Short update after my post about green electricity
Luxembourg non-industrial electricity grid is likely only 40% green, although Luxembourg's residents pay for 100% green electricity since 2011.
Documenting the exact origin of the electricity is still impossible today. Therefore, it is not excluded that the majority of Luxembourg’s imported electricity comes from coal in Germany.
The Guarantee of Origin, or the green certificate, is a subsidizing tool in very isolated cases only. It is much more a mean for electricity suppliers to buy their way to “green”.
In my last post, I described the electricity mix of Luxembourg at the national level. In this short technical update, I will try to find out where the electricity of the private consumer in Luxembourg is physically comes from and how green it really is.
What’s the first post been about?
Luxembourg produces 14% of its electricity nationally and imports the remaining part from abroad, mostly from Germany, followed by France and Belgium. The origin of the imported electricity cannot be physically traced. As a result, Luxembourgish electricity providers buy Guarantees of Origins from countries without physical link to Luxembourg, such as Norway, Sweden Iceland or Spain, that allow them to market their electricity as a green. Thus, Luxembourgish electricity is 55% green on paper, although only 10% come directly from green sources in Luxembourg.
[Source: ILR - 2018]
So, where is Luxembourg's electricity coming from exactly?
Luxembourg has two operators of electricity grids: Sotel and Creos. Sotel delivers electricity almost exclusively to industrial customers (over 95% to Arcelor Mittal). Creos is the operator of the non-industrial grid, of which 18% is generated in Luxembourg (mostly from renewables), the rest of it is imported from Germany over high voltage lines (more than 80%).
I have recently asked German grid operators and energy agencies where the imported electricity from Germany would come from. It is virtually impossible to figure out the exact mix of imported electricity – the system is too complex to do so. In the best case, the German electricity mix is likely to arrive in Luxembourg (38% renewable for 2018). That’s also the assumption I made in my first article.
However, it could also be well below 38%. Green electricity is often fed into the grid at middle or low voltage levels and therefore consumed first locally in Germany, before being transmitted to Luxembourg at high voltage. In addition, there are times when the entire demand cannot be covered with renewable electricity and when fossil fuels have to fill the gap. So, it cannot be excluded that the majority of Luxembourg's electricity is physically coming from large coal plants in North Rhine-Westphalia or Saarland, which are connected directly to high voltage transmission.
[Source: Forschung Stromnetze - with edits]
Important: I do not state explicitly that the majority of electricity comes from these fossil fuel plants, but it is a possibility. To make more accurate statements (similar than claiming that the electricity is 100% green), too many factors come together.
How green is the Luxembourgish electricity really?
That remains a question without an easy answer. I remain with my presumption that Luxembourg is importing the German power mix, even if it is not excluded that it could be much worse.
Remarkable is what I found on Encevo’s website. Encevo is not only the parent company of grid operator Creos, but also of Luxembourg’s biggest electricity suppliers Enovos and Leo, which sell only 100% green electricity. Encevo recently issued a promissory note and had to document how green the electricity of Creos’ grid is.
The report, which was verified by the independent company Sustainalytics, reads as follows: "The energy mix of Germany [...] has been used to derive the portion of renewable energy imported from Germany into Luxembourg". Thus, they reach a total share of renewable energy in Luxembourg's grid of 40%.
This a rather contradictory finding: the electricity from the Creos grid is only 40% green, while the residential customer has, according to Enovos, received only 100% green electricity since 2011.
[Source: Encevo]
For reference, I also post the official mix (including certificates) of Enovos and Leo, as published on the website of the Institut Luxembourgeois de Régulation (ILR). Here, Enovos and Leo reach 55.3% or 87.6% of green electricity, respectively – a remarkable difference compared to the 40%, which is possible only through the practice of certificates. Also surprising is that they don't even buy certificates for 100% of their electricity ...
[Source: ILR]
Where is the problem: don't certificates promote renewable energy plants ...?
I don't think so. Every European power plant, powered by renewable sources (water, wind, solar, biomass), receives a “Guarantee of Origin” for each megawatt hour of green electricity it produces. These green certificates are necessary to document the origin of green electricity in Europe.
These certificates can also be exchanged between electricity producer and suppliers throughout Europe, allowing suppliers to market their electricity as “green”. There are no limiting criteria from which country the issued certificates must come from nor is their sale limited in time - that is, they do not have to be purchased at the same time than the electricity is purchased.
The Luxembourgish electricity suppliers buy their certificates mostly from Scandinavia and Iceland, and this from hydro plants. It is estimated that this specific type of green certificates costs 1-2 € per megawatt hour (MWh) - before 2018 even well below 1€. By comparison, the market price of electricity was between € 33-52 per MWh for the Nordics in 2018, so that these GOs are not economically significant to promote renewable energy in these regions.
[Source: Aleasoft - with edits]
The GO system has not been designed to be an incentivation scheme, but to allow informed consumers, not just based on electricity prices, to signal their preference for renewable energy in the market.
Over time, it has become, however, as described by the Financial Times or EnergyPost, for many power providers a cheap mean for buying green credentials and letting the unaware consumer think s/he would consume green electricity (and let him/er pay for it as well).
Doesn't such a system promote the green balance sheet at the European level?
A thought that is in many minds is that certificates encourage the goal of renewable energy at EU-level. This may be theoretically true, but the mechanisms are too cheap practically, as we have just seen. In addition, renewable energies are being promoted in many countries by national schemes, for example through tariffs. In return, GOs are handed to the government.
With this logic, the electricity from the power socket will not get greener in many places if electricity does not flow physically between those countries. For example, hydro plants and wind turbines could be built in Scandinavia and in the Northern Sea. Both regions have the potential to supply a vast share of Europe with electricity - but without cables down to the European customer, this mechanism remains inefficient.
In the case of Norway, one can also see how absurd this mechanism is. Norway produces almost all of its electricity from renewable sources, more precisely from hydro plants. These plants are on average 40-45 years old, have already been depreciated and can also finance their investments themselves. If, as in the example below, green certificates from Norway are sold all over Europe, the share of renewable energy in Norway on paper will shrink to 16% - but physical flows will never change.
For Norway, this is a good business: the regional consumer will continue to receive green electricity (without a "green" specification) while European suppliers, such as for Luxembourg, pay for greening their shares. The physical flows in neither import nor export countries has changed.
[Source: Energie Norge]
I want to make sure I get 100% green power. What can I do?
I have been asked that question a few times. Of course, every household could become self-sufficient by, for example, building solar panels on their rooftops with batteries in the garage. Unfortunately, this is not feasible for everyone so that the majority of costumers will remain dependent on the electricity supplier and the mix from the grid.
It is also important that the point of my article is not how to get to 100% green electricity – I just find the GO practice a hilarious mechanism and argue that the treatment of the customer is not transparent.
Luxembourg surely has limited capacities to bet nationally on renewable energy. However, it is likely that Luxembourg will significantly increase its proportion of renewable energy in the electricity mix in the coming years. If Luxembourg expands and reaches its national renewable energy capacities as defined in the climate plan by 2030, up to 2251 GWh, could be generated from a renewable source, which accounts for 40-50% of the non-industrial electricity needs. If Germany were to achieve its target of 65% renewable energy in the electricity mix by 2030, the electricity in Luxembourg could be up to 77% green in 2030.
A comment on this will follow in the coming weeks.
