a supplier to add value, which is particularly important when premium prices may prevail. Technical Issues Many LAs are unaware of the technical aspects of energy supply, including the siting of meters and full understanding of consumption profiles. Providing readily accessible software over the internet which helps to interpret consumption patterns, preferably on a day by day basis, will allow suppliers to again add value to their services. It will also lend itself well to introducing energy efficiency measures. Data Handling It is a problem for LAs to deal with large amounts of electricity consumption data from different sites that may be billed at differing frequencies and paid by different methods. Demonstration LAs will be better able to understand and appreciate green energy procurement if it is demonstrated by another LA. The green energy supplier can also gain considerable benefit from the promotion of this. Premium Pricing The suppliers need to very clearly state how their green tariff has been calculated and what flexibility exists to meet the LAs requirements. Green tariffs are mostly assumed to be up to 10% higher than conventional tariffs, but this may not always be the case. Green tariffs are often open to negotiation and some suppliers are offering green electricity without a premium when compared to the incumbent supplier’s charges for conventional electricity.

44 4.6.2 Guidelines for Local Authorities The Tendering Process • Explore the exemptions from least cost within the Standing Order eg using local suppliers • Obtain a full list of green suppliers from OFFER and request flexibility eg a percentage green energy supply, in the tender documents • Use the Best Value route and request an energy service package to get value for money Green Energy Purchasing Policy • Implement cross referenced renewable energy and environment policies • The energy policy should recognise the possible premium for green energy • The environment policy should link CO2 savings with green energy consumption Energy Consortium Buying • Explore options for buying outside an existing consortium for suitable green energy sites • Persuade the consortium to purchase a percentage of electricity from green sources • If planning to join a consortium, retain a number of key sites within area for green energy Key Individuals • Appoint a green energy motivated individual to promote green energy to Council Members • Ensure that this individual liaises with all relevant Committees - energy, environment, etc • Advertise this individual to electricity suppliers as the contact for green energy purchases Verification and Accreditation • Seek independent verification from the electricity suppliers that their energy is green • Check whether the suppliers are planning to abide by the EST managed REAS • Propose reinvesting savings from energy efficiency measures in green power purchase Technology Mix • Identify which renewable energy technologies are of environmental, energy, social interest • Include an outline in the tender of why these renewable technologies are important • Be prepared to select suppliers which offer renewable energy technology specific power Energy Services • Select energy services that will be beneficial and try to place a value on them • Include a request for these energy services in the tender documents • Relate the complete energy services package to energy and environment policies Technical Issues • Locate all site meters and note their type, particularly whether they are half hourly • Provide all consumption data for each meter at each site in the tender documents • Identify where energy efficiency measures could be introduced Data Handling • Choose a single payment mechanism for all sites supplied with green electricity • Be able to track consumption with green tariffs, particularly on percentage green supply • Explore the use of energy consumption monitoring software that some suppliers may make available on the internet Demonstration • Buy green energy as a demonstration of putting LA21 objectives into practice • Prepare suitable promotional material for the general public, businesses and schools • Prepare “how to” information for other LAs wishing to purchase green energy Premium Pricing • If the suppliers require a green premium, check the reasons why and ask for justification • Identify how the premium is applied i.e. to unit charges or to all energy supply charges • Enquire if green premiums can be renegotiated on an annual basis

45 4.6.3 Guidelines for Green Energy Suppliers The Tendering Process • Fully understand the Standing Order regulations with which the LAs have to abide • Be flexible in green tariffs or green electricity percentages offered • Include an energy service package and promote it as better value for money Green Energy Supply Policy • Implement a renewable energy supply policy that can be used for promotional purposes • Target LAs as key customers for green energy supplies • Provide details on CO2 savings made with green energy consumption Selling to Energy Consortium • Examine the economies of scale LAs are seeking when purchasing via a consortium • Offer tariffs with a percentage green supply to reduce premium payment • Help LAs to identify key sites within a given area for green energy supplies Key Individuals • Appoint a green energy account manager specifically for LAs • Ensure LA account manager understands all green supply issues ie generation, distribution • Advertise this individual to all LAs as the contact for green energy supplies Verification and Accreditation • Provide independent verification for the LAs that the energy supplied is green • Join the EST managed REAS when launched* • Ensure that any premium for the green energy is justified by the verification process Technology Mix • Identify and fully understand which renewable energy technologies you are offering • Understand the environmental, energy and social drivers for each technology type • Be prepared to provide supply from specific renewable energy technologies Energy Services • Select energy services that will be beneficial and try to place a value on them • Provide these energy services to LAs • Relate the complete energy services package to your own environmental policy Technical Issues • Help LA locate all site meters and provide details on meter types ie half hourly • Provide interpretations for different consumption patterns and load profiles to assist LAs understanding of electricity demand and supply • Identify where energy efficiency measures could be introduced Data Handling • Offer a selection of payment mechanisms for all sites supplied with green electricity • Provide a consumption tracking mechanism, particularly on percentage green supply • Provide energy consumption monitoring software on the internet Demonstration • Assist LAs who wish to have a demonstration site supplied by green energy • Prepare suitable promotional material for the general public, businesses and schools • Prepare “how to” information for other LAs wishing to purchase green energy Premium Pricing • Ensure all green premiums are justified • Present how the premium is levied - on unit charges or on all energy supply charges • Be prepared to annually negotiate green premiums

* The Renewable Energy Accreditation Scheme (REAS) will be launched by the end of 1999.

