Renewable electricity tariffs and why it isn’t easy being green

Posted in: Energy

Posted on: 15.03.2018

Our research has found that lots of people care about renewable energy, but most don’t have a very good understanding of what it means.

You want to do your bit for the planet. Switching energy supplier to one with good green credentials seems like an easy way to do so. You shop around and find one offering ‘100% renewable electricity’, and at a price that’s competitive — great. But is it?

Research we’re releasing today shows that renewable energy is important to a lot of people. Findings from a survey we commissioned with YouGov show that more than 8 in 10 of us (84%) consider ‘renewable energy’ to be important to them.

Renewable confusion

Brilliant news. Unfortunately, a majority of people (58%) also told us that they don’t have a very good understanding of what ‘renewable energy’ even means.

The biggest misconception, held by 52%, was that a supplier offering 100% renewable electricity would send energy direct from solar and wind farms into people’s homes. Which isn't quite how it works, as everyone gets their electricity from the same grid. What's key is how your supplier goes about sourcing the electricity to match what you use. 

Of course this misunderstanding is totally understandable. The energy market is notoriously complicated, and renewables are a relatively new development that incorporate technologies which are changing at a pace.

Honesty time — we at Good Energy work within the sector every day and some of us still have trouble getting our heads around how it all works occasionally (not the trading and innovation teams though, they’re too clever).

Green intentions

All of this wouldn’t necessarily be a problem, however, if you were able to see the words ‘100% renewable’ on a supplier’s tariff and take them fully at their word. Unfortunately, a few suppliers are capitalising on people’s confusion and the loophole in the system to offer ‘green’ tariffs that effectively do nothing to encourage more renewable generation — something which our research found 48% people believe a ‘renewable’ supplier should be doing.

Consequentially, these tariffs don’t help any efforts to move towards a cleaner, greener future.

We’ve talked before on this blog about how not all ‘green’ tariffs are created equal. The central issue is around how renewable electricity is certified, under the regulator Ofgem’s ‘Renewable Energy Guarantee of Origin’ (REGO) scheme. REGO certificates are issued for every unit of electricity from a renewable source.

So far, so good. The thing is those certificates can be purchased independent of their origin. You don’t have to have purchased the actual energy from the generator, because there’s a market to buy the certificates on their own at a very low cost. About 15p per MWh, meaning a supplier can label an average household’s electricity supply (3.1MWh) ‘100% renewable’ with a spend of around 47p.  

Does that sound like a good way to support the growth of renewable energy in the UK? We don’t think so.

It’s like a grocer paying a few pence to put an organic stamp to put on their box of veg, without actually buying the organic veg.

Which suppliers are doing this?

We don’t want to name and shame anyone. If you’re on a renewable tariff with any supplier, or considering switching to one, we recommend you ask them yourselves.

It is a complicated question you have to ask, however. Suppliers are obliged to publish their fuel mix, and most do (here’s ours by the way), but that won’t necessarily show what’s been actually purchased, what’s ‘REGO only’, and what the supplier has generated themselves (several, ourselves included, own their own renewable energy generation assets).

So we did some mystery shopping asking a few companies what they say, which we’re publishing here anonymously:

Owns and operates its own wind and solar farms, from which it sources around a third of its energy. The rest is from the National Grid, with REGO certificates purchased separately in order to call it ‘green’.

Purchases 20% from renewable generators, with the PPAs and REGOs to show for it. But the remainder is REGO only.

Offers a ‘100% renewable electricity’ tariff with a £5 (£60 a year) a month premium, promising to buy the REGO certificates to account for your usage. Purchasing the REGO certificates to cover an average household’s annual usage costs about 47p.

Focuses on a digital strategy to drive costs down for customers, and offers ‘100% renewable electricity’ to sweeten the deal. But admits 100% of its electricity is covered by REGO certificates purchased independently of the energy, stating ‘we’re a retailer, not a generator’.

A certain shade of green

Now, there are shades of grey, or green, to this story. A REGO only green tariff is still better than a standard non-renewable one. Your supplier is still effectively earmarking renewable energy on the grid and saying ‘that’s yours’. The problem is it does very little to encourage any more renewable energy on the grid. 

Overall, it’s a good thing that more people seem to be switching to renewable tariffs. But if cost is the main draw, and those tariffs are not doing anything to generate more renewable electricity, then we’re going to run into trouble at some point. Recent figures from Bloomberg New Energy Finance showed a massive decline of 56% in renewable investment in the UK in 2017, which is more a result of government policy changes than anything to do with consumer demand, but it shows how important this is, right now.

For our part, we know that Good Energy’s approach of paying our network of 1,400 local generators a fair price for their power actively supports the growth of renewable generation in the UK. And we believe that given how many people clearly care about this topic, and how few have a full understanding of it, the facts should be out there for us to have an open discussion about it.  

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