Energy suppliers can claim to offer green tariffs by paying as little as 93p per customer to renewable generators, a Times investigation has revealed.
There are currently 282 energy tariffs on the market, with 111 of them purporting to be green, from around 70 energy suppliers.
But regardless of the tariff or supplier they're signed up with, all households and businesses receive the same electricity through National Grid. Energy suppliers simply buy or generate enough energy to match their customers’ consumption and pump it into the grid.
Some suppliers, like Ecotricity and Good Energy, generate their own renewable power or buy it directly from third-party renewable generators, through power purchase agreements (PPAs).
But many energy companies are using a sleight of hand enabled by Renewable Energy Guarantees of Origin (REGO) certificates to mislead consumers into thinking their power is green.
REGO certificates are issued by renewable generators like wind farm and hydroelectric power stations alongside the power they supply. However, they’re not attached to the energy and can be traded separately.
Some energy suppliers buy energy on the wholesale market, much or all of it generated by fossil fuels, and then buy REGOs for as little as 30p per megawatt-hour (MWh) to ‘greenwash’ that electricity.
As long as an energy company is holding enough REGOs for the energy they supply, they can claim it’s “100% renewable,” although they're not producing it themselves or even having contact with generators that do.
With REGOs selling for as little as 30p per MWh, according to analysis from Cornwall Insights, and the average household consuming 3.1MWh of electricity a year, firms can pay as little as 93p per customer per year to offer “renewable electricity.”
Firms can also buy EU guarantees of origin certificate, supporting renewable generators far from the UK.
There are also different types of REGOs—for wind power, solar power, hydro and biofuels—at different price points and some of them are dirtier than others.
Up to 20% of the power produced by suppliers of REGOs is thought to be from the incineration of biofuels, such as wood fuel pellets, which is little better for the environment than burning fossil fuels. But suppliers don’t have to reveal what type of REGOs they’re buying when claiming their power is green.
Good Energy, which generates renewable power from its wind and solar farms, has slammed the REGO scheme for allowing other suppliers to mislead consumers and doing little for generators.
Tom Steward, Senior Policy & Regulation Manager at Good Energy, said: “Many suppliers don't actually buy any renewable electricity at all, they just buy brown power—which could even come from coal—and then buy these certificates to make themselves look green.
“These certificates are so cheap they provide almost no financial benefit to renewable generators.
“We calculated for a large solar farm they would just about cover the cost of cutting the hedges around the edge of the site each year.”
British Gas, the UK’s largest energy supplier, launched a green tariff in January of this year. But it’s admitted it covers the tariff with REGOs and EU guarantees of origin certificate, half of them from wind and solar and half from biomass.
E.ON, another Big Six supplier, has said it generates enough green energy to power 1.7 million homes and covers the rest with REGOs.
Up and coming Octopus Energy, which was hailed last week by the Prime Minister and Chancellor as a leader in the UK’s green recovery, said it has contracts with 100 small renewable generators and also buys REGOs. It denied buying energy from fossil fuel plants and attaching REGOs or buying “foreign” REGOs, although it said it was aware competitors do.
Energy market regulator Ofgem has said it expects suppliers to clearly communicate to consumers the origin of the “green” energy they provide. It said it will increase monitoring and “hold suppliers to account” for failing to do so.
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