46 4.6.4 Local Authority Case Studies Gloucestershire County Council: Successfully Purchased Green Power

Gloucestershire County Council (GCC) has successfully purchased 100% green energy for its Shire Hall Complex. Following a competitive tendering process which included a specification for green energy supply on a varying percentage basis and an environmental questionnaire, the contract was awarded to the Renewable Energy Company. The Renewable Energy Company will supply approximately 3,000,000kWh per annum of electricity from landfill gas sites between 1.10.98 to 30.09.00. This represents approximately 10% of the Council’s total electricity consumption and saves 1,700 tonnes of CO2 per year. The two key drivers for the green energy procurement were the strong environmental policy reflecting the Council’s commitment to reduce CO2 emissions and the enthusiasm of the Council’s energy and environment manager. The successful green energy supply has been widely advertised. Two Gloucestershire County Council schools and the Cheltenham and Gloucester College of Higher Education also have green electricity supplies from the Renewable Energy Company.

For more information contact Mike Simpson tel 01452 425829; fax 01452 425792 Plymouth City Council: Successfully Purchased Green Power

Plymouth City Council (PCC) has successfully purchased green energy through a one year contract from SWEB. The SWEB tariff offered a 20% green energy component and also an overall cost saving against the existing SWEB tariff with no green component. The competitive tender process canvassed the majority of second tier suppliers, but SWEB, the incumbent supplier, offered the best deal. The SWEB green tariff will be supplied to 44 below 100kW sites, reducing CO2 emissions by 52,700kg over the one year supply period. The PCC has committed to an environmental strategy and sees the purchase of green electricity, in combination with energy efficiency measures, as being key activities in support of the strategy. The Environmental Policy and Action Plan acknowledges the importance of renewable energy in reducing CO2 emissions and contains a clear willingness to investigate the installation of renewable generation within the Council boundaries and to procure green energy for the Council’s use.

For more information contact Chris Piper tel 01752 307875; fax 01752 304819 West Wiltshire District Council: Currently Preparing for Green Power Procurement

West Wiltshire District Council (WWDC) is preparing to purchase green energy for three key sites. WWDC is using an energy consultant to prepare the green tender documentation and as such, WWDC are not in direct contact with the potential green suppliers. The tender documents will contain requests for both green tariffs and percentage green supply. The three above 100kW sites require 1,116,000kWh per annum and account for 30% of the Council’s total annual electricity consumption. The 1997/98 electricity consumption increased by 8.4% across all the Council’s properties and amounted to 4,880 tonnes of CO2. The main driver for considering green energy purchase is the Council’s strong Energy and Eco Efficiency Programme Policies. The main thrust of the Energy section of the policies is to greatly increase energy efficiency and to develop a renewable energy policy. Coupled with this, the Council’s purchasing policy states that best value should always be sought when procuring goods and services and that best value means balancing price with quality. The purchasing policy also stresses that prices do not always adequately reflect full environmental costs.

For more information contact Tony Miles tel 01225 776655; fax 01225 770311______

47 Local Authority Case Studies Bristol City Council: Successfully Purchased Green Power

Bristol City Council (BCC) has successfully purchased green energy for its CREATE Centre and Records Office Complex through competitively contracting in the above 100kW market. The tendering process allowed for premium pricing to be considered. Suppliers were invited to tender and asked to give details of their green energy product. The initial contract for 12 months commenced April 1998 and was awarded to PowerGen based on 100% green supply. A subsequent tender for 1999-2000 has been carried out with PowerGen again being successful in supplying the CREATE Centre complex. In addition, Amelia Court, an administrative building, is also being supplied with 100% green supply by Yorkshire Electricity. Since 1991, BCC has an active policy framework in place which addresses energy consumption and CO2 emissions. BCC has adopted a Green Charter and energy policy. A new energy policy was approved on 20 April 1999 which aims to reduce energy costs and consumption, and CO2 emissions by 15% by 2010 from a 1996/7 base and most significantly aims to purchase 15% of its electricity from renewable supplies by 2010. The Council has publicised the purchase of green energy for the CREATE Centre complex as part of its sustainable development programme. A promotional poster states that the green energy consumption at the CREATE Centre saves 260 tonnes of CO2 per year, which is equivalent to the volume of 60 hot air balloons.

For more information contact Paul Isbell tel 0117 9224430; fax 0117 9224433 Carmarthenshire and Ceredigion County Councils Were Unsuccessful in Purchasing Green Power

Carmarthenshire County Council (CaCC) invited tenders for the procurement of electricity on behalf of Ceredigion County Council (CeCC) at three sites (a school, a leisure centre and administration offices). Nine supply companies were invited to tender on a restricted quotation basis for the supply of electricity based on conventional and green generation. Only two suppliers submitted timely tenders for green energy (one supplier submitted a tender after the closing date and was therefore disqualified). One of the timely green tenders was incomplete and therefore could not be assessed and the other was 20% more expensive than conventional energy. The successful tenderer currently supplies all the Council’s other 100kW sites with conventional energy supply.

