Blog Post

‘Green’ Tariffs to come under increased government scrutiny over growing ‘Greenwashing’ concerns

Richard Simmonds • March 23, 2021

Green tariffs that claim to use 100% renewable energy are to fall under government scrutiny as energy suppliers and regulators grow increasingly concerned that consumers are being misled.

What are Green Tariffs?

An increasing number of energy suppliers have introduced ‘Green’ tariffs in recent years to effectively cash in on the environmental movement. They promise that all of the electricity provided on the tariff is sourced from 100% renewable energy sources such as wind or solar power.

The likes of British Gas, Octopus Energy, Eon and Scottish Power all offer such tariffs and all promise that 100% of the electricity sent to consumers is renewable.

Concerns over the tariffs were first raised last year when Good Energy which uses direct contracts with renewable energy generators, approached Ofgem asking the regulator to look into them. They worried that many of the ‘green tariffs’ advertised are misleading and that energy suppliers have effectively lied when it comes to telling their customers where the energy is actually sourced from.

Some suppliers purchase cheap Renewable Energy Guarantees of Origin (REGO) certificates or their European equivalents claiming that they prove that they are genuinely using renewable clean energy.

Not all suppliers make this clear when selling their Green tariffs to customers, a fact that has Ofgem and the Energy Ombudsman worried that consumers are being duped.

Now, government ministers are to examine just how these green tariffs are being marketed.

Also read: Ofgem to increase monitoring of Green tariffs and put an end to ‘Greenwashing’

What are REGOs?

The Renewable Energy Guarantees of Origin (REGO) scheme provides transparency to consumers about the proportion of electricity that suppliers source from renewable generation.

Ofgem issues power generators with one REGO per megawatt-hour of eligible renewable energy produced.

The certificates can then be traded on another market where energy suppliers can buy them cheaply (sometimes as low as 10p). Energy suppliers can also purchase European equivalents that are often even cheaper than UK ones.

The supplier can then submit the REGOs to Ofgem allowing them to legally market green or environmentally friendly services and tariffs as 100% renewable.

It is a system that some analysts believe is wide open to abuse and one that allows energy suppliers to be loose with the truth when it comes to them being genuinely ‘green’.

Also read: Ofgem to increase monitoring of Renewable Energy Guarantees of Origin' (Rego) certificates following Times Investigation

Misleading consumers

The UK business department is expected to make a call for evidence to review Green Tariffs and how they are marketed. It has called for greater transparency to ensure that consumers are properly informed over an energy suppliers’ ‘Green’ credentials.

Energy suppliers such as Good Energy and Scottish Power who strike direct contracts with clean energy generators claim that REGOs need to be changed as currently, it is too easy for a supplier to use them and claim they are 100% green.

“Suppliers are using this label of 100% renewable because they can, it’s easy. It amounts to mis selling in our eyes,” said Kit Dixon, policy manager at Good Energy.

Because almost all electricity is added to the grid, regardless of its source it is not possible to trace the energy generated from one particular source to a home or business, something that makes it impossible to verify whether a company is 100% green or not.

Meanwhile, Scottish Power has said that it could make a complaint to the Advertising Standards Authority over the situation claiming that there has ‘been huge misleading of customers in the UK’.

In contrast, energy suppliers that do use REGO certificates insist that the current system is not corrupt or open to abuse as they correspond to units of green electricity that has been legitimately generated.

Also read: Is ‘Green Energy’ really good for the environment?

Battleground

The issue of Greenwashing looks set to become an ongoing battleground among energy suppliers and regulators over the coming years with some suppliers defending their use of REGOs and others calling for the system to be overhauled.

It’s a big issue that could have big impacts on energy suppliers and it’s one that we will keep an eye on.

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