REGOs — The Truth About Green: Independent Accreditation, Greenwashing And PPAs

It’s been an interesting time in the green energy market recently. The CMA is investigating green claims that businesses are making. In addition to this, Ofgem and BEIS are in the process of looking to revamp green tariffs.

Greenwashing isn’t just for the energy industry and is the term used to describe companies using mechanisms to falsely claim they are greener than they actually are. For the UK energy industry, this has predominately been through buying REGOs (Renewable Energy Guarantees of Origin), which allow suppliers to turn 1MWh of electricity supplied to their customers into green energy, where they’ve bought a REGO (1 REGO = 1MWh Green energy). Historically these have dropped to as low as 10p/MWh, meaning turning a household’s entire usage green could cost as little as 30–40p per year. More recently, prices have spiked to over £1/MWh.

Not long ago, USwitch launched a new Green Accreditation process, allowing for a green energy tariff to be classed as either Bronze, Silver, or Gold (https://www.uswitch.com/gas-electricity/green-energy/green-accreditation). Good Energy is the first to receive a Gold Standard, with more expected to come. So, is this a good thing, and what are some more truths about the green energy system?

CLAIM 1. Independent green certification schemes are the solution.

Unfortunately, not. Whilst they set a new standard that can be adopted by some energy suppliers, the ‘Gold’ standard by USwitch is far from the best achievable outcome.

USwitch defines ‘Gold’ as:

-100% of electricity bought from renewable generators under PPAs and at least 10% of green gas, with all emissions from gas being offset.

-Provide a meaningful contribution towards increasing and/or promoting renewable energy.

There are some interesting points here. Firstly, why 10% green gas? There’s no standard to this and is simply an internal supplier decision based upon price. Green gas certificates are more expensive due to limited supply, and therefore it’s quite a big premium to supply 100% green gas vs 100% green electricity. Since a 10% green gas target is largely price-driven, isn’t this just as bad as buying cheap REGOs?

Secondly, 100% of energy needs to be bought from PPAs, we’ll discuss more the challenges with this below.

We’ve seen the result of independent schemes in the past. There are multiple carbon standards in offsetting and multiple green gas standards. Some green gas certificates can be used up to 99 YEARS later. How does that even make sense?! Unfortunately, independent schemes are an outcome of a slow regulatory system that has failed to create standardised approaches.

CLAIM 2.100% PPA backed energy means 100% green electricity.

FALSE. We can agree with many in the industry that this is a significant improvement over greenwashed REGOs, but we can’t pretend this is a gold standard. When the wind isn’t blowing and suppliers’ PPA (power purchase agreement) contracts aren’t delivering enough energy, chances are they are buying anonymous energy from the grid, and then using REGOs generated from other parts of the year to claim that this anonymous energy is green. It’s better than pure greenwashing, but unless an energy supplier is massively overbuying PPAs to guarantee 100% PPA backed energy for each half-hour through the year, then there is some form of greenwashing involved.

In addition, the idea of PPAs insinuates that each customer has their own private wire connecting them to the PPA wind farm 400 miles away. In reality, as a result of just basic physics, each household will get energy from whatever is the closest source. If you live near a nuclear power plant, you are almost certain to get energy from there regardless of how green your energy supplier tells you it is.

Typical household demand profile vs a typical solar generation in summer. Pink is excess energy exported to the grid

CLAIM 3. Additionality is the key

Additionality is the concept of going above and beyond (i.e., something in ‘addition’) to deliver further environmental claims. As a principal, this is fantastic and gives suppliers a wide berth to create innovative outcomes. Some choose to develop renewable assets, some buy trees, some carbon offset. Here are a few points to watch out for:

Building renewable assets isn’t always ‘additionality’. Most of the renewable generation being built is based upon a financial payback — i.e., it’s profitable for the owner. They are therefore not building renewable assets to provide an additional benefit that would otherwise not be built, they are building them to make money, as well as delivering environmental benefits. A £5m solar farm typically is built using debt (aka a mortgage), so in reality, asset owners are putting £1m of their money into the project and are likely to make more than £1m in the long run.

Carbon offset is a great tool, but not the only tool. Offsetting is a way of paying for others to reduce emissions or absorb CO2 to compensate for your own emissions. It allows companies to balance out their emissions, but the best action is to reduce carbon emissions as much as possible, and then offset or remove the rest.

So, what’s the solution to genuine environmental energy?

From my perspective, there are two key ways:

Generate it yourself. The only way to guarantee the electricity you use is genuinely green is by generating it yourself. This way, you can track energy from your solar panels, wind turbine, etc, and see what is physically going into your property for you to use. Batteries are also a great way to maximise this, and generally, double the amount of solar generation a homeowner can utilise and self-consume.

Use less energy. Make your home and usage as energy-efficient and low consuming as possible, and then for the remaining energy, you do need from the grid, try, and pick the best option possible.

Whilst the above approaches are great, no solution is perfect. Manufacturing batteries and solar panels have an environmental impact due to their materials and transportation, and no energy supplier’s green energy is perfect as I’ve outlined previously.

I think for all consumers, take a pragmatic approach, and make an informed decision about what you feel is genuinely the best environmental approach for you, but be careful of greenwashing, and anti-greenwashing claims that exist in the market, as underneath the surface, it’s not necessarily all as it seems.