For more information contact Peter Foale (CeCC) tel 01970 633444; fax 01970 615639 Andrew Morris (CaCC) tel 01267 224372; fax 01267 238378 Electricity Supply Companies Major Electricity Supply Companies Other Useful Organisations Eastern Electricity (DETR) East Midlands Electricity Pool London Electricity National Grid Company (NGC) Manweb Energy Savings Trust (EST) Midlands Electricity Department for Trade and Industry (DTI) Northern Electric and Gas OFFER Norweb Powergen RECo Scottish Hydro Scottish Power Seeboard Southern SWALEC SWEB WRE Yorkshire Electricity

48 5. PROJECT RESULTS

The results from this project provide a number of very clear messages on the ability and willingness of LAs to procure green electricity. There are some LAs who are currently purchasing green power (as demonstrated by the case studies) which indicate that it is possible, albeit at a small scale, at the moment. It is also encouraging that some LAs are keen to pursue the procurement of green energy and anticipate that it is something that they can achieve. Encouragement must also be drawn from the fact that only one of the 23 LAs interviewed was unsuccessful, through no fault of its own, to procure green energy. The fact that the majority of the LAs interviewed (over 80%) expressed an intention to seek green energy is also very positive. This position is even more positive when the circumstances under which a LA must procure goods and services is taken into account. The first phase of the project identified the normal procurement procedures undertaken by a LA. This identified a number of issues, which could be potential barriers, to the procurement of green energy, as follows.

• The type and size of the LA may influence the procurement procedures it will use. However, despite the different types and sizes of LAs, the Standing Order is the common (and often only route) for purchasing goods and services, including electricity. The Standing Order has been established by central government (but reflects local government legislation) and is a set of principles to which the LAs must adhere. • However, whilst the Standing Order route is common, each LA has the responsibility for implementing the Standing Order within its own rules. As such, the interpretation of the principles of the Standing Order is within the remit of the LA and is therefore likely to differ between LAs, even those LAs of the same type, e.g. district councils. This demonstrates the difficulty in introducing a common procedure for green energy procurement since the implementation of that procedure will vary between LAs. • The varying implementation of the Standing Order is further reflected in the different LA departments and those within the department who are responsible for electricity purchase. Electricity purchase responsibility ranges from Chief Executive’s Office, to the Housing Department, Technical Department or Environmental Health Department. Within these departments, Energy Managers, Housing Officers and Environmental Managers all have responsibility for energy purchase for the LA. This further compounds the difficulty of introducing a common green energy procurement procedure. • The Standing Order requires the procurement of all goods and services to attain value for money. Only in exceptional cases will a contract be awarded to a supplier whom did not proffer the lowest tender. When constrained by a requirement for least cost, the LA will incur considerable difficulties in procuring green energy which often, although not always, attracts a premium price. This can be overcome by emphasising the important environmental benefits from green electricity compared with conventional electricity. This would be best achieved via the Best Value principle will allows LAs to take the environmental benefits into account. To date though, the Best Value route has not been fully exploited. • More work needs to be done to raise the awareness of all elected members to the benefits of green electricity and the possibilities, under Best Value, to introduce more flexibility into Standing Orders, whilst maintaining audit accountability and integrity. • Green electricity purchase will fulfil commitments made under LA21 and HECA and could be applied successfully to an ESCO. Through this vehicle, support could be directed towards the fuel poor. It is important that the links between each of these actions

49 are recognised within a LA. This may increase the possibility of purchasing green electricity. These worthy actions may need some form of legislative backing if they are to have ”teeth”. • Green energy suppliers need to raise their profile, to become more proactive, and to seek to enter partnerships with LAs so that the environmental benefits of energy from renewable resources can be made widely available to the community.

The issues above shaped the questionnaires that were used in the telephone interviews with the LAs and formed the basis of the subsequent discussions. It was quite clear that the current procurement practices, while robust, did place some restrictions on LAs in their ability to successfully procure green electricity. The key findings from the first tier questionnaire are as follows.

• The Standing Order prohibits (apart from in exceptional cases) the procurement of goods and services which were not tendered at the lowest price. • Therefore, the main barrier to purchasing green is the perceived premium price. (It is often assumed that green electricity attracts a premium of approximately 10% on top of conventional electricity prices, but the case studies showthat this is not always the case). • The adoption and implementation of key energy and environmental policies is crucial for green procurement to happen. • Therefore, full support of Council Members is very important and can best be achieved by advocating the environmental aspects of green energy purchase which are likely to be “vote winners ”. • LAs in consortia have difficulty in acting independently on behalf of individual sites within their authority area and are therefore restricted in their ability to buy green energy. • There is a strong perception that there is insufficient green generating capacity to meet all LAs requirements and therefore some green energy may not be truly green. • This therefore leads to the potential abuse of green energy schemes and the lack of a widely accepted verification or accreditation green energy scheme exacerbates this problem. • Without central government involvement, the self imposed CO2 reduction targets are unlikely to be met.

The majority of key findings from the first tier interviews were not surprising considering the issues that had been identified by the general procurement survey. The aim of the second tier or in-depth interviews was to identify how the above issues were tackled by those LAs who had already purchased green energy or were currently undergoing a green energy procurement. Identifying a LA that had tried, but was unsuccessful in procuring green energy also provided important results as to the issues that are most difficult to overcome. The key messages from the in-depth interviews are as follows.

