E.ON made a bold announcement last week: all 3.3 million of their customers will be placed on a 100% renewable tariff as standard. No need to change their tariff or account. No extra charge.
A good news story on the face of it. But is it too good to be true? The overnight switch to 100% renewables is becoming a familiar one. Shell Energy did the same thing a few months ago, taking its 3.7% renewable mix and making it go entirely green, just like magic.
How has E.ON gone ‘renewable’?
Unlike Shell Energy, E.ON does own renewable projects and buys directly from independent generators, but not at sufficient scale to switch all those customers onto a fully renewable offering. E.ON states it has renewable capacity to power 1.7 million homes, which is just over half of its 3.3 million customer base. So, what about the other half? E.ON’s blog on the news states that “the rest is backed by renewable electricity certificates”, presumably meaning UK REGOs (Renewable Energy Certificates of Origin) or potentially Guarantee of Origin (GOOs) certificates from elsewhere in Europe.
This is the same greenwashing issue we have been arguing against for years. The problem with greenwashed energy tariffs is that customers believe they are making a choice that makes a difference. But energy “backed by renewable energy certificates” makes very little difference because it does not lead to additional renewable generation capacity being built.
Why is that? Simple economics really. A typical domestic solar array(1 – 4 kilowatts) can earn between 20p to £1.50 per year from REGOs. That’s not very much — if you were considering putting solar panels on your roof would you go ahead based on an extra £1.50 a year?
A common counter-argument is that greater demand for renewable certificates will drive up the price. While that makes some theoretical sense, it ignores the current reality: there is massive over-supply of cheap renewable certificates. In fact, by our calculations there are enough cheap certificates to greenwash supply to almost every single domestic customer in the UK. So even if all suppliers copied Shell Energy’s and E.ON’s approach, it would barely move the needle. It certainly would not drive demand for renewable generation technologies to be deployed at pace.
European Guarantees of Origin
There is a further question for E.ON — it is possible under the current rules to use certificates from renewable generators elsewhere in Europe to prove a ‘100% renewable’ fuel mix. As a German-based company, is it doing this? If so, a bizarre regulatory quirk means that E.ON gets out of some of its obligation to pay subsidies to renewable generators. E.ON’s customers would have to pay lessto support renewable generation in the UK than the average UK customer on a non-renewable tariff.
Genuine support for renewable generators in the UK
The current political environment makes it very hard to build onshore renewables in the UK. Energy suppliers have a vital role to play in overcoming this barrier by paying a fair price for renewable power. Signing power purchase agreements (PPAs) with independent, UK-based renewable generators is the way to do that. Buying cheap certificates is not.
Suppliers of E.ON’s size could make a real difference if only they chose to go truly green, rather than using a cheap accounting trick
Suppliers of E.ON’s size could make a real difference if only they chose to go truly green, rather than using a cheap accounting trick. We do not say this lightly. It will make Good Energy’s fundamental business model more difficult to operate. But we want an active, competitive market for genuine renewable electricity generation that creates more capacity.
We urge any E.ON customer to ask the following of their supplier:
- How much of the ‘100% renewable’ tariff will be directly sourced from PPAs?
- Are you buying renewable certificates outside of the UK for your customers?
- Will you scrap the REGO option which only supports your bottom line?
Going truly green can be hard. It requires boldness, commitment and relentless focus. Good Energy has over 20 years of experience doing just that.