Whichgreen Statistics - Methodology 2004 to 2009

From 2004 to 2009 we’ve published figures for each energy supplier in the UK, showing their annual spend per customer on new sources of renewable energy.  We expressed the annual spend as £s per customer – it is a per capita measure of spending on new sources of renewable energy.

Here’s how the figures are arrived at -

1. The figures are for calendar years.

2. Each year, we indentify new sources of renewable energy built in the UK (we often refer to this as New Capacity).  We identify those from Wind, Hydro, Biomass & Solar PV sources - which are over 50kW in capacity, using OFGEM & British Wind Energy Association (now Renewable UK) data.

3. We only include New Capacity in our calculations. Where existing sites (generators) have been repowered only the increase in net capacity (the New Capacity over and above the pre existing) is taken into account and the Build Cost is proportionally attributed. Sites that were refurbished, but with no increase in total capacity, are not included in the figures, because no New Capacity had resulted.

4. Where the cost of building new projects (the Build Costs) are available within the public domain (e.g. via press releases) these are used in our calculations.

5. For all other New Capacity the Build Cost is calculated based upon the installed capacity of the project multiplied by the generic costs per installed MW as published in the Enviros Consulting report "The Costs of Supplying Renewable Energy (available on the DECC website[1]).

6. Domestic electricity customer numbers for each supplier were obtained from OFGEM[2] or from material released by the suppliers themselves.

7. The spend per customer figure (or £ per customer)  - for each supplier in the UK - is calculated by dividing the Build Cost (from 4 and/or 5 above) of the New Capacity, by the number of domestic customers (from 6 above), it's as simple as that.

8. Once compiled, the relevant information (New Capacity, total Build Cost, total number of customers and the resulting £ per customer figure) is sent to each individual supplier to allow them to verify the assumptions, or indeed correct them if public data is superseded by data that they themselves hold. Suppliers are given 2 weeks to respond after which the figures are published.

Whichgreen Statistics - Methodology 2010 onward

From 2010 we adopted a new approach.

Rather than use the per capita measure of ‘£s per customer’, we adopted a model often used by charities when trying to get across how much of what people give them (in donations) gets to the ‘front line’ – the ‘pence in the pound’ approach. 

So instead of pounds per customer spent on New Capacity we now use pence in the pound – where the pound is from electricity bill revenue - for each energy supplier.  It amounts to much the same thing, but we think pence in the pound has the edge.  It gives a simple handle on the proportion of your energy bill money that gets spent on green stuff.  We think it’s slightly more relevant to the average person and has a little more context.  It’s about how many pence in the pound that you pay to your energy supplier – goes to the green energy front line.

We also moved to represent the spending figures themselves in a new graphical presentation - in an A to G chart of the type that we’re all used to seeing these days to rate white goods (for energy efficiency) and cars (for fuel efficiency).

The other change we made was to present the data as a long term average, rather than an end of year snapshot.

We introduced that change following some fairly consistent complaints from the Big 6 energy companies (British Gas particularly) that they feel we're overlooking the projects they are intending to build 'soon', and renewable energy projects take time to get off the drawing board (as if we didn't know that). Developing renewable energy projects does take time of course. So by using a long term average we smooth the years (good and bad) and, eventually we hope, the promises come good and find their way into the figures.

Here’s how we arrive at the figures for 2010 onwards –

1. We calculate the total spend in any given year, on New Capacity for each supplier, using the same basic process as above (steps 2,3, 4 and 5) the only difference being that the figures we use for the generic Build Cost per MW installed (for each technology) is from a more up to date source[3].

2. We send to each supplier the figure we have for their total investment in New Capacity for the year, their Build Cost, to give them the opportunity to correct or comment. As above in 8.

3.Next we calculate the size of the average electricity bill in the UK.  

We start with average UK electricity bill data supplied by DECC [4] this gives us the cost of a typical electricity bill in the UK – but it is based on a standard consumption rate of 3,300kWh a year. This level remains fixed (in this DECC data) over the years to allow the difference in the cost of average bills to be compared year on year - it doesn’t represent the number of kWh that an average household consumes now (or therefore a typical actual bill).

However, DECC[5] also publishes a more up to date figure for the typical household consumption (in kWh) and we use this to pro rata the cost data (the cost in £ based on 3,300 unit per year) up to a figure in £s for the typical consumption in the year in question. 

4. Once we have the Build Cost for each supplier (their spend on New Capacity) and the cost of an average electricity bill we simply divide one by the other and multiply by 100 to show how many pence in the billed pound are spent building new sources of renewable electricity (New Capacity).

5. We present the figures for each supplier as a long term average, adding each new year as we go.  We applied this new methodology to our previous data for the years 2004 through 2009, to produce the seven year average in 2010.

6. We’ve adopted a ‘white goods’ approach for presentation of the figures for each supplier, showing them in bands from A to G. 

7. The final part is the drawing of the thin dotted blue line. 

We draw it at the boundary between Category C and D  - at 4.4 pence in the pound. This represents the pence in the pound spending level required of all companies to meet the annual growth component of the Renewables Obligation.  Not the total RO target in any given year, just the amount of increase, the incremental growth required by the RO.  It’s thus the amount needed to be spent to avoid falling (further in most cases) behind the RO – it’s the basic ‘keep up’ minimum.

8. To calculate this – we start with DECC figures for the average number of units (kWhs) of electricity that households in the UK use - in any given year (as per 3 above). We also know the annual incremental growth of the Renewables Obligation for any given year, as published by OFGEM.

Renewables Obligation - % Rise 2004 to 2010

From these two figures we can calculate the number of units of green electricity that need to be generated to meet the incremental growth of the RO.

Knowing the number of units required to be generated (to meet incremental growth) we can ascertain the installed capacity (New Capacity) required to generate that. We base that calculation on new onshore wind capacity (using standard load factors).  We do this as it gives the cheapest cost of all technologies per unit generated - and therefore gives the smallest sum required to be spent. We multiply the New Capacity required (to be built) by the average Build Cost cost per MW, as per 1 above.  And hey presto we have the cost in pounds per year required to meet the incremental RO target.  We then convert that to pence in the pound of a typical bill in any given year.  And we thus have pence in the pound required to meet the incremental growth target of the RO – the minimum all suppliers need to meet to simply keep up with the rate of growth required.  In 2010 this figure was 4.4p per billed pound.

Average Annual Expenditure on Building New Sources of Renewables 2004 to 2010 (expressed as pence spent per pound billed)

[1] The Costs of Supplying Renewable Energy.pdf

[2] Energy Supply Probe - Initial Findings Report

[3] Mott MacDonald, 2010, UK Electricity Generation Costs Update.pdf 

[4] DECC. Average annual domestic electricity bills by home and non-home supplier (Table QEP 2.2.1) 

[5] DECC. Digest of UK Energy Statistics. Chapter 5 Table 5B Domestic Sector Sales / Domestic Customers = average domestic consumption).pdf