• Successful green energy procurement was the result of a number of key features:

• the LAs had strong energy and or environmental policies, which sought to place a “value” on environmental benefits, particularly reduced CO2 emissions, and aimed to meet objectives under the LA21 programme; • the elected Council Members were willing to explore green energy as an exceptional case from the principle of least cost under the Standing Order arrangements; • a key individual who was a strong advocate of renewable energy who pushed the procurement process forward;

50 • the LAs were not part of a buying consortium so had the ability to act independently; • the LAs had a thorough understanding of the green energy suppliers to whom tender documents were sent; • the LAs had a good knowledge and understanding of electricity supply issues, such as the intermittency of renewable energy generation, and demand issues, such as consumption profiles.

• Unsuccessful green energy procurement was a result of the following:

• lack of a strong energy or environmental policy to reinforce the procurement of green energy; • lack of a key individual to actively drive the green procurement process forward; • poor knowledge of all green energy suppliers that could have been invited to tender; • the green energy suppliers that were invited to supply did not adhere to the requirements of the tender specification and provide sufficient details on the supply of green energy to the LA sites in question; • poor justification of the premium price that was offered by the green energy suppliers.

The review of all the major UK electricity suppliers aimed to understand the green energy supply issues. In doing so, the full picture of the trade of green energy in the liberalised market would be obtained. The key findings from the telephone survey are as follows.

• Generally, the first point of contact with the supplier was via the general customer telephone number. It took some time and many points of contact before the correct person to discuss green tariffs was found. This would be very frustrating for a customer, who would be disinclined to pursue the difficult route of finding the correct person with whom they could discuss green electricity. • The contact for green tariffs could not discuss supply options for LAs. This meant being passed to yet another contact. • Often, a key account manager for LAs did not exist. • The information was often inconsistent e.g. the LA account manager provided different information on the green tariff on offer to that provided by the green tariff expert. Clearly, this inconsistency needs to be rectified or otherwise customers will be confused and the supplier will be poorly represented. • Not all of the suppliers who had green tariffs also had promotional literature. Those that did, did not always automatically offer to mail the literature on their products. A follow­ up mailing of information or brochures on the green tariffs would be very beneficial in reinforcing the product to the customer. • Only one supplier had a very good web site advertising its green tariff. One other supplier did mention its green tariff on its web site, but only to a limited extent. This is an obvious gap in the suppliers’ marketing and promotional activities. • Many of the suppliers did not appear convincing in their ability to track the green product sold to the customer. This is particularly important for LAs who may pay a premium price for the green electricity and it is imperative that the premium product can be clearly verified and tracked.

There are clearly some issues that are affecting both the LA as a purchaser of green electricity and the green electricity suppliers. These issues form the basis of the guidelines which then attempt to address each of the issues with a possible solution.

51 6. CONCLUSIONS AND RECOMMENDATIONS

The review of LAs who have been involved in the procurement or possible procurement of green energy and the review of green energy suppliers has highlighted a number of important issues that need to be addressed and potential barriers to overcome if LAs are to become widespread green energy purchasers. The conclusions from the reviews are as follows.

• The current Standing Order tendering process does not readily allow for the purchase of green electricity at a possible premium. • The absence of a strong environmental and or energy policy will severely hamper the purchase of renewable energy. • Operating in a buying consortium will restrict the LAs ability to buy green electricity for specific sites. • A key individual who is enthusiastic about renewable energy will provide the impetus for green energy procurement. • An independent and widely recognised and accepted accreditation scheme will help alleviate concerns over the purchase of “true” green energy, particularly if a premium is paid. • The ability to offer electricity generated from specific renewable energy technologies will help meet some of the LAs concerns over types of generating plant. • Offering a complete package of energy services will increase the likelihood of a LA being able to procure green energy as part of this package and will help the suppliers to distinguish themselves in the electricity market. • LAs need to improve their understanding of the technical aspects of electricity supply, such as consumption profiles and different types of meters, and be able to deal with large quantities of data. • Demonstration of the procurement of green energy will be of enormous benefit to other LAs who are planning to purchase green energy.

To address the conclusions above, a number of recommendations are proposed (see Table 10.0 below). These recommendations form the basis of the guidelines for both the LAs and the green energy suppliers.

52 Table 10.0. Recommendations to Help Establish a Local Authority Market for Green power Guidelines for Local Authorities Guidelines for Green Energy Suppliers The Tendering Process The Tendering Process • Explore the exemptions from least cost within the Standing Order eg using • Fully understand the Standing Order regulations with which the LAs local suppliers have to abide • Obtain a full list of green suppliers from OFFER and request flexibility eg a • Be flexible in green tariffs or green electricity percentages offered percentage green energy supply, in the tender documents • Include an energy service package and promote it as better value for • Use the Best Value route and request an energy service package to get value money for money Green Energy Purchasing Policy Green Energy Supply Policy • Implement cross referenced renewable energy and environment policies • Implement a renewable energy supply policy that can be used for • The energy policy should recognise the possible premium for green energy promotional purposes • The environment policy should link CO2 savings with green energy • Target LAs as key customers for green energy supplies consumption • Provide details on CO2 savings made with green energy consumption Energy Consortium Buying Selling to Energy Consortium • Explore options for buying outside an existing consortium for suitable green • Examine the economies of scale LAs are seeking when purchasing via a energy sites consortium • Persuade the consortium to purchase a percentage of electricity from green • Offer tariffs with a percentage green supply to reduce premium payment sources • Help LAs to identify key sites within a given area for green energy • If joining a consortium, retain a number of key sites within area for green supplies energy Key Individuals Key Individuals • Appoint a green energy motivated individual to promote green energy to • Appoint a green energy account manager specifically for LAs Council Members • Ensure LA account manager understands all green supply issues i.e. • Ensure that this individual liaises with all relevant Committees - energy, generation, distribution environment, housing etc • Advertise this individual to all LAs as the contact for green energy • Advertise this individual to electricity suppliers as the contact for green supplies energy purchases

