Here’s how we fix the broken green tariffs market

The British public are more motivated than ever to act against climate change, with 65% of us prepared to make changes to our lifestyles to live more sustainably. While the power sector has unquestionably led the decarbonisation charge in the UK, grid mix electricity still carries with it a reasonable chunk of CO2. It remains the case that purchasing renewable electricity is one of the single most significant things an individual or business can do to reduce their emissions.

As the demand for renewable tariffs has risen, suppliers have moved to meet it. In 2016, approximately 9% of tariffs available to domestic customers were green or renewable. Now, they make up more than half. However, with their rise in popularity, the credentials of these green offerings have rightly come under increased scrutiny. The most contentious issue is the use of low-cost Renewable Electricity Guarantees of Origin (REGOs or GoOs) to greenwash purchases of wholesale or fossil-fired power, which results in the end customer lending next to no support to renewable generators themselves – about £1.50 a year.

Compounding the issue is the fact that it is incredibly difficult for consumers to determine which suppliers are selling them REGO backed tariffs, and which are actually purchasing renewable electricity from generators. While REGOs can be tracked via an Ofgem database, genuine purchases of renewable power remain commercially sensitive unless suppliers choose to divulge that information. Work done by Which? in 2019 and Baringa earlier in 2021 shows that many suppliers do not actually buy enough renewable power to cover the amount they sell to their customers.

Change is Coming

Consumers are understandably angry when they discover that their supplier doesn’t actually buy any renewable power on their behalf, and that their decision to switch to a green tariff isn’t resulting in any additional support for renewables. When asked by YouGov, the majority of respondents said they would be concerned if they discovered their tariff was greenwashed in this way. As a consequence, press attention has increased, with a string of features in national papers and a special feature on Jeremy Vine’s Radio 2 show bringing the issue to the fore.

The rules which govern green tariffs were first introduced in 2003, when renewables only contributed less than five percent of total electricity generation. 18 years later they are widely recognised to be out of date, and due a refresh. Fortunately, change is coming. In December’s long awaited Energy White Paper, BEIS made a commitment to ‘ensure consumers are provided with more transparent and accurate information on carbon content when they are choosing their energy services and products.’ The industry is now digesting a Call for Evidence on the matter – the government’s first step in changing the rules.

Tying Power to Provenance

Good Energy set out our preferred route to reform earlier this year alongside Scottish Power. The crux of the issue at present is that REGOs can be bought separately from the power they pertain to. A simple way of rectifying this could be to require suppliers to buy power and certificates together: if they want to buy a REGO to sell renewable power to their customers, they would actually have to buy the renewable power. As well as being more in keeping with what consumers expect, this would increase the number of suppliers signing Power Purchase Agreements, which in turn provides greater support and long-term security for current and prospective renewable generators.

This notion of encouraging direct relationships between suppliers and generators is supported by others. When adjudicating Uswitch’s recent Green Tariff Accreditation scheme, an independent panel of industry experts concluded that a ‘gold standard’ tariff must be 100% backed with PPAs, providing a meaningful contribution towards increasing and/or promoting renewable energy. At present, only two suppliers have gold accredited tariffs.

Half-Hourly Matching

That said, we’re definitely not the only game in town when it comes to policy proposals, and other opinions are available. One such idea is a move to half-hourly certificate matching. In essence, shortening the window within which a REGO can be used from the current annual period to half hour periods. Under such a regime, a supplier could only sell a 100% renewable tariff if it had enough certificates to cover its customer’s demand in each half hour window. This is a far cry from bulk-purchasing certificates to cover wholesale power purchases and could bring a variety of benefits. Suppliers would no longer be able to use a certificate generated on a sunny summer weekend to cover their customer’s winter peak demand, and greater emphasis would be placed on building renewable generation capable of generating away from periods of peak solar/wind export.

There are examples of this kind of approach on a smaller scale already. EnergyTag, a non-profit initiative, is working on an hourly model for electricity certificates, and ENTRNCE offer a half hourly matching service for PPAs to offer traceability for corporate entities.

Half hourly matching is not such an alien concept to Good Energy either. Our promise to customers is that over the course of a year, we match our customer’s demand with 100% PPA backed power sourced from a community of over 1600 generators. However, we have always invested heavily in forecasting and origination capability to ensure that we get close to covering our customer’s demand on a half hourly basis too – and we succeed far more often than not. In 2020, we matched our customer’s half hourly demand more than 95% of the time, using wind, solar, hydro and bio generation purchased directly from our generators.

We would suggest that if BEIS consider a half hourly approach to qualifying green tariffs, it should be based on power purchases, rather than certificates. That way, suppliers and generators are given stronger incentives to behave in a way which benefits a high-renewables system, and customers can be sure that their bills are genuinely supporting the transition to clean, green electricity system.

This article first appeared in Cornwall Insight's Energy Spectrum.

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