Energy Tariffs Should Have “Olympic Medal-Style Ratings” to Beat Greenwashing

Ofgem should create a simple rating system, modelled on Olympic medals, for energy tariffs marketed as green, think tank Social Market Foundation (SMF) has proposed.

The government is already investigating the green branding of energy tariffs amid concerns that suppliers are taking advantage of consumer confusion to sell fossil fuel-backed electricity as “renewable.”

Currently, most energy suppliers that sell “100% renewable” electricity are purchasing it on the wholesale market, where it can come from any source, including gas and coal-fired power stations. These companies then launder this energy with certificates purchased for as little as £1 per supplied household per year.

Critics of the system say Renewable Energy Guarantee of Origin (REGO) certificates provide little direct support for renewable generators. They argue that only energy tariffs backed up with electricity the supplier itself generates from renewable installations or purchased through long-term contracts with renewable generators, helping them finance expansion, should be classified as green. Currently, just Scottish Power, Good Energy and Ecotricity meet these standards.

The government’s review, announced last month, will consider whether the rules about what can be marketed as a green energy tariff are “suitably transparent” and “fit for purpose.”

Research from Social Market Foundation suggests that they aren’t. In a poll conducted by the think tank, two in five people reported that they don’t know enough to decide what is meant by green energy. This rises to nearly half (47%) of those on lower incomes.

Nearly half (47%) of survey respondents said they wanted to know about the sources of “green energy,” with just 22% saying the current information is sufficiently transparent.

Amy Norman, senior researcher at the Social Market Foundation, said: “Consumers want to know whether their energy bill is doing more harm than good for the environment, and they shouldn’t have to navigate a bewildering system to understand that fact.

“The current accreditation system for green energy tariffs is outdated, confusing and risks consumers facing misleading claims from energy suppliers, who can legally market ‘100% renewable’ energy tariffs which aren’t what they seem.”

The think tank suggests that bewildering and misleading labels on energy tariffs are eroding consumer trust and compromising the government’s climate goals.

“Support for Net Zero hinges on business and policymakers’ ability to deliver trusted markets where clear lines can be drawn between what people buy and what difference those products and services make to decarbonisation,” Norman explained.

SMF has suggested that Ofgem label energy deals on a simple three-point scale borrowed from the Olympics. Suppliers that offer tariffs leading to “demonstrable environmental benefits,” like investing in renewable infrastructure and power generation would receive gold medals, with tariffs that contribute less to decarbonisation goals given silver and bronze.

“If the Government wants to help people understand more about their personal contribution to tackling climate change, it should work with Ofgem to introduce a badging system for energy tariffs which is crystal clear for consumers,” Norman said.