53 Verification and Accreditation Verification and Accreditation • Seek independent verification from the electricity suppliers that their energy • Provide independent verification for the LAs that the energy supplied is is green green • Check whether the suppliers are planning to abide by the EST managed • Join the EST managed REAS when launched (due by the end of 1999) REAS • Ensure that any premium for the green energy is justified by the • Propose reinvesting savings from energy efficiency measures in green power verification process purchase Technology Mix Technology Mix • Identify which renewable energy technologies are of environmental, energy, • Identify and fully understand which renewable energy technologies you social interest are offering • Include an outline in the tender of why these renewable technologies are • Understand the environmental, energy and social drivers for each important technology type • Be prepared to select suppliers which offer renewable energy technology • Be prepared to provide supply from specific renewable energy specific power technologies Energy Services Energy Services • Select energy services that will be beneficial and try to place a value on them • Select energy services that will be beneficial and try to place a value on • Include a request for these energy services in the tender documents them • Relate the complete energy services package to energy and environment • Provide these energy services to LAs policies • Relate the complete energy services package to your own environmental policy Technical Issues Technical Issues • Locate all site meters and note their type, particularly whether they are half • Help LA locate all site meters and provide details on meter types i.e. half hourly hourly • Provide all consumption data for each meter at each site in the tender • Provide interpretations for different consumption patterns and load documents profiles to assist LAs understanding of electricity demand and supply • Identify where energy efficiency measures could be introduced • Identify where energy efficiency measures could be introduced

54 Data Handling Data Handling • Choose a single payment mechanism for all sites supplied with green • Offer a selection of payment mechanisms for all sites supplied with green electricity electricity • Be able to track consumption with green tariffs, particularly on percentage • Provide a consumption tracking mechanism, particularly on percentage green supply green supply • Explore the use of energy consumption monitoring software that some • Provide energy consumption monitoring software on the internet suppliers may make available on the internet Demonstration Demonstration • Buy green energy as a demonstration of putting LA21 objectives into practice • Assist LAs who wish to have a demonstration site supplied by green • Prepare suitable promotional material for the general public, businesses and energy schools • Prepare suitable promotional material for the general public, businesses • Prepare “how to” information for other LAs wishing to purchase green and schools energy • Prepare “how to” information for other LAs wishing to purchase green energy Premium Pricing Premium Pricing • If the suppliers require a green premium, check the reasons why and ask for • Ensure all green premiums are justified justification • Present how the premium is levied - on unit charges or on all energy • Identify how the premium is applied ie to unit charges or to all energy supply supply charges charges • Be prepared to annually negotiate green premiums • Enquire if green premiums can be renegotiated on an annual basis

55 APPENDIX A

First Tier Questionnaire Used with 22 Local Authorities

A1 Establishing a Local Authority Market for Green Power: Broad Questionnaire Used with 22 Local Authorities

The aim of this project is to maximise the potential local authority market for green power by identifying the mechanisms available to local authorities which will enable them to become purchasers of green energy. This will include understanding the decision making processes for green energy purchase, identifying both the influencing factors and the barriers, with an action plan to overcome these obstacles. In addition, understanding the role of green energy suppliers in meeting the purchasing requirements of green power will cover all aspects of the green energy chain. Guidance notes for both the purchase and supply of green power will be produced.

Four objectives to meet the project aim are:

• to identify the mechanisms available to LAs as active purchasers of green power, including the decision making processes and timetables for power procurement, influencing factors, obstacles to action and means to overcome them; • to develop a coherent plan of action to establish the LA green power market; • to produce guidance notes for LA officers on the opportunities for green power purchasing and how to secure authority backing for such procurement; • to produce guidance notes for suppliers on the characteristics and needs of the LA market.

The aim of this questionnaire is to elicit the broad issues for LAs in purchasing green electricity. This questionnaire will be used in telephone interviews with 22 LAs of different sizes and types, regionally spread across Great Britain, sourced from the Green Government Initiative.

Local Authority name ......

Contact name ......

Jot, Tide ......

Department ......

Address ......

