Energy suppliers ‘wise’ to abandon use of REGO certificates over ‘greenwashing’ concerns

Good Energy and OVO Energy both criticised the REGO regime, which issues a certificate for each megawatt hour (MWh) of renewable electricity produced by a generator. REGO certificates are most often used to help energy suppliers demonstrate the proportion of electricity they purchase from generators that is made using renewables. OVO’s decision to divest from REGO certificates came after internal research showed that the majority of its customers do not understand how green energy tariffs are used.

OVO said that many customers mistakenly believe that the REGO certificates mean their property is directly served with 100% renewable electricity. In reality, however, on days of low wind and solar energy generation, much of the electricity supplied on green energy tariffs still comes from fossil fuel production. OVO said that REGO certificates do not reduce real energy sector emissions, adding that the lack of transparency around how they are used was misleading to consumers.

Good Energy, meanwhile, said that the current system, which allows REGOs to be traded separately from the renewable electricity in respect of which they were issued, is flawed and misleading. The company has instead called for a time-based certification regime, which would see customers’ energy use matched with carbon-free power for every hour of the day. It added that this system could use of technologies, such as anaerobic digestion, hydropower and battery storage, to provide power at times when wind or solar generation is not possible.

Energy expert Euan McVicar of Pinsent Masons said: “Given the concerns over greenwashing, OVO and Good Energy have made a wise move. Using REGOs to reduce ‘Scope 2’ emissions – indirect emissions that are purchased from an electricity generator – is a questionable method, and the REGO scheme does nothing material in and of itself to support new renewable generation”.

He added: “It is also significant to see a leading supplier take action on its own in the face of stalled policy developments from the UK government and regulators. Ministers launched a call for evidence on transparency of carbon content in energy products two years ago, but no findings have yet been published and no proposals forthcoming. The decision by OVO and Good Energy could prompt greater interest on how green tariffs are presented to consumers from the Competition and Markets Authority (CMA), after it introduced the Green Claims Code in 2021.”

In 2015, energy regulator Ofgem also introduced rules requiring green tariffs to offer some additional environmental benefits – on top of those that already exist without them – or else the companies that offer them must print a disclaimer explaining that the tariff does not necessarily provide any environmental benefit. McVicar warned, however, that these requirements might no longer be sufficient to protect consumers. “Given the findings of OVO’s research, Ofgem could be missing a trick by not creating rules that would help promote additional renewable energy to help them protect the interests of consumers through the reduction of greenhouse gases.”

Ronan Lambe of Pinsent Masons said domestic consumers are increasingly interested in where their electricity comes from, and businesses are increasingly being required to report on the emissions associated with their activities. “OVO is pushing for a kitemark that would demonstrate a tariff that is truly additional but includes better rules on transparency. Proper enforcement will also be required to help business meet its reporting rules properly while the Good Energy proposals are also worthy of detailed consideration,” HE said.

He added: “One alternative for business is to use a tariff backed by power purchase agreements (PPAs) from specific, new renewable energy projects. One interesting idea involves the use of a time-based certification system, so that an energy user’s demand is matched – to the greatest extent possible – with renewable electricity generated during those hours of demand.”

“While this system is not yet a mainstream feature of corporate PPAs, it could well become more popular. It is likely that the largest and most sophisticated electricity consumers drive this change in the market – and a number are already signing PPAs on this basis. This ‘temporal correlation’ between renewable generation and consumption is also an important feature of the developing green hydrogen market. It is, however, difficult to predict whether the correlation will prompt reform of REGOs – such that they cannot be traded separately to the electricity they were issued in respect of – or scrapped altogether,” Lambe said.