REGOs have ‘outlived original purpose’

Ovo Energy’s chief executive has slammed the use of Renewable Energy Guarantees of Origin (REGO) certificates and has insisted the “system has outlived its original purpose”.

Raman Bhatia was speaking at an event hosted at the Tate Modern in London today (18 April) unveiling, along with company founder Stephen Fitzpatrick, Ovo’s plan to become the first large supplier to scrap the use of REGOs from the middle of next month.

The move forms part of the company’s Path to Zero initiative, a series of measures that Ovo believes the UK needs in order to hit its net zero ambitions, with a warning that without significant change, the country is on track to miss its carbon targets.

It is not the first time the use of REGOs has caused debate amongst suppliers. The subject has been a source of contention in the sector, with some arguing the certificates do not create a demand for renewables.

In his speech, Bhatia said: “REGOs, in their current guise, do not provide any incentive to bring on additional renewable capacity. They simply don’t. And the fact of the matter is, the REGO system has outlived its original purpose around accountancy and it’s time for change and that time is now.

“So Ovo, from mid-May, will stop offering, marketing, 100% renewable tariffs backed by certificates, we don’t think that makes any difference.

“Instead we will be reinvesting in an alternative offer, an offer that will help the British public reduce energy consumption as well as, over time, reduce their carbon footprint and we are calling this Path to Zero.”

In a panel session following the speech Stephen Harris, Ovo’s VP of energy, gave more details about how the power supplier plans to support the growth of renewables following its decision to ditch REGO certificates.

He said money associated with the scheme should be targeted at encouraging new, incremental renewable generation.

He added: “That’s why we’ve made a commitment to subsidy free power purchase agreements (PPAs) where we pay above the fair market price to offtake electricity from a new generator during their first three years of production and providing that extra incentive which we believe will help get truly new incremental renewable generation onto the grid.”

In a subsequent Q&A session Harris was asked by Utility Week whether Ovo had discussed its idea with other retailers, and what the appetite was like amongst its fellow suppliers for banning REGOs.

In response, he referenced figures from an Ovo-commissioned report by Cornwall Insight which suggests the costs of REGOs in 2022/23 will be more than £1.4 billion.

Harris said: “We’re very careful about how we talk to our competitors about our commercial offerings, so we haven’t had a lot of discussions with other suppliers around REGOs.

“What we have done is talk to government and regulators and talked to them about some of the shortcomings.

“I think it’s fair to say when we talk to government and we highlight there’s £1 billion a year being spent voluntarily by businesses and consumers who want to be green, that’s a lot of money that isn’t being channelled into taking the next step so there definitely is an appetite there to look at how we can make that money work and be deployed in a more effective way.”