Post code

Telephone number

Fax number

E-mail address

A2 FOR ALL MULTI-ANSWER QUESTIONS, TICK ALL RELEVANT BOXES No Question Yes No 1 Does your LA currently purchase green power? (If no, go to question 7) la If yes, when did your LA go through the green procurement Date process? lb Was the process a competitive process? lc When is the procurement process up for review? Date

2 If yes, what were the reasons for your LA to purchase green energy? Yes No 2a Economic 2b Environmental 2c Political 2d Socio-economic 2e Best value 2f Agenda 21 2g Other (specify) 2h Other (specify)

3 Who were the key influencers for green energy procurement? Yes No 3a An individual (specify job title) 3b A committee (specify) 3 c A working group (specify) 3d Other (specify)

4 How did your LA undertake the green energy procurement? Yes No 4a Using unchanged standard procedures 4b Using amended standard procedures 4c Using completely new procedures

5 If the green energy procurement required amended or new procedures, how long did it take to agree the new procedures? Yes No 5a Less than 3 months 5b Between 3-6 months 5 c More than 6 months

6 What additional information did your LA need to enable it to procure green energy? Yes No 6a In-depth explanation for purchasing green power 6b Justification for possible greater expenditure 6c Cross links with other LA initiatives 6d Availability of green power suppliers 6e Other (specify) 6f Other (specify) 6g Other (specify)

A3 GO TO QUESTION 9 7a Is your LA planning to purchase green energy? (If yes, go to 8) 7b If not, why not? 7c What needs to be in place for your LA to consider buying green power?

8 If yes, does your LA require any of the following additional information to enable it to procure green energy? Yes No 8a In-depth explanation for purchasing green power 8b Justification for possible greater expenditure 8c Cross links with other LA initiatives 8d Selection of green power suppliers 8e Other (specify) 8f Other (specify) 8g Other (specify)

9 What were/are the barriers to green power procurement? Yes No 9a Too high cost 9b Weak environmental argument 9c Poor supporting policy 9d Insufficient individual/group support 9e Other LA priorities 9f Other (specify) 9g Other (specify) 9h Other (specify)

10 How were the barriers overcome; or, How are you planning to overcome the barriers? Yes No 10a Change in policy 10b Supporting additional incentives 10c Additional individual/group support lOd Committee/working party support lOe Other (specify) lOf Other (specify) 10g Other (specify)

11 What lessons can be learned from the experience of purchasing green power? Yes No 11a Need for implementing legislation 1 lb Need for supporting information 11c Easier procurement procedures lid Smoother administrative procedures lie Support from specific committees/working parties 1 If Support from specific individuals/groups llg Other (specify) llh Other (specify) 111 Other (specify)

A4 12 What recommendations do you have for green energy procurement for other local authorities? 12a (specify) 12b (specify) 12c (specify) 12d (specify)

A5 APPENDIX B

The Lighthouse Project

B1 Glasgow City Council’s Lighthouse Project

The Lighthouse Project is part funded by the EC’s THERMIE Programme under the banner of RESET - Renewable Energy Strategy for European Towns. The Lighthouse Project represents a beacon for sustainable design and a flagship for innovative architecture for the future. Green energy is therefore an important part of sustainable building design. The “green energy” to be supplied in 1999 by Scottish Power has a 5% premium. The tariff does not match supply with green generation, but acts as an eco-tariff whereby the premium is ring fenced for future investment in renewable generation. It has been designed specifically for the Lighthouse Project only. The Lighthouse Project is managed by a separate company (The 1999 Company) and not directly by the Council.

B2 APPENDIX C

Second Tier Questionnaires Used with the Five Case Study Local Authorities

C1 Establishing a Local Authority Market for Green Power: In-depth Questionnaire Used with the Case Study Local Authorities who have Successfully Purchased Green Power

The aim of this project is to maximise the potential local authority market for green power by identifying the mechanisms available to local authorities which will enable them to become purchasers of green energy. This will include understanding the decision making processes for green energy purchase, identifying both the influencing factors and the barriers, with an action plan to overcome these obstacles. The local authorities canvassed using this questionnaire have successfully purchased green power.

This questionnaire will build upon the information gathered during the broad interview and will ‘drill down’ for a greater explanation for the reasons for and mechanisms behind green energy procurement.

A case study will be prepared using the material from the in-depth questionnaire. The guidelines that will be produced as a result of this project will draw on this case study and present recommendations on how any barriers may be overcome and how the green procurement process can be made smoother.

Local Authority name ......

Contact name ......

Jot, Tide ......

Department ......

Address ......

Post code

Telephone number

Fax number

E-mail address

C2 USE THE INFORMATION FROM THE BROAD QUESTIONNAIRE TO CHECK THAT THE INITIAL PROCUREMENT FACTS ARE CORRECT. USE THE SPACE BELOW TO RECORD ANY DISCREPANICES WITH THE BROAD QUESTIONNAIRE RESULTS.

Procurement Procedures and Tender Process

1. If your procurement procedures had to be changed to allow your LA to purchase green energy, please tell us how they were changed.

2. If the procedures weren ’t changed, what green energy aspects did you specify in the tender document?

3. Did you use any government or LGA documentation to prepare your green energy tender? If so, which ones?

4. What additional information did you use? Who did you obtain it from?

5. How did you find out about green energy suppliers?

6. How many companies were sent the tender documents?

7. How many submitted a bid?

8. What type of green products were the suppliers offering?

9. Would you like to see a different or better definition of green energy? If yes, what issues should the definition address?

10. What type of verification did they provide that their products were green?

11. Would you like to see a better audit trail for green energy? If so, what issues should the audit trail address?

Reasons for Purchasing Green Energy

12. To which council policies, if any, were the reasons for purchasing green energy linked? If not, what were the justifications for purchasing green energy?

