The trend toward deregulation of the energy industry in the US is dramatically changing the dynamics of electric power production and delivery. Vertically integrated power production systems are rapidly being replaced by a patchwork of competing power generators, distributors, and marketers. Power customers, meanwhile, are compelled to sift through an assortment of competing and frequently confusing energy purchase options. In addition to variations in price and quality of service, these options include choices related to the relative environmental impacts of energy sources.
Historically, market demand for what is widely being referred to as ‘green power’ has been masked by the regulated monopoly structures of US energy delivery systems. Until now, concerns about the environmental effects of energy production have been expressed primarily in the political arena, and in the market through the embrace of demand-side energy efficiency measures. Deregulation opens up a new opportunity for residential energy customers to use their purchasing power to help the environment on the market’s supply side. It likewise introduces an opportunity for businesses to include energy purchase in their overall environmental management and improvement strategies.
By the same token, deregulation is an opportunity for government policy makers and environmental stakeholder organisations interested in harnessing marketplace forces to achieve their respective environmental goals.
Surveys suggest that the market potential for ‘green power’ is substantial. For instance, an independent telephone survey commissioned by the US National Council on Competition and the Electric Industry found that 96% of consumers feel that electric companies should be environmentally responsible, and 92% feel that the environment should be protected even if the electricity they purchase ultimately costs more. Other surveys have indicated that 23-45% of residential consumers may be willing to pay premiums for green power.
Green power offers an attractive option for power producers and marketers. Generators interested in demonstrating the effectiveness of their investments in advanced technologies are beginning to seek independent certification that their power is ‘green’. Power companies looking toward the potential divestiture of selected generation assets are increasingly viewing environmental performance as an important element in the valuation of such assets. A growing number of power marketers view green power certification as a reasonable approach for justifying value-added price premiums.
What is ‘green’? At present, there is little consensus over the definition of green power. In their efforts to create market mechanisms that will ensure service choice and reliability while simultaneously protecting industry investments, state legislatures and public utilities commissions have had insufficient time and resources to create scientifically based definitions of green power. As in the early years of healthy food marketing, when terms such as ‘organic’, ‘natural’ and ‘low-fat’ were inconsistently defined and applied, a wide range of environmental claims, criteria and standards are emerging to fill market demand in the power industry.
This state of affairs has bred a certain mistrust among power customers. For instance, in November 1998, nationally recognised consumer activist Ralph Nader, and consumer organisations such as California’s TURN (Toward Utility Rate Normalisation), attacked certain green power programmes as fraudulent schemes that were simply repackaging existing power blends into higher priced products without resulting in real environmental improvements. Large commercial and industrial customers, likewise, have tended to view green power claims warily, and generally have avoided committing themselves to any particular green power purchases thus far. What has become clear is that the credibility and ultimate success of environmental marketing efforts in the energy sector will depend on three factors: •The establishment of a credible scientific framework for assessing the relative environmental merits and trade-offs of each power option.
•Independent verification of the relative impacts of each power source.
•The ability to communicate this information effectively to the public.
Thus far, attempts to define and certify green power have tended to follow the green seal of approval model typified by such eco-labelling schemes as Germany’s Blue Angel programme. Under such programmes, an expert committee seeks to identify the features of particular products within a product category that can be differentiated as ‘green’. While available scientific evidence is consulted in this process, the ultimate selection of product criteria by the expert committee is inherently subjective in nature. This fact has been demonstrated by the emergence of competing eco-labels around the world offering different, and frequently conflicting, criteria for the same product categories.
A further shortcoming of the seal-of-approval approach is the fact that each product category is treated as its own universe. Under such an approach, environmental impacts for any given category may be amplified out of proportion, and cross-category comparisons become impossible. Such is the case in the energy sector. For instance, green power criteria for hydroelectric power tend to focus on habitat degradation, but provide no basis for putting these habitat impacts into perspective compared with impacts from other power generation systems.The result is that important power generation options may be discarded without a full or fair hearing on their merits.
An alternative approach that offers a more level playing field in the assessment of the environmental impacts of power production systems does exist. The scientific methodology known as life-cycle impact assessment (LCIA) is well-suited to the task of assessing power production systems. This methodology is cradle-to-grave in scope, assessing the full range of environmental impacts associated with each industrial stage — raw material extraction, transport, power generation, transmission and decommissioning.
Using LCIA, it is possible to •Clarify and quantify the environmental benefits and costs of each energy option.
