Soaring REGO costs could put an end to greenwashing

With the cost of renewable energy certificates increasing more than 11,000% in recent years, are they still a viable option for energy retailers? And what impact is this having on the market for green tariffs? Adam John asks the experts whether this spells the end of greenwashing.

Following its exit from the European Union, the UK no longer accepts the trading of European Guarantees of Origin (GOO) certificates. Alongside Renewable Energy Guarantee of Origin (REGO) certificates, GOOs were used by suppliers to show how much renewable electricity they had supplied in the previous year.

Utility Week analysis of renewable energy auction prices shows that the recent outlawing of GOOs in the UK may be responsible for staggering increases in the cost of REGOs, with some rising in price by more than 11,000%.

Data from renewable electricity trading platform e-Power shows that between May 2019 and October 2023, the cost of wind REGOs went from 22p to £24.80. Similar increases have been observed in solar PV, as well as in biomass fuels.

The latest auction results from December show that wind REGOs have decreased to £13.35, but this is still almost 6,000% more expensive than in May 2019.

Utility Week asked experts about the reasons for these soaring costs and impact they could have.

Utilita’s head of sustainability, Archie Lasseter, tell us: “The UK energy grid mix at any time probably on average is about 50% green over the course of a year but you’ve got every supplier saying ‘our tariff is 100% green’. How is that possible? It’s because people are buying GOOs, adding to the renewable energy pot in the UK by buying certificates from the EU.

“You’ve got anywhere between 24-40% of all certificates being GOOs and now that they have been removed, that demand has peaked and gone into REGOs while the supply of REGOs has remained flat, therefore they are becoming more scarce and the price of them goes up.”

With prices having risen by so much, questions have been raised about the future of REGOs, and the impact on the amount of green tariffs suppliers are able to provide to their customers.

Jaron Reddy, UK & Ireland manager at Entrnce, a technology company which helps facilitate renewable energy trading, suggests the age of REGO-backed green tariffs may be over.

“If the prices remain at this level, green energy is not going to add up for anybody. I don’t think any consumer in the UK, especially considering the cost of living crisis, is going to want to pay huge amounts of money to claim they are procuring green energy. People want to pay the bills.”

He continues: “With these prices, REGO-backed green tariffs may fizzle out. REGOs were invented 20 years ago; they were invented to push renewable energy in the market. We had probably 2% renewable energy in the system at the time and now half the energy in the system comes from renewables at times. It’s time for an upgrade, the current system is facilitating dodgy claims about renewable credentials.”

REGOs are one of the energy retail sector’s most contentious issues and have been a source of debate for years. The issue periodically rears its head and last year the debate was reignited when Ovo Energy declared it would stop buying REGOs as part of a drive to end industry greenwashing.

Susie Leppard, Ovo’s head of renewable energy, explains: “Our research shows that any supplier promoting 100% renewable tariffs backed by REGOs is giving customers a misleading feeling about being green. We must end this greenwashing as an industry.

“As a result, we moved away from selling products purely backed by REGOs and instead now focus on supporting the next generation of renewable energy in the UK.

“We are also championing a new system to help avoid greenwashing practices by calling for clearer identification of tariffs which actively support renewable energy generation and decarbonisation, rather than relying solely on REGOs to support their claims.”

Yet despite soaring costs and questions over their renewable worth, the certificates are likely here to stay for now.

Good Energy is a renewable power supplier which has long held the view that REGOs are inadequate in supporting renewable generation. The company is one of three suppliers which is exempted from the price cap because of its renewables credentials. Yet despite its intense opposition to REGOs, the supplier still purchases them. Kit Dixon, head of policy and regulation, explains that suppliers who offer 100% renewable tariffs are required to under their licence conditions.

Dixon tells Utility Week: “We do use REGOs because we are required to. If we want to be able to tell our customers that we are 100% renewable, we are required under the fuel mix disclosure regulations, to use REGOs.

“The important distinction is that we will only ever buy REGOs from a customer where we also have a power purchase agreement (PPA) in place. We will never buy them separately, independently of the power, because that means that there is no direct link between us and a generator for that renewable-ness and we think that’s wrong.

“That’s something that other suppliers have done extensively – not buy any renewable power whatsoever, just buy a load of REGOs to chuck on the top and call it green … we think the REGO system needs to change but we are required to use them if we want to make any renewable claims at the moment.”

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