OVO Energy has become the first of the Big 6 to stop using cheap certificates to ‘green’ their electricity tariffs, which actually provide ‘little to no benefit’ to growing renewable energy in the UK.
In an announcement on 18 April, the energy giant said it will immediately end the use of Renewable Energy Guarantee of Origin (REGO) certificates, which provide proof that a unit of power has been produced from renewable sources such as wind or solar, and are commonly used to certify that a tariff is 100 per cent renewable.
Research commissioned by OVO found that 81 per cent of people believe that ‘100 per cent renewable electricity tariffs’ backed by REGOs help to fund new renewable energy projects. However, this is not the case.
How REGOs work
When an energy supplier purchases power directly from a renewable energy generator, they also obtain the REGOs that come with that power. At the end of the year, the supplier should then ‘retire’ these certificates to Ofgem as proof that they have bought enough renewable electricity to cover their customers’ needs.
However, because of the way the market currently works, the electricity and the REGO certificate that comes with it can actually be bought and sold separately. A surplus of certificates on the market means that REGOs are extremely cheap, so energy firms can buy up certificates in bulk at low cost, in effect greenwashing electricity that can come from any source – including fossil fuels.
Distraction from real action
To overcome the problem, OVO will join others in the industry in calling for a new kitemark system for green tariffs to help customers avoid greenwashing practices by “clearly identifying which tariffs support decarbonisation or the generation of renewable energy”.
Writing in The Times on 18 April, OVO’s CEO Raman Bhatia said: “At best, these [REGO-backed] tariffs run the risk of giving customers a good but misleading feeling about being green. At worst, they are an active distraction from the real steps we need to make energy greener and cheaper. If we don’t take a new approach then we risk failing to get to net zero which would be a climate catastrophe.”
Instead of purchasing REGOs, Bhatia added that OVO will divert spending towards helping customers cut their energy demand through free and discounted green technologies such as smart thermostats, insulation, support to understand energy usage and payments for shifting consumption to greener and cheaper times of the day.
Big implications?
OVO’s move has already been backed by Good Energy, a rival supplier which already purchases renewable energy directly from generators rather than relying on REGOs.
“By ditching its purely REGO-backed product OVO has indicated where green tariffs are going,” explained Good Energy CEO Nigel Pocklington. “Big suppliers can have more impact through demand shifting, efficiency and innovative tariffs. So if they want to help decarbonising energy that is where they should focus.”
A move away from cheap REGO-backed tariffs could have wide-ranging implications for the green economy, as many businesses currently rely on such tariffs to report a reduction in their carbon footprint. Rooting out greenwash in the sector could therefore drive investment towards more impactful measures such as energy efficiency and on-site renewables.
