REGOs: sorting fact from fiction
The scheme is failing to make the electricity market more transparent, but how?
The Renewable Energy Guarantees Origin (REGO) scheme was set up with the intention of making the electricity market more transparent by telling customers what proportion of their energy comes from renewable sources. But the scheme is failing at achieving this simple goal, because the certificates that prove the energy’s origin aren’t necessarily sold alongside the energy itself. Confused? Here we separate the common misconceptions from the reality.
Myth 1: If a supplier offers a renewable tariff, it must be getting at least some of its energy from renewable sources.
Fact: Unfortunately, it isn’t quite that simple.
Any renewable generator which generates one megawatt hour of electricity is eligible to receive a REGO certificate for that unit of power from OFGEM, to certify that it is green.
The problem is that REGO certificates can be sold completely separately from the power, (known as “unbundled”) and there is a thriving secondary market for this.
Suppliers are free to source all their energy from fossil fuel sources, then buy REGOs to market it as green. Right now, it is perfectly legal for a supplier to trade all year with brown power and buy unbundled REGOs at the last minute to label a tariff as green.
I think this could be clearer. The fact is a supplier can trade all year with brown power and buy REGOs at the last minute to cover a green tariff.
Myth 2: REGOs offer financial support to renewable generators.
Fact: It only costs suppliers about 50p to purchase one REGO. The total cost to a supplier to claim that a domestic electricity tariff is green by backing it with REGOs is around £1.50 per year. We wrote about this when Shell went green ‘overnight.’ The money that renewable generators get from REGOs is so small as to be negligible, so it does nothing to support the creation of new renewable projects, such as building a solar farm.
The latest best practice guidance on green electricity procurement from the UK Green Building Council says that your supplier should demonstrate additionality: that is, buying electricity from them will lead to new, additional renewable generation. Ofgem verified Good Energy’s tariffs as providing this additionality as part of their work on the energy price cap.
Myth 3: REGOs are the fastest way to green the grid.
Fact: The idea that REGOs will at some point become significant enough to accelerate decarbonisation of our energy system is unfounded. The Climate Change Committee have said unequivocally that the best way for businesses to support renewables through their choice of electricity tariff is to choose a supplier that holds direct power purchase agreements with renewable generators.
If all suppliers who wanted to market their electricity as “green” had to source it through direct agreements with renewable generators, two things would happen:
- The relative green credentials of suppliers would be much clearer to consumers, who would feel more confident switching to renewable energy.
- The signal being sent to renewable generators to build more would be stronger.
More customers sending a much clearer signal to investors would mean that we could decarbonise our electricity system faster.
Myth 4: REGOs allow businesses to go green at low cost.
Fact: It’s true that at present, some of the cheapest “green” tariffs tend to be offered by companies which get most of their electricity from fossil fuel sources and then greenwash it with REGOs. But as we have discussed, this is not really “going green” because the purchase does nothing to support the generation of renewables.
Good Energy is lobbying for more clarity in the energy market so that brokers and customers understand exactly what they are buying. We think that if suppliers want to sell renewable electricity to their customers, they should have to buy it from generators in the first place. That way, pricing for the end customer would suddenly become a much more level playing field. The resulting boost in genuine investment for renewables – already the cheapest form of electricity generation - could bring the price down for everyone.
The government are currently reviewing the way renewable electricity is marketed, and we are confident they will make the required changes to policy to make finding a green tariff and supporting renewables easier. In the meantime, it’s important to do your research when choosing a supplier and find out the truth about their sources.
At Good Energy, we buy our 100% renewable electricity from over 1,600 independent generators, investing in the industry to help it grow. You can learn more about how we source our electricity here, and learn more about REGOs and greenwashing here.