Green Energy

Green energy is a term used to describe sources of energy that are considered to be environmentally friendly and non-polluting, such as geothermal, wind, and solar power. These sources of energy may provide a remedy to the systemic effects of global warming and certain forms of pollution.

Green energy is commonly thought of in the context of electricity, heating and cogeneration. Consumers, businesses, and organizations may purchase green energy in order to support further development, help reduce the environmental impacts of conventional electricity generation, and increase their nation’s energy independence. Renewable energy certificates (Green certificates or green tags) have been one way for consumers and businesses to support green energy. Over 35 million homes in Europe and 1 million in the United States are purchasing such certificates.

Additionally, some governments have drafted specific definitions for green energy or similar terms that may be eligible for subsidies and support for related technologies.

In several countries with common carrier arrangements, electricity retailing arrangements make it possible for consumers to purchase green electricity (renewable electricity) from either their utility or a green power provider.

When energy is purchased from the electricity network, the power reaching the consumer will not necessarily be generated from green energy sources. The local utility company, electric company, or state power pool buys their electricity from electricity producers who may be generating from fossil fuel, nuclear or renewable energy sources. In many countries green energy currently provides a very small amount of electricity, generally contributing less than 2 to 5% to the overall pool.

By participating in a green energy program a consumer may be having an effect on the energy sources used and ultimately might be helping to promote and expand the use of green energy. They are also making a statement to policy makers that they are willing to pay a price premium to support renewable energy. Green energy consumers either obligate the utility companies to increase the amount of green energy that they purchase from the pool (so decreasing the amount of non-green energy they purchase), or directly fund the green energy through a green power provider. If insufficient green energy sources are available, the utility must develop new ones or contract with a third party energy supplier to provide green energy, causing more to be built. However, there is no way the consumer can check whether or not the electricity bought is "green" or otherwise.

In some countries such as the Netherlands, electricity companies guarantee to buy an equal amount of 'green power' as is being used by their green power customers. The Dutch government exempts green power from pollution taxes, which means green power is hardly any more expensive than other power.

In countries where suppliers are legally obliged to purchase a proportion of their electricity from renewable sources (for example under the Renewables Obligation in the United Kingdom), there is a danger that energy suppliers may sell such green electricity under a premium "green energy" tariff, rather than sourcing additional green electricity supplies. Where a Renewable Energy Certificate or similar scheme is in operation it is also possible for the energy supplier to sell the green electricity to the consumer, and also sell the certificate to another supplier who has failed to meet their quota, rather than "retiring" the certificate from the marketplace. In other cases green energy tariffs may involve carbon offsetting rather than purchasing or investing in renewable energy.