Where do REGOs come from?
Any renewable generator which generates one megawatt hour of electricity is eligibleto receive a certificate for that unit of power from the regulator, OFGEM. They can then sell these certificates with the power, or separately.
Are REGOs causing renewable electricity to be ‘double counted’?
REGOs are only of value to the energy suppliers offering green tariffs. But renewable power is valuable to other organisations, such as corporations with renewable Power Purchase Agreements (PPAs). PPAs are a good way for big businesses to ‘go green’ as they create a direct relationship between generator and mass energy consumer.
Think a server farm, or a huge factory getting its electricity a wind or solar farm.
That is clearly a good thing that should be encouraged. But the big corporation, factory or server farm does not need the REGOs associated with the power they are buying. This means they can be sold on and potentially used to greenwash a household ‘green’ energy tariff. This effectively means that the renewable electricity is being double counted — once by the corporation reporting itself to be ‘powered by 100% renewable electricity', and once by the customer on the green tariff.
How much does it cost to ‘green’ a typical household’s electricity?
The cost to your supplier to claim your electricity is green through backing it with REGOs is around £1.50 per year. Despite claims to the contrary by some greenwash suppliers and others in the industry, this has not changed dramatically since the scheme began. When we started writing about greenwashing in 2017, this figure was around 47p. So yes it’s tripled, but when it comes to building a new solar farm, that extra pound doesn’t get you very far.
Why are REGOs so cheap?
In short — surplus. Over a third of electricity generation is now renewable. Although ‘green’ tariffs are gaining in popularity, they are still nowhere near enough homes and businesses on green tariffs to use all of that renewable power. Which means that matching your electricity use to renewable generation via a certificate, means effectively nothing. Because there are always going to be so many certificates. In fact as renewable generation grows, ‘green tariffs’ which are just REGO-backed wholesale power will only become more meaningless.
What are European ‘GoOs’ and why are they a problem?
REGOs are part of a European wide certification scheme, and are what the certificates from UK generators are called. Certificates from elsewhere in Europe are simply called Guarantees of Origin or GoOs, and can also be used to ‘greenwash’ an energy tariff. Like REGOs, they tend to be cheap, passing little value back to generators. But in addition, they are unhelpful in creating a more local electricity market — we should be encouraging UK renewables first, because the less far electricity has to travel, the lower carbon it is.
Furthermore, use of GoOs allows suppliers to avoid some of their obligations to pay the mandatory support mechanisms all suppliers have to pay. Our analysis suggests that in 2019, British Gas avoided paying around £49 million of its UK green levies this way. Effectively a ‘double greenwash’ — using cheap certificates to offer fake green tariffs, and to avoid the support they would otherwise be obliged to give UK renewables.
Who are the greenwash suppliers?
Which? published a report on greenwashed energy tariffs which included a table showing how suppliers offering ‘green tariffs’, which you can find here. If your supplier is not on the list, do some digging on their website — if they talk about how they back your electricity use with REGOs but don’t talk about any agreements with generators, that’s a giveaway. It can still be difficult to tell, so go ahead and ask — ‘how much of the green electricity you supply each year is backed by agreements with renewable generators, and how much is just backed by REGOs?’ If any of it is just REGOs, without also buying the power to go with them, you’re being greenwashed.
Shouldn’t renewable electricity be low cost for customers?
A common argument from the greenwash energy suppliers is that renewable electricity should not be a premium product. Good Energy is a huge supporter of the concept of a just transition. The idea that everyone should play a part in the solutions to climate change is at the very core of our purpose. The problem is that REGO backed greenwash tariffs are not part of the solution to climate change. Quite the opposite.
It’s true that renewable generation is getting much cheaper — which is good news for everyone. But we know that consumers expect a green tariff to help support renewables, not just match it to what’s already been generated via a certificate — that is effectively meaningless. When you choose a green tariff, you are choosing to help grow renewables. And cheap fake green tariffs do not do this. Instead, they divert customers away from choosing suppliers who are genuinely investing in renewables.
If the market was transparent, those who want to support renewables and can afford to do so would not be misled by fake green tariffs, and we would have much more support for growing renewables. Which will get us to 100% renewable energy system faster, and make electricity cheaper for everyone.
