Community Power: making renewable energy cheaper than gas
This article was written by our Sales and Origination Director, Tom Parsons
Last month, I visited the beautiful Albourne Estate – a sustainable vineyard and winery in Sussex that has an impressive 159 panel solar array. As a customer and generator of ours, they use their home-grown energy to power their operations and sell the excess to Good Energy to be used by our customers.
Despite building the business around sustainability, the owner, Alison, was puzzled about why renewable energy costs the same to buy as gas. Shouldn’t renewable power now be far cheaper than non-renewable power?
The short answer is, yes it should – but that isn’t how our energy market currently works.
In this article, I explain why renewable power costs the same to buy as gas; and how our new product, Community Power, will help.
Why does renewable power cost the same to buy as gas?
I’m going to explain the way the UK wholesale energy market is designed using a penalty shootout analogy, which I’ve borrowed from my colleague, Simon Shaw.
In a penalty shootout, a team will select its strikers in order of preference. Renewable energy (being the cheapest and greenest) will be selected first, followed by nuclear. But when the pressure is on, the last individual, gas, will step up and decide the result, and therefore set the final price. You can read more about how this works in this article.
This means that whatever price gas is set at, renewables will be priced the same. And as gas prices have been heavily influenced by the Russian invasion of Ukraine, the price of electricity has been very high. For renewable generators, this has meant a period of high profits – although large renewable generators pay a substantial windfall tax to reduce consumer bills. A lot of our smaller renewable generators have used their profits to build more renewable generation – further helping to decarbonise our energy system.
How can we make renewable energy cost less for consumers?
Late last year, we had a query from a business who wanted to help its customers to decarbonise (and therefore reduce its own Scope 3 emissions), by offering them a discounted 100% renewable electricity tariff. To do this, they were looking to build a new renewable energy asset, and wanted to price the power for this group of customers so that it covered their costs for maintaining the asset, but wasn’t linked to wholesale market prices.
Since then, we’ve had a range of organisations coming to us with the same question. This included a wind farm that wanted to make its power available at a lower cost for the local residents, a community-owned hydro scheme that wanted to provide lower cost power to the owners’ homes, and a consultancy that wanted to help their employees decarbonise their homes.
We loved this idea so much that we developed a new product called Community Power.
How does Community Power work, and who is it for?
Community Power enables a generator to provide their electricity to a selected group of customers at below market rate.
The generator sets the price they want to receive for their electricity; and their set group of customers then benefits from a discount on their energy bill each month. Prices are regularly reviewed to help keep them below market rate.
The majority of the time, the energy used by the customers will be matched directly with the generation asset. But when the sun isn’t shining or the wind isn’t blowing, Good Energy will source the rest of their power from other renewable sources at least 90% of the time, as part of our hourly matching ambition.
The product could be used in many different ways. From a business wanting to provide discounted renewable power to its employees, to an organisation looking to decarbonise its customers, to community groups looking to benefit from their local renewable generation asset.
And as Good Energy can supply electricity to properties across Britain, the customers that could use Community Power don’t have to be located next to the generation asset. In fact, they could be on the other side of the country and still benefit, whilst helping to support new build or existing renewable generation.
If you are a generator, business or organisation that wants to know more, or you want to provide your power at a lower cost for a group of customers, please get in touch.
