Will green energy catch on if its price tag remains so high?
What price wind power? Further, is British industry ready to stump up that price? The Department of Trade and Industry wants to know. The DTI has recently begun researching the question of whether businesses will be prepared to pay a premium in order to buy their electricity from 'green' sources. Wind farms are by far the most promising of these, being the only power source approaching economic viability in the UK which can also be said to have no irreversible consequences for the environment.
The Body Shop is the one significant electricity user so far to take a proactive stance on this issue. The company cannot - yet - supply itself legally from its own generating capacity. But by investing £500,000 for a 15% stake in a wind farm at Bryn Titli in Wales, it can claim to be putting back - in the form of 'clean' energy - the nearly 12 million kilowatt-hours (kWh) that it takes from the National Grid. 'We have a long-term intention of making our UK operations wholly covered by investment in renewables,' points out Dr David Wheeler, general manager of The Body Shop's ethical audit department. One way of doing this might be to buy up more of the Welsh wind farm: if it bought the rest of Bryn Titli it could, in effect, buy its own energy after 1998. That, of course, is the date set by the Government for deregulation of the electricity market. From then on, companies will be able to negotiate contracts with any electricity generator, as opposed to shopping around among the various regional electricity companies in search of the lowest price, as at present.
The Body Shop does not expect to be alone. 'As we talk more about the need for sustainable development,' says Wheeler, 'I think the penny will drop with business leaders that it's not just about minimising your impact or making incremental improvements in efficiency, although these are important. It is also about making strategic commitments to sustainability, and in the energy field this has to mean involvement in renewables.' For the time being such environmentally-friendly principles come with a price-tag, although it is not as high as might be thought. The wind industry has made great strides in cutting costs over the last five years. Today, on average, wind-generated electricity costs about 4.4p per kWh to produce, against 3p for each kWh using coal or gas. As a result of a government-administered 'market enablement' programme for renewables (which forces the RECs to buy in green electricity at premium prices), more than 500 turbines have been erected in the UK with a combined capacity of over 500 million kWhs per year. However subsidies for new wind farms are due to dry up when the electricity market is deregulated. Their disappearance, says Hugh Babington Smith, executive director of the British Wind Energy Association, 'will leave a huge question-mark' over the fledgling UK industry.
At some point the cost of electricity from renewable sources must undercut the cost of using fossil fuels. In the meantime, and in the absence of new subsidies (or a carbon energy tax), businesses will have to pay a penny or so extra per kWh for green electricity after 1998. If they want it, that is.