If everyone switches to a REGO backed tariffs, wouldn’t that green the grid?
Firstly it depends who you mean by ‘everyone’. Domestic households only make up just over a third of electricity demand — the rest is industrial and service usage. Coincidentally just over a third of generation is already renewable, so as we covered earlier, feasibly every single household could switch to a REGO backed tariff and it would make no difference to the greenness of the grid.
Which itself is incredibly unlikely to happen. Less than six million households switch supplier each year. And many are switching to tariffs marketed as green — around nine million are now on REGO backed greenwashed tariffs. Yet this has done very little to change the value of the REGOs, which can still be acquired for around £1.50 per customer.
How does having direct agreements with generators make a difference?
The big difference here is the value to the generators. We calculated the hypothetical value of just REGOs to one of our 5MW solar farms — that’s fairly big farm with three large fields covered in solar panels, producing enough power for around 1,250 homes. The value of the REGOs over a year would just about cover cutting the hedges. You don’t need to be a business expert to recognize that would be a far from sufficient financial foundation to get the solar farm built.
Meanwhile our dedicated PPA t(Power Purchase Agreement) team speak to prospective generators who are creating a business case to get new renewables built all the time. We are able to give them a power price they struggle to find elsewhere, on terms that work for them, because other suppliers are not in the market for PPAs. That price allows them to create that business case, find finance, and get their generators built. Our PPA team are also a crucial source of support to the generators we work with – offering insight into how changes to the energy system could affect them, keeping them up to date on the changing price of power, and making sure they know about new regulations that are coming that might harm their business model.
Imagine if all suppliers offering green tariffs were doing the same — the market for building new renewables would explode.
Isn’t building your own renewable generators better than offering PPAs?
Good Energy owns two wind farms and six solar farms, but we moved away from building our own generators several years ago because we can have a much bigger impact enabling others to generate clean power than trying to do it all ourselves.
We believe in a fairer, democratized, decentralized energy system. Not one where a handful of companies own all the power stations — whether those are power stations are renewable or not. Our long-term goal, as explained in our manifesto, is not to sell power at all, but allow all of our customers to generate, share, store and use their own.
How has the REGO loophole been allowed?
Ofgem’s supply license conditions were not intended to be abused in the way that they are. Our policy document details how the license conditions became out of date once the Climate Change Levy exemption closed for renewables in 2015, which in effect opened up the loophole. This was written with support from Dr Jeff Hardy, who used to oversee the team at OFGEM that wrote these rules in the first place.
It also explains how suppliers simply buying REGOs to back green tariffs should not be making claims of environmental ‘additionality’. These are marketing messages you might see on supplier adverts or websites that make claims like they are ‘making energy greener’ or ‘helping fight climate change’. These claims are against the regulations right now, and should be stopped.
What is the regulator doing about it?
Ofgem said in their Decarbonisation Action Plan at the start of the year that they ‘expect suppliers to be transparent about what constitutes a ‘green tariff’ and we will undertake work to ensure that consumers are not misled.’
The Sunday Times asked OFGEM about Greenwashing and they said...
We expect all suppliers to clearly communicate the nature of the green energy they provide, and the source of energy the customer can expect. As part of our wider strategic focus, we will step up our monitoring in this area, shine a light on good and bad practice and hold suppliers to account.
So we know that Ofgem are looking at this, but as yet we have not seen any action take place.
Who else can do something about this?
Ofgem is independent from Government, but we know that they work closely with the government’s Department for Business, Energy and Industrial Strategy — BEIS. If government is concerned about greenwashing in the energy market, OFGEM is more likely to prioritise it. So do write to your local MP — every politician who has this issue on their radar helps.
Who can I complain to?
If you’ve been a victim of greenwashing, do let us know your story by emailing email@example.com.
If you think you have been misled by green claims, complain to your supplier. If their response is unsatisfactory, complain to the Ombudsman.
If you see marketing claims you believe to be unfounded — bearing in mind that any environmental claim like ‘making energy greener’ or ‘fighting climate change’ from a supplier which does nothing more than buy REGOs is in fact against the existing regulations — complain to the Advertising Standards Agency (ASA). Although it’s worth being aware that the ASA isn’t an energy specialist.
Write to the media too. Consumer affairs journalists and shows want to hear about this.
Ready to switch?