13. How long are these policy objectives predicted to be in place?

14. How long did it take to get these policies in place?

15. How will the objectives be measured?

16. How are you monitoring your green energy consumption?

17. Who were the main supporters of these policies?

C3 Key Drivers

18. Did the key influencer need the support of other individuals or groups? If so, which individuals or groups?

19. What type of support did they need?

20. How easy was it to obtain?

Overcoming the Barriers to Green Energy Procurement

21. There are well documented barriers to green energy procurement. What were the barriers and how did you overcome the ones you faced?

22.In overcoming these barriers, are there any methodologies you would recommend to other LAs in the same position?

23.What else would you like to see in place to promote the procurement of green energy?

Lessons and Recommendations

24. What lessons can be learned from the experience of purchasing green power?

25. What recommendations do you have for green energy procurement for other local authorities?

Green Energy Promotion

26. Have you informed the local community of your green energy purchase? If so, how and when?

27. Have you had any feedback from the local community? If so, what was it?

Development of the Green Procurement Guidelines

28. How would you like to see the guidelines developed?

29. Would you like to be involved in helping green energy suppliers offer more appropriate green products to local authorities?

30. Are there any other ways you can see LAs helping the uptake of green energy consumption across the wider community?

C4 Establishing a Local Authority Market for Green Power: In-depth Questionnaire Used with the Case Study Local Authorities who are Currently in the Process of Purchasing Green Power

The aim of this project is to maximise the potential local authority market for green power by identifying the mechanisms available to local authorities which will enable them to become purchasers of green energy. This will include understanding the decision making processes for green energy purchase, identifying both the influencing factors and the barriers, with an action plan to overcome these obstacles. The local authorities canvassed using this questionnaire are currently in the process of purchasing green power.

This questionnaire will build upon the information gathered during the broad interview and will ‘drill down’ for a greater explanation for the reasons for and mechanisms behind trying to purchase green energy.

A case study will be prepared using the material from the in-depth questionnaire. The guidelines that will be produced as a result of this project will draw on this case study and present recommendations on how any barriers may be overcome and how the green procurement process can be made smoother.

Local Authority name ......

Contact name ......

Jed) Tide ......

Department ......

Address ......

Post code

Telephone number

Fax number

E-mail address

C5 USE THE INFORMATION FROM THE BROAD QUESTIONNAIRE TO CHECK THAT THE INITIAL PROCUREMENT FACTS ARE CORRECT. USE THE SPACE BELOW TO RECORD ANY DISCREPANICES WITH THE BROAD QUESTIONNAIRE RESULTS.

Procurement Procedures and Tender Process

1. Have you changed your procurement procedures to allow your LA to purchase green energy? If so, please tell us how they have been changed.

2. If the procedures weren ’t changed, what green energy aspects are you specifying in the tender document?

3. Are you using any government or LGA documentation to help you to prepare your green energy tender? If so, which ones?

4. What additional information are you using? Who have you obtained it from?

5. How did you find out about green energy suppliers?

6. How many companies are you sending the tender documents to?

7. Have any submitted a bid? If so, how many?

8. What type of green products are the suppliers offering?

9. Would you like to see a different or better definition of green energy? If yes, what issues should the definition address?

10. What type of verification are the suppliers providing that their products are green?

11. Would you like to see a better audit trail for green energy? If so, what issues should the audit trail address?

Reasons for Purchasing Green Energy

12. To which council policies, if any, are the reasons for purchasing green energy linked? If not, what are the justifications for purchasing green energy?

13. How long are these policy objectives predicted to be in place?

14. How long did it take to get these policies in place?

15. How will the objectives be measured?

16. How will you monitor your green energy consumption?

17. Who are the main supporters of these policies?

C6 Key Drivers

18. Do the key influencers need the support of other individuals or groups? If so, which individuals or groups?

19. What type of support do they need?

20. How easy will it be to obtain?

Overcoming the Barriers to Green Energy Procurement

21. There are well documented barriers to green energy procurement. What are the barriers and how did you or are you planning to overcome the ones you face?

22.In tackling these barriers, are there any methodologies you would recommend to other LAs in the same position?

23.What else would you like to see in place to promote the procurement of green energy?

Lessons and Recommendations

24. What lessons can be learned from the experience of purchasing green power so far?

25. What recommendations do you have for green energy procurement for other local authorities who are going through the same process as yourselves?

Green Energy Promotion

26. Have you informed, or are you planning to inform, the local community of your intention to purchase green energy? If so, how and when did you/will you do it?

27. How will you monitor and record any feedback from the local community?

Development of the Green Procurement Guidelines

28. How would you like to see the guidelines developed?

29. Would you like to be involved in helping green energy suppliers offer more appropriate green products to local authorities?

30. Are there any other ways you can see LAs helping the uptake of green energy consumption across the wider community?

C7 Establishing a Local Authority Market for Green Power: In-depth Questionnaire Used with the Case Study Local Authorities who have Tried to Purchase Green Power but was Unsuccessful

The aim of this project is to maximise the potential local authority market for green power by identifying the mechanisms available to local authorities which will enable them to become purchasers of green energy. This will include understanding the decision making processes for green energy purchase, identifying both the influencing factors and the barriers, with an action plan to overcome these obstacles. The local authorities canvassed using this questionnaire have tried to purchase green power but was unsuccessful.

This questionnaire will build upon the information gathered during the broad interview and will ‘drill down’ for a greater explanation for the reasons for and mechanisms behind trying to purchase green energy.

