Why Network Rail departed from its pledge of 100% renewables for non-traction power

Non-traction power refers to all of Network Rail’s power needs unrelated to electrifying trains, such as lights in stations and signaling equipment.

A 2013 statement from Network Rail said: “With a network containing more than 20,000 miles of railway, tens of thousands of signals and hundreds of signal boxes controlling 25,000 trains a day, Network Rail is the single biggest consumer of electricity in Britain.”

In Network Rail's Environmental Sustainability Strategy for 2020 to 2050, it said: “We will purchase 100% renewable non-traction electricity by 2020, and will aim to feed in 100% of our non-traction electricity from renewable sources by 2030.”

However, NCE found that Network Rail has been relying on the ‘standard grid mix’ for its electricity in its recent investigation into the rail operator’s expenditure on energy, which showed that its bills have doubled in recent years.

‘Standard grid mix’ means the electricity Network Rail bought from the grid was generated by all suppliers and technologies.

By opting to use the standard grid mix, the carbon intensity of Network Rail’s electricity usage is in line with the average intensity of the national grid. The grid has decarbonised slowly with coal being entirely removed as a source of generation capacity in 2024, and the use of renewables, primarily offshore wind, increasing. However, it is not yet fully decarbonised.

NCE asked Network Rail to explain why it had not achieved it’s ambition to purchase 100% renewable non-traction electricity.

A Network Rail spokesperson explained that from 2020 to 2022, it did buy 100% renewable electricity for non-traction purposes.

The spokesperson said that by 2023, the price of REGOs, which guarantee renewable power origins for electricity, had risen significantly. They are currently £10/MWh which is on top of the basic cost of electricity and is double the price REGOs were in 2020.

Instead, Network Rail chooses to spend its money on reducing electricity consumption.

The purpose of REGOs

According to Ofgem, which regulates REGOs, “one REGO certificate is issued per megawatt hour (MWh) of eligible renewable output to generators of renewable electricity”.

It continues: “The primary use of REGOs in Great Britain and Northern Ireland is for Fuel Mix Disclosure (FMD). FMD requires licensed electricity suppliers to disclose to potential and existing customers the mix of fuels (coal, gas, nuclear, renewable and other) used to generate the electricity supplied.”

NCE spoke with Bain & Company advisory partner, and former Department for Business, Energy and Industrial Strategy director general for energy transformation and clean growth, Julian Critchlow to dig deeper into why Network Rail stopped buying REGOs.

Critchlow said organisations buying electricity can “cover their purchases using those renewable certificates and therefore state, with some validity, that their purchases are renewable because they are effectively supporting the renewable part of the generation mix”.

“Alternatively, they can try to reduce their consumption, thereby eliminating the need for buying electricity in the first place, and therefore making themselves greener,” he continued.

“As the value of the certificates rise, the more you’re incentivised to reduce consumption because that might be a cheaper way of saving carbon emissions than buying, and that’s exactly how the market was intended to work.”

Critchlow said REGOs around 2020 would have been the only way electricity consumers could guarantee that electricity was renewable and the certificates would cover your section of the electricity mix.

Why Network Rail stopped buying REGOs

Climate action ramped up dramatically in the UK from 2019, following activism by recognisable people and groups like Greta Thunberg and Extinction Rebellion, which then led to the UK Government legislating for a net zero target by 2050. This then further led to major organisations setting earlier net zero targets in response to public, consumer and shareholder pressure.

Critchlow said that he believed Network Rail started buying REGO certificates in 2020 when many organisations were doing the same in efforts to achieve their net zero goals. However, because there is a finite supply of REGO certificates, demand soon outstripped supply and the price rose significantly.

Critchlow believes that when it was suddenly “much more expensive” for Network Rail to buy REGOs, it began to look at projects like moving to electric vehicles (EVs) that were actually cheaper ways to decarboonise, because the EV price had come down significantly.

While this shorting of the market might seem like a flaw in the REGO system, Critchlow said it was designed this way. “If the certificates for REGOs run out, that would push the price very high, which then becomes a very significant incentive for wind farms to be built,” he said.

DNV is a Norwegian risk management and independent advisor to the maritime, energy and healthcare industries.

A DNV spokesperson explained why it thought Network Rail may have stopped buying REGOS, and said: “Price can be a result of supply and demand. But also rising demand for green tariffs which are now popular in the UK, this means companies can get electricity through their supplier which is green and includes the provision of REGOs.

“Corporate PPAs are also booming, which include the provision of REGOs in most cases, therefore reducing the need for unbundled REGOs.

“Additionally, the UK’s most recent funding round has slowed down the addition of new generation capacity, therefore less REGOs on the market from new projects, but also Brexit means that the previously accepted GoOs (Guarantees of Origin) from Europe are no longer accepted, thus contributing to a supply shortage.

“Ultimately, high prices are a reflection of a shortage in the market, and consumers who only deem it necessary to obtain them for their renewable energy procurement targets will obtain them, otherwise there are other procurement mechanisms available that will help them meet their targets but at a lower cost.”

Why it can make sense for businesses to decarbonise slowly

Critchlow said the case of Network Rail and its attempts to use 100% renewable electricity showed why it makes sense for businesses to decarbonise slowly.

“What will make you behave less sensibly is if you set your target in the very near term and there isn’t the time to implement other strategies,” he said. “That means you’re forced into buying whatever’s available.

“But if you have a medium- or long-term plan, then you can put into place the cheaper things up front and then phase them in over time. Doing the timing right is the right strategy. The broader and more integrated the strategy, the lower the cost will be overall to deliver the same result.”

How Network Rail’s decarbonisation fits into the energy policy landscape

Critchlow said one of the ways public authorities are trying to decarbonise the economy via public policy is to encourage people to use public transport.

“One of the reasons for setting a very rapid decarbonisation target for the electricity grid by 2030 is because then everything you supply, whether it’s an electric vehicle or a train or a bus, is all going to be decarbonised at source,” he said.

“So your initiatives are to get people onto the trains and the busses, electrify them, and then decarbonise that source, the grid.

“The UK has [decarbonised the grid] faster than pretty well any other country.”

Network Rail pins blame on COVID and war in Ukraine

A Network Rail spokesperson said: “We’re committed to doing everything we can to reach net zero by 2030 on our non-traction electricity.

“Price rises in energy since the COVID crises and the invasion of Ukraine have made that more of a challenge but it’s one we are up for. The roll-out of electric vehicles, improving the energy efficiency of our buildings, and investing in green energy are all ways we are working on to achieve that.”

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