•Demonstrate the benefits of employing advanced technologies to diminish environmental impact on a case-by-case basis.
•Look beyond traditional renewable energy sources to other power sources that demonstrate clear environmental advantages and produce power with lower overall environmental effects.
•Provide a rational scientific justification for associated price premiums.
•Provide the necessary transparency, accountability and full disclosure of environmental impact information across all relevant media to meet the needs of policy-makers and stakeholders.
International acceptance Of particular importance to the energy sector, LCIA has been standardised within the ISO 14000 standards series for environmental management, achieving draft international standard status in late 1998 (see article IWP&DC, December 1998 pp27-29). The ISO 14000 standards series represent an effort by industry, government, and stakeholder representatives to establish a more scientific basis for environmental decision-making within the context of the industrial processes. Delegates from over 70 countries have participated, including national standards bodies, government agencies, and industry and stakeholder representatives.
As such, this methodology can be applied uniformly to energy production systems around the world. In the US power imports and exports to and from Canada or Mexico can be evaluated on a comparable basis with power generated and sold domestically. It should be noted too, that LCIA is the only scientific methodology recognised within ISO that can be used for comparative assertions among products on a life-cycle basis.
Given the availability of a suitable scientific methodology for assessing environmental impacts that reduces subjectivity in the assessment process, there remains the need to ensure that any such assessments are carried out in a neutral, unbiased manner if claims are to be credible.
Historically, certification of products and services has been technical in nature, dependent on standardised test methods conducted by uncontested third-party organisations such as Underwriters Laboratories (UL). However, when the need for environmental claims certification in the energy arena became apparent, many stakeholders saw this as an opportunity to advance specific environmental policy positions and objectives. Not surprisingly, the emerging green criteria frequently reflect these positions.
For instance, many green energy programmes treat renewable energy sources as impact-free, when in fact, all energy sources have some impacts. For instance: •Geothermal generation can deplete aquifers and cause water pollution through the discharge of heavy metals, and air pollution through the emission of hydrogen sulphide. In addition, the geothermal reservoir will deplete in time.
•Wind power is an inconsistent source of energy, with no potential for storage of fuels. As an energy production option, wind is a thousand times more dilute than hydro power in terms of the gross amount of land area required. In recent years, several wind farms have been involved in habitat controversies and have been refused permits by local authorities. In addition, wind farms create significant noise pollution and require on-going maintenance, resulting in further impacts (eg significant amounts of fossil fuels used for maintenance vehicles).
•Biomass generation involves forest land use issues, including potential resource depletion, habitat degradation, etc.
Each of these impacts should be considered fully and fairly before choices are made. Through the institution of a science-based approach rather than a policy-driven criteria approach, the certification process can achieve this end. Certifications may then be conducted by any neutral third party with no vested interest in the particular outcome of a given study and no policy positions or objectives to pursue. Independent peer review adds an additional measure of transparency and credibility to the process.
In the US, Scientific Certification Systems (SCS), a third-party certifier of environmental claims and experienced LCIA practitioner, has developed such a certification programme for certified low impact power. This programme is specifically designed to follow the rigorous guidance of the ISO LCIA standard, in order to address the need for accurate appraisal of the environmental impacts of energy generation, and to support the marketing of energy which offers clear environmental advantages.
Environmental impacts are assessed in the context of atmospheric, aquatic and terrestrial eco-systems at the appropriate local, regional or global scale. These impacts are summarised in an impact profile, which allows the relative eco-efficiency of different energy modes to be compared with a regional system power average. This system power average represents life-cycle scale environmental impacts of each regional grid’s energy mix.
Moreover, this assessment approach supports the establishment of the environmental claim, certified low impact energy. The claim applies to power generation systems that demonstrate higher eco-efficiencies across all environmental impact indicators when compared with the regional baseline. It can be applied to individual power generation sources as well as to energy blends offered by different power marketers.
Certified eco-efficiency profiles can be used to highlight the environmental strengths of energy sources that do not qualify for the certified low impact energy claim, but that have important environmental benefits not readily understood in the market.
SCS certified low impact energy In this way, the SCS certification provides a quantitative assessment of the relative impacts of each power source, providing a rational justification for price premiums, and adding financial, brand image and market share value to low impact energy products. Consumers at all levels — residential, institutional, commercial and industrial — gain a clearer understanding of the environmental benefits they create when they choose a low-impact energy blend.
SCS is currently conducting hydro power certification projects in the US Northeast, California and the Pacific Northwest.