A case study will be prepared using the material from the in-depth questionnaire. The guidelines that will be produced as a result of this project will draw on this case study and present recommendations on how any barriers may be overcome and how the green procurement process can be made smoother.

Local Authority name ......

Contact name ......

Job Tide ......

Department ......

Address ......

Post code

Telephone number

Fax number

E-mail address

C8 USE THE INFORMATION FROM THE BROAD QUESTIONNAIRE TO CHECK THAT THE INITIAL PROCUREMENT FACTS ARE CORRECT. USE THE SPACE BELOW TO RECORD ANY DISCREPANICES WITH THE BROAD QUESTIONNAIRE RESULTS.

Procurement Procedures and Tender Process 1. Did you change your procurement procedures to allow your LA to purchase green energy? If so, please tell us how they were changed.

2. If the procedures weren ’t changed, what green energy aspects did you specify in the tender document?

3. Did you use any government or LGA documentation to help you prepare your green energy tender? If so, which ones?

4. What additional information did you use? Who did you obtained it from?

5. How did you find out about green energy suppliers?

6. How many companies were sent the tender documents?

7. How many submitted a bid?

8. Did any supplier offer a green tariff or product (albeit unsuitable)? If so, which company and what did they offer?

9. Would you like to see a different or better definition of green energy? If yes, what issues should the definition address?

10. Did any of the suppliers who offered a green product also offer any verification that their products are green?

11. Would you like to see a better audit trail for green energy? If so, what issues should the audit trail address?

Reasons for Purchasing Green Energy

12. To which council policies, if any, were your intentions for purchasing green energy linked? If they were not linked, what were the justifications for planning to purchase green energy?

13. How long are these policy objectives predicted to be in place?

14. How long did it take to get these policies in place?

15. How can the objectives be met and measured without purchasing green energy? Will you try to purchase green energy again?

16. How were you planning to monitor your green energy consumption?

17. Who were the main supporters of these policies?

C9 Key Drivers

18. Did the key influencers need the support of other individuals or groups? If so, which individuals or groups?

19. What type of support did they need?

20. How easy was it to obtain?

Overcoming the Barriers to Green Energy Procurement

21. There are well documented barriers to green energy procurement. What were the barriers and how did you try to overcome them?

22. Despite not overcoming them, are there any methodologies you would recommend to other LAs in the same position?

23. What else would you like to see in place to promote the procurement of green energy?

Lessons and Recommendations

24. What lessons can be learned from your experience of trying to purchase green power?

25. What recommendations do you have for green energy procurement for other local authorities?

Green Energy Promotion

26. Were you planning to inform the local community of your intention to purchase green energy? If so, how and when were you going to do it?

27. How were you planning to monitor and record any feedback from the local community?

Development of the Green Procurement Guidelines

28. How would you like to see the guidelines developed?

29. Would you like to be involved in helping green energy suppliers offer more appropriate green products to local authorities?

30. Are there any other ways you can see LAs helping the uptake of green energy consumption across the wider community?

C10 APPENDIX D

The Green Supplier Questionnaire

D1 Establishing a Local Authority Market for Green Power: Green Supplier Information

The aim of this questionnaire is to elicit all the relevant information from the licensed suppliers in the UK of green power products they can and are offering to local authorities (LAs) as commercial customers (>100 kW). The information needs to cover the following:

• all green tariffs and how they have been constituted; • other green “products”, such as energy efficiency measures or the development of an ESCO route; • the issues of supplying electricity to LAs (commercial and government - Standing Order least cost principle); • regulatory requirements for supplying commercial customers under the liberalised market.

The tariffs offered could include a number of different types:

• a tariff for green product generated directly from renewable sources; • a tariff which does not directly pay for renewable energy generation, but the payment is used for investment in new renewable generation which may, or may not be, matched by the supplier; • other tariff structure or combination.

Supplier Name

Contact Name

Job Title

Department

Address

Post Code ......

Telephone Number

Fax Number ......

E-mail Address .....

D2 Green Tariff Information

1. Do you have a “green tariff” that is available to local authorities?

2. If yes, how is the tariff structured? (Include details on the level of tariff and how it has been constructed).

3. What sources of energy are used in your green tariff?

4. Are you planning on changing this mix or make technologies optional?

5. If so, what sources of energy do you plan to increase/decrease?

Other Green Products

6. Do you have any other green energy products, such as energy efficiency measures, green loans, etc.

7. Do you see the ESCO route as appropriate for this market?

8. If so, why and how?

Supplying Electricity to Local Authorities

9. Do you currently supply your green tariff to local authorities?

10. If yes, which local authorities and how long have they been your customer? ALL THIS INFORMATION WILL BE TREATED AS COMMERCIAL-IN-CONFIDENCE.

11. What are the issues in supplying electricity to local authorities? (Include details of competitive tender routes and the Standing Order mechanism, plus any metering issues).

12. If these issues caused problems, how did you overcome them?

Regulatory Issues

13. What regulatory issues do you face in the liberalised market for supplying local authorities? (The commercial market was liberalised in 1994, but new issues may have come about with the liberalisation of the domestic market).

14. How will you address these issues?

Recommendations

15. How should local authorities prepare tender documentation to secure green energy?

16. What information do they need to include?

D3 17.Do you have any recommendations to local authorities who are considering purchasing green

D4