The first step towards reforming green tariffs
This is a welcome move, and we fully support government working with industry on developing remedies.
It is important to stress that this is just the first step, however.
The government has yet to take a view on how they plan to reform green tariffs. The call for evidence invites views from a wide group of stakeholders – all impressing their ideas on what route the government should take.
Now, as you can imagine, we had quite a bit to say.
Good Energy’s response to the call for evidence is twofold – separated into short term reforms & long term priorities.
We would like to see the government bring forward a consultation on short term regulatory reform.
We have identified four actions the government and Ofgem could take relatively quickly to improve transparency and drive additional investment in renewable generation.
So, what can the government do in the short term?
Reformed tariff information
The best way to immediately improve transparency among energy tariffs would be to implement changes to Fuel Mix Disclosure regulations.
This should be targeted on ensuring that the key metric provided to the consumer is the percentage of their consumption which will be matched by direct purchases of renewable electricity made by their supplier.
Stronger monitoring and compliance
Government and Ofgem should make it clear to suppliers that when they make a green claim about an electricity tariff, they should provide full disclosure to businesses about the basis for that claim.
Despite the current rules requiring suppliers to share detailed information about the environmental benefit delivered as a result of the customer choosing the tariff, we do not feel that suppliers have been adequately challenged on their compliance with this condition
Prevent levy avoidance
The practice of some suppliers using European Guarantees of Origin certificates to avoid environmental levies should be halted immediately.
Suppliers currently pay around £45 per annum per customer to support renewable generation via levies.
However, the cost to suppliers who choose to avoid these levy payments by purchasing Guarantees of Origin (GoO) certificates was less than £8 per customer in 2019/20. Closing this loophole would go some way to ensuring the costs of renewable generation support schemes are distributed fairly.
Net zero watchdog
Finally, there is another option for government which could be to introduce a ‘Net Zero Watchdog’ – performing an oversight role across the economy. Whilst organisations such as the Committee on Climate Change perform an excellent role in advising on climate policy, there is room for a consumer-focused watchdog to help assist consumers.
Independent experts, across different sectors, could be brought in to assess claims made by businesses and provide much needed confidence for an increasingly environmentally conscious consumer.
Looking ahead
In the long term, we envisage the green tariffs landscape developing enormously.
As we move to a smarter, flexible, renewable-led energy system, businesses could have the opportunity to take advantage of the abundance of data that will allow more granular reporting – possibly down to each half hour of the day.
We are proud at Good Energy to already be making this a reality for our business customers.
Last year, we matched our customers demand with renewable generation every half hour of every day 93% of the time. Indeed, even before that, we matched our customers demand 90-95% of the time for the years 2017-2020.
Not only is this great from a transparency and visibility point of view for businesses, but this also offers fantastic opportunities to accelerate the shift to a truly flexible, decentralised energy system.
Matching consumption and demand in real time will create the right incentives for energy suppliers to source a diverse mix of renewable generation.
This can ensure the grid can still be powered by renewables when the sun isn’t shining or when we have periods of low-wind, without having to resort to buying expensive fossil gas on the wholesale market.
By combining smart data with renewable generation, we can accelerate to an energy system powered by renewables in real time. It’s a win-win for everyone.
