Government seeks to make REGO scheme more transparent

A call for evidence on the issue of greenwashing in the energy sector has proposed more transparency around the Renewable Energy Guarantees of Origin (REGO) scheme.

This morning (16 August) the Department for Business, Energy and Industrial Strategy (BEIS) published the document which explores how green electricity tariffs are marketed by suppliers.

One area highlighted concerns the REGO scheme and whether the system around REGO certificates needs to be smarter, as well as whether suppliers need to provide clearer information to households about their green tariffs, including type of renewable energy used, where the renewable power was generated and when.

BEIS explained that given the rising importance of time granularity in electricity supply, the lack of a feature which reflects the time energy was generated or consumed in the existing REGO system may present a “particular challenge to providing consumers with transparent information”.

The document noted how renewable electricity made up less than two per cent of the national mix when REGO certificates were first implemented 20 years ago. It said the framework was not designed in a way to distinguish between the different types of generation now in the energy market (and their associated carbon content) or to provide consumers with information to play their part in net zero decarbonisation.

“As net zero requires smarter and more flexible energy solutions, it is vital we have a transparent accounting system which better reflects the physical realities of the electricity grid and creates stronger customer incentives to make the most of low carbon generation when it is most needed,” it said.

BEIS said the lack of understanding of the retrospective annualised matching principle underlying REGO schemes may continue to foster “confusion and distrust” from consumers who are aware that renewable generation is not always available when their electricity consumption occurs.

“Consumer trust is vital and increasing the granularity of information is a way of increasing transparency and addressing consumer confidence,” it added.

Additionally, BEIS warned, information initiatives alone may have limited success and the regulation of green tariffs must cater for a “broad range of customer motivations”.

Emma Pinchbeck, chief executive of Energy UK, said the trade body would welcome more transparency over green tariffs.

She said: “Consumer confidence in new services and products is an essential part of our transition to a smart, flexible and low-carbon energy system. So we would welcome more transparency over green tariffs which could allow consumers to make more informed choices.

“The market has changed rapidly in recent years and with renewables and low carbon sources now supplying well over half of our power, it is a sensible time to review the current regulations. We also welcome the government’s look into services like price comparison websites and auto-switching which play a big role in the choices made by millions of energy customers.

“It is crucial consumer protection keeps pace with the growth of innovative new services in this fast evolving market and so we look forward to working with the government to help achieve this.”

Nigel Pocklington, chief executive of Good Energy, said: “Good Energy has been a lonely voice calling out greenwashed energy tariffs. We believe this is one of the biggest consumer scandals in history, so to see the government sit up and take notice is gratifying.

“But it is vitally important that we get the crackdown right so that green tariffs actually support renewables in a meaningful way, that comparison sites follow Uswitch’s lead in doing the right thing and that customers choosing ‘100 per cent renewable’ know what they are buying. We cannot tackle the climate crisis if people who think they are doing their part are being misled.”

A spokesperson for Bulb said: “We think it’s important people know where their energy comes from. We publish all the details about where our 100 per cent renewable electricity comes from on our website. We work directly with generators, and we buy energy from the wholesale market too.

“To reach net zero we’ll all need to change how we use energy, so we provide new technology like smart EV charging and home battery technology to help cut carbon emissions.

“We’ll be responding to the government’s consultation with some ideas about how the renewables market can be improved, to make sure everyone can benefit from affordable, green energy. ”

However Doug Stewart, chief executive of Green Energy UK, warned that the sector should be “careful” what it wishes for.

He said: “Over these past 20 years, we have seen green schemes come and go, without any common standards or industry consensus.

“Most green schemes and policy frameworks to date have been developed to ensure generators are rewarded as trailblazers and early adopters. With the exception of feed-in-tariffs (FiTs) where the bar was set too high to start, they have been relatively successful in that aim. The difficulty comes in how suppliers deliver this to the consumer.

“REGOs cannot be double counted, and whilst I welcome the good intentions of the government, we should be careful what we wish for. If not, we are in danger of reorganising the deckchairs on the Titanic and further complicating the market for no one’s benefit. If the price of REGOs has to rise, it has to rise.”

Third-party intermediaries

The government has also published today a second call for evidence on third party intermediaries (TPIs) in the energy retail market.

BEIS said it recognised that while TPIs, which include price comparison sites, auto-switching services, and non-domestic brokers, do offer valuable services, there are concerns the actions of some could lead to consumer harm.

Yet they are not directly regulated and operate outside the scope of the current retail energy market regulatory framework, which was developed when most customers would engage directly with their supplier.

BEIS said it wanted to be confident that customers and the energy system remain adequately protected as the role of TPIs evolves in the future.

There are a number of approaches the government said it could take to develop a regulatory framework for TPIs, should one be required.

Any regulatory framework would need to display certain features. These include being flexible enough to accommodate both existing and future TPI business models and not acting as a barrier to innovation or distorting competition.

It would also need enforceable and able to credibly deter TPIs from contravening their regulatory requirements, prevent harm from occurring and provide a “suitable remedy” for consumer harm if it does occur.

In response, Abby Jitendra, principal policy manager for Citizens Advice, said: “Third party intermediaries can make it easier for people to engage with the energy market, but people can face problems with them, including billing mistakes, switching errors, mis-selling and pressure sales. It can also be difficult for people to get help when things go wrong.

“As we transition to net zero, TPIs will play an increasingly important role in helping people choose and use low-carbon services. It’s crucial that they’re regulated to ensure people have confidence in using them and that they work as well as possible.”